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Strategic Planning Part I The Art Of War And Enlightenment - Jun 5, 2010

Posted by: Dennis Niven in Articles

Have you seen your company's Strategic Plan collecting dust on the CEO's shelf?  I think I know why, and will recap what I have learned in my 37 years of business experience and philosophy & cultural studies in a three-part series.

 

Strategic planning is not a new-age concept, having served as the cutting edge of the art of war in the Eastern world since well before Sun Tzu wrote a series of martial essays on the subject in China during the fourth century, BCE.  Great military strategists in the East learned how to win wars strategically rather than violently from Sun Tzu's compilation of The Art of War. Sun Tzu was first brought to the attention of the Western world by a Jesuit missionary to Peking, Father J.J.M. Amiot, whose interpretation of The Art of War was published in Paris in 1772.  Unfortunately, that was well after generals in the West learned to win wars through extreme violence.

 

Amiot's The Art of War was a major insertion of Eastern intelligent thought into what was to quickly becoming the Age of Enlightenment in the West, where traditional institutions, customs and morals had come under question.  Enlightenment influenced intelligent thought throughout the West to this day, and gave us terms such as coffeehouse, encyclopedia and democracy, and names such as: Voltaire, Hegel and Kant; Beethoven, Haydn and Mozart; Franklin, Jefferson and Madison.  Winning through intelligent strategy was advocated as the primary source for legitimacy and authority.  Strategy, thought and reason are inherently non-violent, which makes perfect sense in the world of business (don't you think?).

 

Then why is our plan up there collecting dust?  There are four main reasons: (1) Leaders cannot be strategists, and vice-versa; (2) The practice of strategic planning as an exercise in intelligent thought has been watered down in Modernity to mean little more than business planning in prose rather than in numbers; (3) Intelligent thought has been cast aside in favor of making quick decisions, thinking on the run, and thinking outside the box, and: (4) strategic planning as a futuristic, visionary exercise means very little to almost every person working in mid-market companies, as their job is to work in the now or to analyze the past.  For these reasons, strategic planning is not understood, is undervalued (if not hated) and, if done at all, quickly collects dust on the CEO's shelf.Read more...

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American Recovery And Reinvestment Tax Act Of 2009 - Mar 4, 2009

Posted by: Dennis Niven in Articles

 

President Barack Obama signed the 1,073 page "stimulus" act into law on February 17, 2009-the American Recovery and Reinvestment Act of 2009.

The cost of the entire stimulus act is nearly $800 billion. The tax provisions represent approximately $300 billion of that total cost. This blog update focuses on the individual tax changes in the new law.

Making Work Pay Credit
By far, the most costly tax provision is the "Making Work Pay Credit" at an estimated cost of $116 billion. This refundable credit is available for both 2009 and 2010. The credit is equal to the lesser of 6.2% of earned income of the taxpayer, or $400 for a single person or $800 in the case of a joint return. The credit is limited when modified adjusted gross income exceeds $75,000 for a single person or $150,000 for a married person. The credit is phased out at a 2% rate above those levels. For example, the credit is fully phased out for a single individual with modified adjusted gross income of $95,000. Individuals who may be claimed as a dependent are not eligible for the credit. Qualified taxpayers would either receive the credit by a reduction in their income tax withholding or can claim the credit as a lump sum when they file their tax return.

$250 Economic Recovery Payment
The new law also provides for a one-time payment of $250 to Social Security recipients, railroad retirees, disabled veterans, and retired government workers. This payment will reduce the amount of the "Making Work Pay Credit" to which a recipient might otherwise be entitled.

Alternative Minimum Tax "Patch"
The new law includes an alternative minimum tax patch for 2009 at a cost of $70 billion. The AMT patch for 2009 raises exemption amounts for joint filers to $70,950 and to $46,700 for single filers. This AMT patch will relieve about 26 million taxpayers from AMT exposure.

First-Time Home Buyer Credit
The first-time home buyer tax credit is increased from $7,500 to $8,000 for homes purchased from January 1, 2009, though November 30, 2009. There is no required repayment for a home acquired in 2009 after 36 months in the home. The credit begins to phase out for single taxpayers with adjusted gross incomes in excess of $75,000 and in excess of $150,000 for joint filers. A first-time home buyer is defined as someone who has not owned a present interest in a principal residence within 3 years of the purchase date. An eligible taxpayer can elect to take this refundable credit based on a 2009 purchase of a home on his or her 2008 tax return.

