Tip of the week

August 2019

Where Are You in Your Retirement Time Table?

August 20/19

Now that I am old, someone asks me at least once a week, when am I going to retire? So far everyone is hopeful that I am not retiring soon, so that they don’t have to find a new accountant. My answers are the same as they have been for years. I either say that I hope to work for another 20 years or that I plan to die at my desk. However, my plan may not be your plan. 

If you are a business owner, then you should have already figured out if you have a business that can be sold to others. Not all business can be sold. Some are one person businesses and when that one person plans to retire, there will be no value in the business. If you are planning to sell your business, you need a plan. It is a great idea to check the plan at least once a year. 

As we are coming to the end of summer and the beginning of a new academic year, now is a good time to ask yourself some important questions:

· How long until I would like to sell my business? 

· Am I doing what I need to do to make the sale happen? 

· Have I established who the likely buyers could be? 

· Do I know what my business is worth? 

Have I compared what it is worth to what I need to retire?  

Term Loan or Line of Credit?

August 13/19


If you are thinking about buying something like a new car, a new recreational vehicle or a computer, it can be tempting to put it on your existing line of credit. However, in many cases it would be better to get a term loan rather than use that line. Here are a couple of reasons for that. 

A car or computer has a certain useful life and when that life is over and it is time to buy a new one, you will be sad if you have not paid for the old one yet. You want to have car left over when the loan is paid, not loan left over when the car is no longer any good. If you borrow the money on a line of credit there is usually no required monthly payment beyond paying the interest. Few of us would be disciplined enough to figure out how long the car will last and divide the loan by that number of months, and make the payment on the line of credit each and every month.

If you went for the term loan however, you will be required to make the monthly payment. In fact, the payment will disappear out of your bank account, so there is a better chance that the loan will be paid before the car is used up. Another advantage of the term loan is that the bank cannot call that loan unless you miss a payment, whereas a line of credit has to be renewed sometimes annually and you could lose that line. 

Next time you are thinking about putting something on your line of credit, think about the monthly payment you should be making to pay that loan off.

Could a Fraud Happen at Your Business?

August 6/19

  I am working on audits this time of year and an auditor is always looking for the possibility that the numbers on the financial statements are wrong. We call this the risk of material misstatement or RMM for short!

There are a number of things that can cause a mistake in financial statements. There can be missing documents like invoices. The records could be wrong because no one has balanced the bank account. There could also be deliberate mistakes made, such as not reporting all of the sales that are made because you put the cash in your pocket instead of the bank. However, today I am talking about fraud.

Have you given any thought to how someone could steal money from you? Do you accept payments from customers in cash? Could any of your employees keep that cash and you would not figure it out? We call this thinking about fraud scenarios, which basically breaks down to, how could someone rip you off? Have you thought about that? Put it on your to-do list.