planning - Linkenheimer LLP CPAs & Advisors

In Financial Planning, Forecasts and Projections Aren’t the Same

Businesses are rightly encouraged to regularly generate professionally prepared financial statements. Doing so is important for both understanding your own financial position and providing accurate, comprehensive information to stakeholders such as investors, lenders and advisors.

However, keep in mind that financial statements are historical records. They depict the state of the company at a given point in time — not where it will likely be in the future. For the latter purpose, you need to create either a forecast or a projection. But aren’t those two things the same? Not exactly.

Defining the terms

The American Institute of Certified Public Accountants (AICPA) addresses the distinction under its AICPA Attestation Standards Section 301, Financial Forecasts and Projections. The organization differentiates the two terms as follows:

Forecast. Prospective financial statements that present, to the best of the responsible party’s knowledge and belief, an entity’s expected financial position, […]

By Linkenheimer LLP|2023-06-19T19:13:38+00:00June 19th, 2023|planning, strategy|0 Comments

Why Businesses May Want to Consider ESG in Strategic Planning

When engaging in strategic planning, business owners and their leadership teams must consider various factors. These commonly include the state of your industry, the national and local economies, the company’s financial position and cash flow, and opportunities in the marketplace.

However, in today’s world, where transparency is everything, another factor that may be important for some companies is a clearly defined approach to environmental, social and governance (ESG) issues.

3 areas of focus

As a general concept, ESG (as it’s often called for short) focuses on three areas:

The environmental component considers your company’s impact on the environment, including the energy it uses, the waste it produces and the resources it consumes.
The social element examines your business’s relationships with people, communities and institutions. It includes fair labor practices; worker health and safety; diversity, equity and inclusion; and your company’s impact on the people of the community or communities where it operates.
The governance portion includes policies, practices and procedures your business adopts to govern itself. Considerations include ethics, transparency, legal compliance, executive compensation, supply-chain management, data protection, and product quality and safety.

The idea is that, to be a good “corporate citizen,” it’s important to recognize the impact of […]

By Linkenheimer LLP|2023-06-07T19:27:01+00:00June 7th, 2023|business, planning, strategy|0 Comments

More Parents May Owe “Nanny Tax” This Year, Due To COVID-19

In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This may result in federal “nanny tax” obligations.

Keep in mind that the nanny tax may apply to all household workers, including housekeepers, babysitters, gardeners or others who aren’t independent contractors.

If you employ someone who’s subject to the nanny tax, you aren’t required to withhold federal income taxes from the individual’s pay. You only must withhold if the worker asks you to and you agree. (In that case, ask the nanny to fill out a Form W-4.) However, you may have other withholding and payment obligations.

Withholding FICA and FUTA

You must withhold and pay Social Security and Medicare taxes (FICA) if your nanny earns cash wages of $2,200 or more (excluding food and lodging) during 2020. If you reach the threshold, all of the wages (not just the excess) are subject to FICA.

However, if your nanny is under 18 and childcare isn’t his or her principal occupation, you don’t have […]

By Linkenheimer LLP|2020-09-03T20:02:06+00:00August 11th, 2020|income tax, individuals, planning, tax implications, tax planning|0 Comments

At the Very Least, Update the Financials in Your Business Plan

Every new company should launch with a business plan and keep it updated. Generally, such a plan will comprise six sections: executive summary, business description, industry and marketing analysis, management team description, implementation plan, and financials.

Now, ideally, you would comprehensively update each section every year. But if the size, shape and objectives of your company haven’t changed all that much, you may not need to make major revisions to the entire plan. However, at the very least, you should always review and revise your financials.

Explain your route

Lenders, investors and other interested parties understand that descriptions of a business or industry analysis may be subject to interpretation. But financials are a different matter — they need to add up (literally and figuratively) and contain realistic projections in today’s dollars.

For example, suppose a company with $10 million in sales in 2019 expects to double that figure over a three-year […]

By Linkenheimer LLP|2020-09-03T20:03:33+00:00October 23rd, 2019|business, planning, strategy|0 Comments

Does Your Team Know the Profitability Game Plan?

Autumn brings falling leaves and … the gridiron. Football teams — from high school to pro — are trying to put as many wins on the board as possible to make this season a special one.

For business owners, sports can highlight important lessons about profitability. One in particular is that you and your coaches must learn from your mistakes and adjust your game plan accordingly to have a winning year.

Spot the fumbles

More specifically, your business needs to identify the profit fumbles that are hurting your ability to score bottom-line touchdowns and, in response, execute earnings plays that improve the score. Doing so is always important but takes on added significance as the year winds down and you want to finish strong.

Your company’s earnings game plan should be based partly on strong strategic planning for the year and partly from uncovering and working to eliminate such profit fumbles as:

Employees interacting with customers poorly, giving a bad impression or providing inaccurate information,
Pricing strategies that turn off customers or bring in inadequate revenue, and
Supply chain issues that slow productivity.

Ask employees at all levels whether and where they see such fumbles. Then […]

By Linkenheimer LLP|2020-09-03T20:03:37+00:00September 27th, 2019|business, planning|0 Comments