New Car Tax Deduction
If a taxpayer purchases a new vehicle between February 17, 2009, and December 31, 2009, he or she will be eligible for an "above-the-line" deduction for state and local sales taxes or excise taxes paid on the purchase. This means taxpayers will achieve the tax deduction even if they do not itemize their deductions. This rule applies to the first $49,500 of the purchase price of any one vehicle. The deduction will be phased out for a purchasers who have adjusted gross incomes exceeding $125,000 for single taxpayers or $250,000 for joint returns. Newly purchased foreign and domestic vehicles qualify, including cars, light trucks, motorcycles, and motor homes with a gross vehicle weight of not more than 8,500 pounds. The sales tax on leased vehicles is not included. Also, a taxpayer is not eligible if he or she elects to deduct sales and use taxes as an itemized deduction.

American Opportunity Tax Credit
The American Opportunity Tax Credit is essentially a modification and renaming of the existing Hope Scholarship Tax Credit. A credit of up to $2,500 for the first 4 years of higher education expenses would be available. The credit would be calculated based upon 100% of the first $2,000 of qualified tuition and related expenses, plus 25% of the next $2,000 of such expenses. The credit would begin to phase out at $80,000 of modified AGI for a single taxpayer and $160,000 for married taxpayers. Up to 40% of the credit would be refundable. The American Opportunity Tax Credit would also be allowed for the Alternative Minimum Tax.

Tax Relief for Families with Children
Tax relief in the form of larger refunds or reduced income tax withholding for families with children is provided for by temporary increases for 2009 and 2010 in the earned income tax credit for families with three or more children and the refundable portion of the child tax credit.

Unemployment Compensation
The new law excludes up to $2,400 of unemployment compensation from income for 2009. Amounts in excess of $2,400 are taxable.

Tax-Free Transportation Fringe Benefits
Qualified transportation fringe benefits, including trans....

Read more...

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Breaking News Things Your Cpa Need To Consider Now - Feb 18, 2009

Posted by: Dennis Niven in Articles

 

Net Operating Losses and the American Recovery and Reinvestment Act of 2009

Just as tax season is rolling and your CPAs are knee-deep in tax returns, the American Recovery and Reinvestment Act of 2009 (ARRA 2009) changed the NOL carryback rule for net operating losses arising from an eligible small business in 2008.

Warning: This is a change for this tax season

Longer Carryback Period Available
The new law provides an eligible small business with an election to increase the present-law carryback period for an applicable 2008 NOL from 2 years to any whole number of years elected by the taxpayer that is more than 2 and less than 6 (§172(b)(1)(H)(I)). Thus, a 2008 NOL can be carried back 2 years to 2006 (same as old law) or it can be carried back to 2003, 2004, or 2005, whichever the taxpayer elects.

Example: Sharon's 2008 Form 1040 shows a $35,000 NOL arising from her sole proprietorship, a business that grossed $200,000 in 2008. Sharon had no taxable income in 2005 or 2006. She had a great year in 2004. Sharon can elect to carryback her 2008 NOL to 2004 (or to 2003 if that carryback produces a higher refund).

Election to Waive Carryback Still Available
The taxpayer may still elect to waive the carryback and carry the 2008 NOL forward for 20 years ((§172(b)(3)).

An Eligible Small Business
An eligible small business is defined in §448(c) (except $15,000,000 replaces $5,000,000). Thus, a business with average annual gross receipts for the prior 3 years of less than $15,000,000 is eligible for the new carryback periods (§172(b)(1)(H)(iv)).

Applicable 2008 NOL
An "applicable 2008 NOL" means the NOL for an eligible small business for any taxable year ending in 2008. At the taxpayer's election, an applicable NOL can be one arising for any taxable year beginning in 2008. Thus, the NOL arising from a C corporation's fiscal year ending January 31, 2008, as well as a C corporation's fiscal year ending November 30, 2009, may qualify for the new carryback periods (§172(b)(1)(H)(ii)).

