Accounting News and Notes

The IRS just announced that the optional mileage rates effective July 1, 2008 through December 31, 2008 is 58.5 cents per mile. This was done in response to Soaring Gas Prices which we have seen throughout the past twelve months. This is an increase of eight cents per mile which was in force for the first six months of the year. Rates are generally adjusted just once annually but this special adjustment was done in recognition of the rising prices we pay at the pump.

“Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” said IRS Commissioner Doug Shulman. “We want the reimbursement rate to be fair to taxpayers.”

As gas cost are a larger component of gas prices this change was required to keep pace of the higher cost of gas causing the increased cost of operating and maintaining a vehicle for business use. The federal government is starting to realize the severity of this issue and is beginning to take steps to make the U.S. less dependent on foreign oil. Stay tuned for more information.
 

We are hearing it daily:  We are in tough economic times.  Gas prices are rising faster than our Atlanta summer temperatures, the housing market slowdown is affecting many ancillary industries, and recession is on the horizon or even here.  The business owners I talk to are asking how this affects the potential sale of their business, and what they should do about it. Some of the questions, all interrelated, are:

 Are there buyers out there?

There might be more buyers now than in good economic times.  As corporations downsize, laid off workers and managers look to escape the corporate world by owning their own business.    There are also industry or strategic buyers seeking opportunity by buying distressed companies. 

Will I get the price I want?

That depends.  Value is influenced less by the industry than by your specific operation.  It is influenced less by the national economy than by the state economy, which is less important than the local economy.  If you have a good operation even in a challenged industry, you will get a good price.  However, if your Financial Statements have been hurt by the current economy, you must analyze and decide if it is worth hanging in there for a turnaround which may be years away.  Determine a current market price based on trailing twelve months of performance versus the valuation on your projections for the future.  Is the difference enough to warrant waiting?  

 How long will it take to sell?

If you are in one of the distressed industries, and aren’t willing to accept a lowball offer, it may take longer to find a buyer who has the confidence to make a move. If you have an attractive business regardless of industry, you will find a buyer

What can I do to make my business more attractive to buyers?

·         Clean up the financial statements. Make sure you have 3 to 5 years of clean and accurate financial statements available.  If not clean and accurate, it will be discovered in the Due Diligence phase costing you much time and credibility.  In addition to your Income Tax Returns, have Income Statements (P & L) as well as Balance Sheets available.   Be able to identify the additional financial benefits to the owner hidden in these reports. ·         Physically improve the looks of facilities. Put new paint on the walls, decorate the public areas, make sure the equipment is clean and running well, and tidy up the office space.  If it appears you care about and attend to the details of the physical plant, buyers will believe you approach all aspects of your business with the same concern.  ·         Pay down debt, if you can.  Not only will it make your Balance Sheet more favorable, your Income Statement will improve by reducing the debt service.  For those industries where selling price is a multiple of Net Income, you will increase the sale price of your business proportionately.  ·         Document your business processes. Even if you may be planning to stay on after the sale for a transition period, potential buyers will be more comfortable if a business manual details exactly how your business is run. Take the time to document all the steps involved in your business cycle, including design, ordering, manufacturing, shipping, sales, disposal, billing, customer service, etc.·         Reduce the “you” in your business.  If you are your business, then your business is worth less without you.  If potential buyers believe that most of the business procured is based solely on your relationship with customers, they will anticipate losing business and discount their purchase offer accordingly.  Make the marketing and operational changes necessary to ensure your business can and does run without you.  ·         Prepare a business or marketing plan. Buyers will want to know what you are doing to maintain and grow your business.  Document your marketing strategies and identify your major customers.  Buyers are not, or at least should not be, satisfied with maintaining what you have built.  They want to grow your business.  Help them by pulling together information on industry and customer trends, and indicate how you would grow the business if you had the time, energy, and resources.   

As you may have realized, instituting all these steps are good moves to make even if you weren’t planning to sell.  But having made these adjustments, once you make the selling decision, you can move forward quickly.   And finally,

·         Gather pertinent business information. Buyers will want to know about such things as the number, skills and experience of your staff, the size and value of your facility, and the type of equipment and the amount of available inventory

·         Obtain an accurate and up-to-date valuation of the business.  To avoid selling your business at less than market value–or, conversely, pricing yourself out of market—obtain an accurate valuation of the business that is prepared by a professional who is familiar with the market place and valuation methodology. 

