Why Outsourcing Your Accounting Needs May Be What Your Business Needs to Grow

In 2020, there was record-breaking new business growth in the United States. The sheer number of new businesses created was 24 percent higher than the prior year. New employer identification number (EIN) applications broke records in quarter three. 

These new EIN applications took place despite the pandemic that has swept around the world. 

In the 1930s, an Austrian economist described this phenomenon of new business growth in times of uncertainty as “creative destruction.” In short, this creative destruction happens as people come up with new ways to overcome challenges, such as the inability to shop in person due to lockdowns or health concerns. Plus, many companies folded or scaled back during the pandemic.

In today’s blog, LongSchaefer’s trusted business advisors look at why outsourcing your accounting needs as you decide to grow your business.

Understand Financial Functions

It’s exciting and successful as your business takes off! But it’s hard to know what you don’t know about the financial functions and find the time to manage the books and your other priorities. 

Brushing important accounting and recordkeeping tasks to the side can hurt your bottom line because you aren’t paying attention to KPIs that denote your business’ financial health.

You also may not understand when tax payments are due, which creates stress for you as a business owner.

So how do you tackle this problem? Keep reading to find out.

Outsourcing Your Accounting

Your business will thrive when its financial functions are in working order. Business owners quickly realize they will either need to carve out the necessary time to manage their organization’s finances or hire someone to do it. 

Hiring a CFO is one option. However, most new businesses do not have 40 hours of work for a qualified individual. This is when outsourcing CFO services can be a practical solution. 

Benefits of Working With an Outsourced CFO 

Lower Operating Costs. Any change that reduces costs without endangering operations is generally positive. Many businesses simply don’t have enough cash flow to justify hiring a full-time, in-house CFO for your accounting.

Increased Efficiency. Inefficient operations harm your organization from the top-down. A real advantage of outsourcing your accounting is that behind your outsourced financial planning experts at LongSchaefer stands an entire team of accountants, partners, consultants, and bookkeepers at your disposal. All of us have areas of expertise that bring to bear for your success. When you outsource financial activities and have them analyzed by an independent third party specializing in finances, your company becomes more efficient.

More Flexibility. When a business owner wears too many hats, one is bound to fall off or fall by the wayside. Outsourcing your CFO functions and financial accounting will allow your organization to become more flexible. Rather than working on something outside your core business, you have more flexibility in dealing with your immediate environment and activities. Changes that make your organization more agile make it better able to excel. 

Reduced Risk. Outsourcing the financial functions of your company may reduce the risk your business or organization faces. Outsourcing payroll, for example, can reduce risk because experts now handle these financial functions and look for improvements. 

New Ideas. Outsourcing CFO and accounting duties brings new ideas to the table. Small businesses must recognize that outsourcing to an expert and trusted business advisor gives your business a clear advantage with their complex financial activities.

High Growth Potential. Many organizations face limitations when trying to take on more activities because their current staff is spread too thin. Outsourcing financial activities can allow business owners and other staffers to engage in better-targeted tasks as part of your core business model.

Talk to LongSchaefer About Outsourcing Your Accounting Needs

Outsourcing financial services for your business and organization can help you operate more effectively and efficiently. With LongSchaefer’s requisite knowledge of different organizational structures and financial expertise, we can help you create innovative changes in your organization. 

If you would like to learn more, please call LongSchaefer’s trusted business advisors at 513-245-0300 to speak with one of our professionals and learn how our outsourced CFO and accounting services can help enhance your business success.

Like-Kind Exchange Updates: Clarifying Real Property & Escrow Policies

If you own business or investment property, or want to exchange real property for others, you might take some time to become acquainted with “like-kind exchanges”, also known as a 1031 exchange. 

As with all tax code changes, the IRS consistently makes clarifications to previously unclear areas or adjusts the language based on new policy. In 2020, there were some larger changes noted to section 1031 of the tax code. This section deals with like-kind exchanges of real property. 

In today’s blog from the Cincinnati CPAs of LongSchaefer, we explain some like-kind exchange updates that clarify real property and escrow policies.

Defining “Real Property”

In the past, the definition of real property held more ambiguity. There was little difference between the state and local definitions. 

The new language allows real property to be defined by local and state guidelines in addition to the list included in the final regulations. Property must also pass a facts and circumstances test. 

The final regulations include updated and specific categories such as land and improvements to land, unsevered natural products of land, and water and airspace superjacent to land. Please note that property previously excluded prior to the 2017 TCJA is still excluded. 