Transition Rules
For an NOL for a taxable year ending before the enactment of the provision (for example, an NOL arising from a C corporation with a fiscal year ending January 31, 2008), the law includes the following transition rules:

1) any election to waive the carryback period under either §172(b)(3) with respect to such loss may be revoked before the applicable date;
2) any election to increase the carryback period under this provision is treated as timely made if made before the applicable date; and
3) any application for a tentative carryback adjustment under §6411(a) with respect to such loss is treated as timely filed if filed before the applicable date.

For purposes of the transition rules, the applicable date is the date that is 60 days after the date of the enactment of the provision.

Example: TAX Inc., and eligible small business, had a $50,000 NOL from its fiscal year ending January 31, 2008. It carried back the NOL to its tax returns for the years ending January 31, 2006, and January 31, 2007, but was only able to use $10,000 of the of the January 31, 2008, NOL. It may revise its carryback if it does so within 60 days of enactment and elect to use the NOL on its January 31, 2003, January 31, 2004, and/or January 31, 2005, returns.

Tax Season Warnings - Things you CPA should do NOW

• STOP and reconsider any decision to elect to waive the carryback period. This may have seemed automatic to them for some clients, but now they need to look at the prior 5 years' returns to determine if a carryforward is the right decision.
• STOP and reconsider any carryback of the C corporation NOL to the second prior year. It's easy for them to prepare the Form 1139 carryback as they are preparing the 2008 Form 1120. They need to revise their office procedure (and slow down). They must look at the 5 prior years' tax returns. Maybe another year gives a better tax benefit for the NOL.
• STOP and find the time to look at any fiscal year returns. They probably only have until April 16 or 17 to revise the NOL carryback for those clients.

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Congrats To The Comerica Bank Arizona Companies To Watch Contest Winners - Nov 11, 2008

Posted by: Dennis Niven in Articles

 

The Phoenix-based Arizona Small Business Association (ASBA) and the Cassopolis, Michigan-based Edward Lowe Foundation have announced winners of the 2008 Comerica Bank Arizona Companies to Watch contest.  ASBA and the foundation, which promotes entrepreneurship, selected the 50 winners from more than 3,000 nominees (and 300 finalists) across the state.  To qualify, a company must be what they call a "second-stage" firm, defined as having 10 to 100 full-time employees and $750,000 to $100 million in annual revenue or working capital.  Winners also must be privately held and based in Arizona.  According to the foundation, these "second-stage" companies comprise 12 percent of all Arizona businesses and create more than 40 percent of the jobs in the state.

Tonight the awards were issued to the 50 winners at a gala event at the Phoenix Convention Center, and I am proud to say that 5 of them are clients of mine.!

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Working Capital Improvement - Sep 5, 2008

Posted by: Dennis Niven in Articles

By Dennis Niven 

Working Capital - The Precursor to Cash - Working capital management is arguably the most important management activity in emerging and mid-sized companies because of the significant financial impact that it has on the company's well-being. While most CEOs and business owners have heard and accept that "Cash is King," working capital, the precursor to cash, is often the least understood and most poorly managed area of companies when they first visit with one of our partners. This is true even though the definition and calculation of working capital and working capital ratios are widely understood and seem to be simple enough at the personal checkbook level.

When working capital is not adequately managed, the deterioration of cash flow critically affects a company's ability to fund operations, reinvest in the business and, ultimately, to survive. With adequate working capital management, cash flow supports a company that thrives in the marketplace.

With working capital management being critically important to a business combined with the fact that few CEOs and business owners truly understand or have the time to manage working capital, it is imperative that a company has experienced, professional assistance in managing the various and complex elements of working capital. B2B CFO^® partners are real-world experts in working capital management at the highest levels of America's fastest growing companies. Cash. We Help You Get It^TM is not only our slogan; it is what we do with hundreds of clients every day.

Need to Know More? - Following is a discussion of working capital for business and why it is so critical and complex to manage. Few areas within a business can so quickly make or break the CEO's or business owner's vision for the future.

Definition of Working Capital - Working capital for business is often referred to as simply the excess of short-term assets over short-term liabilities. Short-term assets include cash and other assets expected to be turned into cash within one year - marketable securities, accounts receivable, short-term notes receivable, inventory and prepaid expenses. Short-term liabilities include those expected to be paid with cash within one year - accounts payable, short-term debt such as credit lines, the short-term portion of long-term debt and accrued expenses.