In my experience, there are always willing and able buyers for attractive, well run, and forward thinking businesses despite current economic conditions.  Making your business one of those is the secret to a profitable and quick sale. For more information, you can contact Hal Rogness of Walden Businesses, Inc. at 678-277-9951.

Soaring Gas Prices…The Triple Threat

Gas prices continue to soar as the national average for gas and diesel prices reach unprecedented levels. If the impact was not bad enough at the pump, the ”trickle down” effect on every item or good you purchase is facing undue price pressures as well. Although our dependence on foreign oil has continued to grow the dramatic upswing in prices is due predominantly to the rising prices of OPEC and other major suppliers raising their prices on barrels of crude oil. Many prognosticators believe that a gallon of gas might well approach the $5 dollar a gallon mark by year end with diesel fuel potentially surpassing $5.60 a gallon benchmark. Although this is affecting all consumers at the pump the most damaging impact in our economy is not at the pump but at the source where all goods and services are delivered.

All companies who transport their products are now paying higher fees for airfare, trucking, and rail  with no sector of the transportation industry going unscathed.  As the moving cost from suppliers to distributors and then from distributors to retailers increase, the corresponding costs have to be passed along each step of the way. A prudent investor should be able to expect inflation rates to be higher in 2008 than at any time in the last several years as the cost of services and products rise solely to maintain the already slipping margins most companies have been experiencing as a result of a general lessening of economic growth. Also, just as bad things seem to happen in threes so does our economy similarly suffer from first a downturn in the stock market, then a housing/debt crisis, followed shortly by heightening gas prices.

Much of the variations we have experienced in the stock market are part of the normal ups and downs which have occurred for decades and decades. However the housing and foreclosure debacle issues are at previously unheard of proportions as anxious financiers/banks/lending institutions extended credit under relaxed lending criteria. Many of the homes lost in the last months were done from over zealous lenders granting monies and credit to those who otherwise would not have been granted a loan. Also consumers were to blame as they rushed out to obtain loans which extended their credit to such a level that any hiccup in their income stream would dramatically impact their ability to meet their monthly obligations as they became due.

Gas prices now are putting additional stress on an already struggling economy. Whether consumers are in an up or a down economy their living standard and mantra should always be the same “to live well below what their income would suggest they could afford.” Though in tough economic times this will necessitate a bit more belt tightening than we would prefer the precepts are the same. The decline in the stock market continues to offer bargains for those in a position to invest, however rising gas and energy prices are now in a position to rain on our overall economy for many years to come.

Finding an Atlanta CPA is not as difficult as some make it out to be nor is it as easy as some would like to think. When looking for a good CPA for your business you will want to be sure of the below factors before making your decision. How well you select your CPA will impact the financial health of your business, your employees, and even your long term financial security of your retirement. By utilization of these criteria you will be best armed to look at finding a CPA who is best apt to help guide your business to the Promised Land of financial success.

Seek to find a CPA who is not transaction oriented. Anyone can do what you ask or perhaps even file your returns for a few years while striving to keep your tax bill as low as legally possible. You will want to find a CPA whose ambition matches that of your own including your zeal and temperament and one who is a forward thinker. His practice and focus should be foward thinking and insightful, while consistently giving advice focusing on the future of your business and not solely an interpreter of its past. No CPA can change what has already transpired but a wise and sage CPA can help you and your business avoid pitfalls which will befall you otherwise. A CPA can help strengthen your management team, if used wisely and often, and can help guide you through many of business most thought provoking issues while offering counsel to both maximize your time and efforts.