Inherently Permanent

The purpose or use test that the IRS previously required to determine whether the property contributed to unrelated income no longer applies to like-kind exchanges.

Instead, the final rules state that if the tangible property is both permanently affixed and will remain affixed to the real property for an indefinite period of time, it’s considered inherently permanent and a part of the real property. 

This does not automatically include temporary items that might be easily removed from the structure, including installed appliances, sheds, carports, Wi-Fi systems, and trade fixtures. 

In addition, if interconnected assets serve an inherently permanent structure together, they are now analyzed as one distinct asset rather than separate assets. For example, a gas line powering a heating unit would qualify as part of the heating unit. However, if the gas line solely powered a stove or oven, it would not qualify. 

Facts and Circumstances Test 

Not all fixtures and assets are automatically included in the inherently permanent rule. Use the facts and circumstances test to determine if it’s eligible to be considered a part of the real property. 

For each fixture, ask:

  1. Is the asset designed to be removed?
  2. Would removing the asset cause damage to the real property?
  3. How much time or expense do you need to move the asset?
  4. Are there any circumstances that suggest the fixture can stay attached for a finite period of time? 

While there is still some room to get better, the facts and circumstances test are a vast improvement. The previous rule may have led to expensive and inefficient cost segregation studies. 

Incidental Property 

In the past, non-real property that could be transferred as part of an exchange could potentially violate escrow rules that permit a Qualified Intermediary to facilitate an exchange not made in real-time. This is also called a third-party exchange. 

The new regulations for like-kind exchanges now allow some leeway. Definitions say the fixtures or non-real property is deemed as typical for the kind of property transfer or if the aggregate value does not exceed 15 percent of the fair market value of the real property.

The new regulations are now considered incidental and will not be in violation of the escrow rules. Keep in mind, real property is still a separate transaction. These transactions are not included in the gains deferment of the exchanged real property. 

Qualified Intermediaries 

The new regulations for like-kind exchanges maintain the transaction must be structured as an exchange. The seller cannot receive funds from the sale before becoming owner of the new property. Qualified intermediaries can hold the properties or funds in an escrow account within the prescribed time limit. As such, the transaction looks like an exchange. 

Bottom Line

Most of the time, the sale of any investment property not considered your primary residence can result in capital gains tax. Utilizing a 1031 like-kind exchange can help defer that tax until later. You could see a lower tax liability down the road. 

On April 28, 2021, President Joe Biden introduced a new economic plan that would impact 1031 exchanges. His proposal would abolish 1031 exchanges on real estate profits higher than $500,000. As we move further into 2021, LongSchaefer will continue to monitor the impact.  

Talk to LongSchaefer’s Trusted Business Advisors

If you would like to discuss tax strategies in business or investment properties, give LongSchaefer’s Cincinnati CPAs a call at 513-245-0300. Our team can help you understand if the decision you are making falls in line with applicable tax laws and if it’s the best strategy for your real property investments.

The New $125 Million Grant Fund for Small Businesses in Ohio

In late October 2020, Gov. Mike DeWine and legislative leaders announced a new program called the Small Business Relief Grant (SBRG). Ohio has up to $125 million to give to small businesses affected by the COVID-19 pandemic. Today’s blog from LongSchaefer highlights the basics of this program.

Related Post: How Sharp Business Planning Helps Your Firm Recover After the Coronavirus

Who is eligible to receive SBRG funding?

Small businesses with between one and 25 employees will be able to receive grants of up to $10,000.

Bars or restaurants with an on-premise liquor license may receive a $2,500 grant from the Bar and Restaurant Assistance Fund. This fund applies to the more than 15,000 liquor permit holders in Ohio, including restaurants, bars, breweries, distilleries, wineries, casinos, and private clubs.

When can my small business apply for a grant?

Small businesses can start applying for SBRG funding at 10 a.m. on Nov. 2, 2020. Applications will be accepted until the end of the year. LongSchaefer can advise you on how to fill out the application properly to ensure you receive this grant in a timely manner.

What documentation must I show for the application?

Small business owners must show proof of all paid W-2 employees on the payroll as of Jan. 1, 2020. You must also show proof of business expenses from at least 60 days before the grant application period. You’ll also need your most recently filed state or federal tax return. 

Liquor permit holders must show they must have one of 30 active liquor licenses and an on-premise permit as of the close of business on Oct. 23, 2020. 