Calculation of Working Capital Ratios - The current ratio, a measurement of working capital and a commonly used test of a company's financial strength, is the total of short-term assets divided by the total of short-term liabilities. Generally, if the result is less than 1.0 then the company might not have enough working capital assets to convert into cash to pay liabilities and operating expenses when they are due. On the other hand, if the result is greater than 1.5 the company is generally considered as having enough working capital assets that can be converted into cash to pay liabilities and operating expenses when they are due.

The acid test ratio, also called the quick ratio and liquidity ratio, omits inventory from the current ratio calculation to crudely indicate whether a liquidation of the company would provide enough cash to pay the company's debts if operations ceased. Generally, a result of at least 1.0 is considered to be acceptable.

Reliance on Calculations and Ratios - CEOs and their staffs tend to look (if they look at all) at working capital computations that yield current and acid test ratios greater than those generalized above as comfort that the business is doing well enough concerning liquidity, and turn their focus away from working capital management to marketing their product or services, making or acquiring the product, providing their services, etc.

Our seasoned partners are trained in working capital management and know that the above generalizations are not adequate, and are often entirely misleading, to assess the financial health of the company.

What is Adequate Working Capital? - Adequate working capital for business varies, often extremely, from a small business to a large business, from an under-capitalized company to a well-capitalized company, from a growing business to a business declining in size or sales, certainly from a start-up company to a mature company, and it varies from one day to the next. What might be adequate is quite different between times when excess cash needs to be invested and times when the business owner has no idea how to fund tomorrow's payroll.

Working capital measurements and ratios also have severe limitations in working capital management. They are snapshots of one moment in time and can vary greatly moment to moment. The assumed liquidity....

Read more...

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Testimonial - Abacus 247 LLC - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Dennis has provided invaluable assistance.  He is available whenever we need him, gives knowledgeable advice and has helped us to recruit an excellent new staff member.  Best of all, he is genuinely interested in what is best for us, and doesn't press us to undertake assignments which are beyond our means."

Robert Wilkinson - Managing Partner, Abacus 247 LLC
http://www.abacus24-7.com/

 

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Testimonial - Springboard Inc. - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"I have worked with B2B CFO for about 4 months and found it to be a great relationship. Dennis Niven is very responsive and unselfishly interested in helping me build my business. I look forward to continuing our relationship."

Gavin Hays - CEO, SpringBoard, Inc.
www.springboardstaffing.com

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Testimonial - Stc Investors LLC - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Having Dennis on board has really helped with investor realtions thru the prodcution of various financial statements.  He has helped with proformas and other items that have helped us plan more effectively."

Fred R. Auzenne - CEO, STG Investors LLC
www.supplementstogo.com

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Testimonial - Killer Shade LLC - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Dennis is a stud! He helped us start a relationship with a bank before we needed it and when we did need financing- the bank was there and Dennis got us way better terms than I thought possible. It made me want to give him sloppy wet man kisses!!"

Mike Campion - Chief Shade Officer, Killer Shade LLC
www.killershade.com

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Testimonial - Arizona Society Of Cpas - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Dennis is a master at establishing personal relationships quickly and listening to a CEO's concerns. He assists wherever he's needed, focusing on an organization's well-being. We appreciate all he's done to help the ASCPA."

Cindie Hubiak, CPA - President & CEO, Arizona Society of CPAs
www.ascpa.com

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Testimonial - Perspectiva - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Dennis provided needed insight into our firm's financial condition. We were too close to the trees and could not see the direction we were headed. With a good understanding of our financial score card, we were able to make needed decisions regarding resources and manpower."

Gloria Barrera - Partner, Perspectiva
www.perspectiva.net

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Testimonial - Able Information Technologies Inc. - Sep 5, 2008

Posted by: Dennis Niven in Testimonials

"Right from the get go, I put Dennis in charge of an acquisition and Dennis completed the due diligence, lined up financing and mentored team members on the process.  He single-handedly made the deal happen!  That is what I call a partner."

Brandon Ames - President, Able Information Technologies, Inc.
www.ableinc.com