Retain a CPA who has consistently outperformed his peers. You can discover this by seeking to know what civic and business organizations they belong to and what positions they have held. Learn about their civic callings, their involvement in community issues, and what they have done to make the world a better place. Do they frequently volunteer their time in both missions and work related activities? Although being a member and team player are important aspects to all of our lives, seek out a CPA who constantly excels in all areas of their lives. Check their grades in college.  Did they pass the CPA exam early?  Did they graduate with honors?  Did they earn awards while in college?  These early indicators will be a prelude to what their business success will approximate.Review their web site to learn substantive content about their past achievements, current involvements, and content. Is their web site material insightful in nature?  Does it provide subject matter which will enable you to manage your business and personal financial affairs better?  Does it clearly list their achievements, goals, and aspirations for you and your business?

Check references and look into what a CPA’s  present customers say.  The reputations they have with the business and civic community alike are critical components of finding and retaining an adviser who is suitable to your business. Be sure to ask for references indicating their standards of performance and whether they consistently outperform  client expectations in response and turnaround time as well as the processing and quality of their work. Inquire as to whether their CPA is readily available by Internet, phone, and for meeting face to face. This is perhaps the most widely voiced complaint about CPA’s and also one of the most critical. What good is the best CPA in the world if you can’t get find them to get your answers resolved.

Seeking out a good CPA will be one of the most important and critical decisions you will ever reach so be sure to find someone who is both technically competent, excels in their work, is accessible, and who’s style and character match that of your own.

James and Heidi Drake work with Campus Crusade for Christ and share a passion for sharing the Gospel and helping students mature spiritually. It was while serving overseas, out of the “Bible Belt”, with Campus Crusade that they really had their first taste of God’s transforming work through the gospel of Jesus Christ.  They saw the gospel truly was “good news” and that the world is hungry to know there is a God Who created them & loves them.  The LORD has now called them to serve at the University of Alabama in Birmingham with the mission of giving every student there a chance to hear & respond to the gospel! If you would like to find out more about their ministry and how to partner with them, check out their web site: www.jamesandheidi.com.  Thank you for considering investing into their lives and the lives of so many lost students who are searching for something more than this world can offer.  Together, we can fulfill the Great Commission

There are a few issues which always need to be in the forefront of every business owners mind as they think about and plan for the future. Planning is hard enough as it is without being sensitive to variables which are prone to have a profound impact on your business. Keeping these items in your mind and viewfinder will help you constantly stay update on your whereabouts and how to get back on track to achieve your calls.

-Document your goals in writing. You are most apt to achieve your goals if they are clearly delineated and detailed. Absent a firm goal you constantly refocus on you are most apt to miss the mark of what you were shooting to obtain in the first place. Always remember “if you shoot at nothing, you are going to hit it every time”.

-Expect the unexpected as “life is what happens while you are busy making plans”.  Your plans should allow for inflation, anticipate variances, and other unknowns which are bound to impact your decisions and daily operations. For example, it is prudent to always live below your means as life and business issues will frequently void the best laid plans.

-Always keep in mind a reasonable rate of return not expecting great rates of returns on your investments to always be consistent. Maintain an healthy degree of risk while not being too aggressive or passive in your investment style and decisions. Don’t make speculative investments trying to “hit the home run” as it is often the turtle and not the rabbit which wins the race. Maintain a consistent strategy of investing whether it be an up or down market. Be realistic with your investment goals whether they be dollars invested, rates of return, or anticipated age of retirement while always allowing for a bit of wiggle room for those unexpected expenditures.

-Stay current with your financial adviser, CPA, attorney, and banker being sure to know when to have meetings with each to ensure you are on the right track to take advantage of law changes, trends in the marketplace, and may of the other general tools available to an adviser to help manage you and your financial affairs throughout the years. As a general rule, I would suggest meeting with each of these professionals at least once annually and more often if the environment/situations change dramatically.

These tidbits will greatly assist you in staying on your toes as you plan the future success of your business and for your retirement.

JOHN WOODEN:
“FAILURE TO PREPARE IS PREPARING TO FAIL. BE QUICK, BUT DON’T BE IN A HURRY. DON’T MISTAKE ACTIVITY FOR ACHIEVEMENT. THE PURPOSE OF DISCIPLINE ISN’T TO PUNISH BUT TO CORRECT. THINGS TURN OUT BEST FOR THOSE WHO MADE THE BEST OF THE WAY THINGS TURN OUT.”