These resources must be in digital format instead of paper. LongSchaefer can help you gather the information you need. 

Where can I find more information?

The Ohio Development Services Agency website has all of the information you need for the SBRG. There is a dedicated page this link for liquor permit holders.

Related Post: 5 Ways Accountants Help With Business Planning

Business Services From LongSchaefer

The tax and accounting pros at LongSchaefer can help you apply for Ohio’s SBRG funding to help your small business succeed during these challenging times. Contact us or call (513) 245-0300 for assistance.

Strategic Business Planning for the Last Quarter of Any Given Year

Business planning always evolves. What works one quarter may not work for the next. That’s why you need to keep abreast of your KPIs and metrics so you can make informed decisions as your business grows. As such, today’s blog from LongSchaefer talks about strategic business planning for the last quarter of any given year.

Related Post: How Sharp Business Planning Helps Your Firm Recover After the Coronavirus

Staffing Levels

Did your workload increase towards the end of the year? Does your business pick up or decline during the winter holidays? How many workers do you plan to retain going into next year? If growth continues, do you have enough resources to hire more people?

Labor is the single biggest expense for small and medium-sized businesses. Optimizing your labor costs can make a huge difference when it comes to business planning in the coming year. Knowing what staff you need to have on hand going into next year will help you to plan your budget. 

Budgets

Budgeting for various departments must be precise while leaving some wiggle room. If revenue dips, can you reallocate funds to other departments or reduce profits temporarily until the situation resolves? Do you see room for improvement in HR, marketing, or management? How about investing in tools to make your existing departments more efficient?

Revenue forecasts should be realistic based on the data you’ve collected over the past year. Also, the IRS may give you tax advantages if you make capital investments before the end of the year. 

Goals for Next Year

Never forget SMART goal setting. SMART is an acronym describing the characteristics of each goal to set on your way to success.

Specific: Write down your specific goals for the coming year.

Measurable: Achieving a specific goal is only as good as the analytics used to measure it. The more data you collect, and the more incremental goals you have, the more accurate your numbers are in terms of reaching a goal. 

Achievable: Lofty goals are nice to have. However, they must be achievable within a specified timeframe. 

Relevant: Is your goal relevant to your business? What department does the goal belong to?

Time-Bound: What’s the timeframe for the goal? The end of the first month? The second quarter? 

Think about how these goals affect your budget. Will you have to hire more people, invest more in marketing, or make capital improvements to achieve these goals?

Accurate Accounting

Accurate accounting is crucial when it comes to business planning for the next year. You need as much data collection as possible, and then the proper analytics software to interpret the data points. That way, you can make an informed decision about your coming year’s goals. Hiring an accountant might prove useful in this regard.

Related Post: 5 Ways Accountants Help With Business Planning

Business Services From LongSchaefer

The accounting pros at LongSchaefer can tailor a business services plan for your exact situation. Contact us or call (513) 245-0300 for more information on our business services.

4 Reasons to Hire a Small Business Accountant

Small business accounting is often an afterthought. It’s not something you necessarily think about on a daily basis. You’re focused on running your core business, and accounting seems like a faraway topic for you to discuss.

Hiring a small business accountant can help you maintain financial stability and plan for the future. It also ensures you have a financial professional on your side without going through the expense of hiring an in-house accountant. LongSchaefer showcases the top four reasons to hire a small business accountant for your firm.

Related Post: 5 Small Business Accounting Issues for Summer 2020

1. Regular Financial Services

Monthly or quarterly reports from a small business accountant give you an overall snapshot of your company’s financial performance. LongSchaefer will reconcile your bank account, generate an income statement and a balance sheet, and clean up your general ledger.

Why should you have these things readily available? When you need to apply for a loan, plan for tax time, and if you’re interested in a merger & acquisition. All three of these instances require highly detailed paperwork as to your company’s financial health. Small business accountants can create this paper trail for you.

2. Customization

Regular reports provide a solid foundation for your small business accounting system. However, not all small businesses are the same, and small business accountants should never, ever take a cookie-cutter approach to your financial prosperity. We can customize the package of financial services you receive by adding payroll, tax planning, tax preparation, or any of our other services.

3. Identifying Problems & Plan for the Future

Reconciling your business checking account each month or quarter allows us to keep your accounts up-to-date. Our small business accountants can identify lost checks or deposits. We could find and flag unauthorized wire transactions, and detect or prevent excess/unjustified bank charges and ensure transactions are posted correctly by your bank. Our reports may also find cases of embezzlement of funds from within your company.

Regular financial reports, especially income statements and balance sheets, from a small business accountant help you plan for the future.  You can’t really know what’s going on unless all accounts are reconciled and properly accounted for on your financial statement. Proper management of funds not only saves you money but also makes money for you. You can plan effectively by having accurate numbers in place.

4. Peace of Mind

CPAs are highly trained professionals who specialize in financial planning, tax preparation, and money management. If you have questions, we’ll answer them promptly. You get unlimited consultations when you hire LongSchaefer! Rather than worry about whether your books are showing you accurate numbers, you can sleep more peacefully at night knowing that you have the right financial data to make the correct decisions about your company’s financial future.

Related Post: Seven Common Small Business Tax Myths

LongSchaefer: Your Small Business Accountant

The CPAs at LongSchaefer help you with comprehensive small business accounting services customized to your needs and goals. Contact LongSchaefer or call (513) 245-0300 to see how we can help as your small business accountant.

5 Ways Accountants Help With Business Planning

When it comes to strategic business planning, you need expertise and experience on your side. You must gather data, analyze every aspect of your business model, and set realistic goals for your profits. Does this sound overwhelming? Business planning can be. Luckily, you have professionals on your side at LongSchaefer. Today’s blog from LongSchaefer explains five ways accountants help with business planning. 

Related Post: Reasons You Should Hire a Small Business Accountant

1. Financial Analysis

Business planning has many facets. Perhaps the most important one is the financial analysis of your company. You can’t plan for the future if you don’t understand what’s going on with your business right now. Accountants dive deep into your numbers, including cash flow, operating expenses, gross revenue, and projected profits. 

Do you have enough loyal customers to sustain your business in lean times? Do you have a target audience that creates a growth pattern for the future? Business planning with accounting professionals can help identify trends for growth in your current numbers.

2. Data Gathering

Financial analysis in a business plan is only as good as the data you have on hand. Accountants know what data you need to collect for a thorough analysis. The more data, the better. Not all of the data will be crucial, but computer software takes the raw numbers and turns them into reports you can use to make decisions about the future of your company. LongSchaefer can crunch the numbers using the right computer software to analyze your current financial standing. We can take a look at your business as a whole, drill down to the unit level, and analyze your costs and pricing models.

3. Risk Management

Risk management is a huge part of business planning. Whereas financial analysis is a quantitative measure, risk management is more qualitative. You must identify future risks to your business and mitigate those risks as much as possible. Think about supply chain issues, labor costs, competitors in your target market, and seasonal ebbs and flows that can all have negative impacts on your company. An accountant can identify and even quantify what these risks can do to your business model.

4. Bank Loan Applications

Applying for additional financing is a daunting task. Banks have stipulations and standards. You’ll need an excellent credit history for your business. Financial institutions also require a stout business plan and financial analysis as part of the application process. The better your business plan, the better your chances of getting an approved business loan. Accountants can help you create the best possible plan for you.

5. Profitability Goals

Profits depend on cash flow and growth. Your business plan can identify growth potential by providing insights on cash flow patterns, inventory management, business financing, diversity of offerings, and the prices of your products or services. Future growth and profitability may include an acquisition of a competitor, adding more staff, or altering the prices of your current offerings. Which ones are right for you? 

This is where accountants thrive on big-picture goals: We help you see where all of the analyses, data, and risk management are headed. If you tweak your prices, where are profits in six months? If you get that business loan and buy a competitor, how quickly can your revenue grow? What happens when you invest in another product line? Accountants can show you how different paths forward could affect your company as you create a business plan for sustained growth and profitability.

Related Post: 5 Small Business Accounting Issues for Summer 2020

LongSchaefer: Business Planning for You

Business planning is no small feat. Whether you want to see one year, five years, or 20 years out, LongSchaefer helps you with comprehensive business services customized to your needs and your goals. Contact LongSchaefer or call (513) 245-0300 to see how we can help your business plan for the future.

May 2020 COVID-19 Update

In order to comply with the Ohio Health Department Order & CDC social distancing recommendations, our offices are closed until further notice. Rest assured that our established protocols and available technology will allow us to provide the same level of service and quality you expect from LongSchaefer during this time.

The SBA has announced details of how it’s helping small businesses through the Coronavirus outbreak. The IRS is sending payments to families affected by this crisis. 

Please click on our Coronavirus information pages for more information.