So, You’ve Been Audited: Should You Go It Alone or Hire a CPA?

IRS Hire a CPA or Represent yourself?I sincerely hope you have never had to go through an IRS audit – and never have to in the future. But what if that dark day does arrive? Should you go it alone and defend yourself or hire a CPA to be on your side?

The temptation to handle this alone is usually prompted by one of two things. First, the notion is that this is not such a big deal. Other times, people think if they handle it themselves, they will save money.

Unfortunately, neither of these are good reasons to defend yourself in a tax audit against the IRS. While the decision to hire a CPA or tax lawyer does depend on the case and the issues at hand, the procedural setting plays an important role as well. The answer is nearly universal that you should hire a CPA to defend you – or even a tax lawyer if the situation warrants it (sometimes they are one in the same person).

Why it is a Terrible Idea to Defend Yourself in a Tax Audit

There are several reasons why partnering with a pro is a good idea. Let’s look at each one and why.

  1. Working with your CPA, you can go back and forth with your side of the story, dig into the facts, and challenge each other in formulating a response. You essentially have a thinking partner and someone to fact check your side of the situation. Plus, they know how to “handle” the IRS in the messaging of responses.
  2. It is prudent to create some space between you and direct communications with the government. For the same reason, defense attorneys do not want their clients talking directly to the police. It is best if you communicate via your CPA or tax lawyer. Whenever you are in direct communications with the IRS, the chance of making a misstep is greater. Once you have said or written something to the IRS, it is pretty much impossible to backtrack.
  3. CPAs are experienced in advocating for clients and documentation.
  4. Early representation is a must! One of the biggest mistakes taxpayers subject to an audit make is to start off on their own and then end up in an even worse situation than they started. One of the biggest reasons why an audit can cost a lot is because the taxpayer dug themselves into hole that a CPA then later had to get them out of.
  5. Most cases rest on fundamental accounting problems. Someone with expertise and good records can address these problems early and competently. Seeing your own facts and documents through an unbiased and objective lens is not easy for most of us.


Ultimately, the decision to hire a CPA to represent you in a tax audit is a personal one. Exactly how necessary this is depends on the facts and circumstances of each individual situation, but it’s almost never a good idea to go it alone. If you ever find yourself in an audit, seriously consider hiring a CPA – and do it early in the process.

Accounting Considerations for Business Insurance Coverages

Business Insurance CoveragesWith more than eight million small businesses in America, and more than $776 billion in net premiums issued by the insurance industry in 2022 for commercial policies (according to the Insurance Information Institute), business insurance is big business. Along with protecting businesses from a myriad of claims, insurance expenses also have to be accounted for correctly.

When it comes to defining prepaid insurance, it’s essentially remittances that businesses (and individuals) make to an insurance company in advance. Normally, the usual time-frame for an insurance policy is 12 months. The time-frame is important when it comes to distinguishing between current and long-term asset classification.

If a prepaid expense, such as an insurance premium payment, is not utilized within 12 months of the remittance, it’s considered a long-term asset. Since it’s very uncommon for it to happen, it’s not seen in many financial statements, but is an important consideration to ensure that prepaid expenses are accounted for correctly.  

Important Accounting Factors

Since the coverage takes place in the future, but the payment is recorded in a preceding period, the prepaid insurance expense is considered a current asset on the balance sheet. Then, when the coverage is effective, the accounting consideration changes to the expense side of the business’ balance sheet.  

Here is an example of how businesses account for insurance expenses.

Company X pays an insurance premium of $3,000 on May 15 for the following 12 months starting June 1. The May 15 payment is recorded on the same date with a debit of $3,000 attributed to prepaid insurance along with a credit of $3,000 to cash. As of May 31, nothing has changed insurance-wise or accounting-wise for this policy, so the full $3,000 will be reported as prepaid insurance. However, once coverage is effective things change.

When June 30 rolls around, an adjusting entry will show a debit insurance expense for $250 (one-twelfth of the annual policy premium), and the same amount will see a credit to prepaid insurance. The June 30 debit balance for prepaid insurance will now be $2,750, leaving the remaining 11 months of insurance coverage that hasn’t yet elapsed – or eleven-twelfths of the $3,000 insurance premium cost.

This process repeats for the remaining 11 months. Depending on the business’ needs, coverage changes, policy changes, etc., the amounts may change but the process will likely remain the same.

Additional Factors

A related term, insurance payable, is another type of debt that is connected with an insurance expense. Listed on a company’s balance sheet, it represents a business’ outstanding premiums. This shows how much a company needs to pay the insurance company, and ideally by the end of the current period to remain current, avoid overdue fees, or have the policy canceled by the insurance carrier.

Along with giving businesses peace of mind, having the right mix of commercial insurance requires the right type of accounting considerations for the business’ internal and external accounting and tax reasons.


Pre-Retirement Planning Guide Younger Adults

Pre-Retirement Planning Guide Younger Adults Step 2: Clarify Goals

You’re never too young to start a bucket list. That’s because some things (such as bungee jumping) you probably want to knock out in your twenties. Women may want to have children before their forties – that sort of thing. A bucket list is comprised of all the things you want to do before you “kick the bucket.” It should be a running list that you add to and check off throughout your lifetime.

If you haven’t started a bucket list yet, a good time to do this is during your pre-retirement planning. It might be better to complete some items, such as expensive travel or home renovations, while you’re still working. That way, you can pay for them with your current income rather than take on debt or withdraw excess funds during retirement.

Another reason to develop your bucket list with your pre-retirement plan is to give life after work a greater purpose. Many people don’t think past the joy of simply not having to get up every morning and go to work. For some, the appeal of retirement is to no longer have to deal with exhausting corporate politics. However, if these are the only reasons you’re looking forward to retirement, they will not likely be as fulfilling a couple of years into it.

In fact, many retirees find they miss both the structure of the workday as well as the responsibilities and intellectual stimulation of a job. If you don’t establish additional and specific goals for your retirement years, you may end up bored, watching television most of the day, short on social stimulation, and wondering where the years went.

Some common goals set by retirees include:

  • Volunteering
  • Home renovation/redecoration
  • Gardening
  • Reading/book club
  • Babysitting/spending time with grandchildren
  • Traveling
  • Writing a book/memoir
  • Learning another language
  • Painting/arts & crafts
  • Learning to play an instrument
  • Carpentry
  • Regular socializing with friends/game night
  • Culture (theatre, symphony)
  • Regular exercise routine
  • Mentoring
  • Taking classes

Aim For Local

Not everyone wants to see springtime in Paris, so recognize that your bucket list is unique to you. If you’re running low on bucket list items, think locally and personally. For example, there might be places nearby you haven’t visited in years (or ever), such as a museum, art gallery, zoo, symphony, or opera. Even if you do attend regularly, consider taking your grandchildren with you during retirement to expose them to your passions and develop memories they will hold onto for life.

As you develop your bucket list, think about how activities could achieve additional goals, such as fitness and socialization. Some of the risks of growing older are increased health problems and potential isolation – particularly if you lose a partner or outlive your friends. Constantly expand your social network to include younger folks, particularly neighbors. Helping them out with occasional babysitting or taking care of pets while they are out of town help “pay it forward” for those elder years when you could use a bit of help yourself.

Achieving a successful retirement is all about good planning and preparation. You want to have money to enjoy your life, good health to keep staying active, and friends and loved ones to spend time with. These are the core elements that contribute to a long life, so start planning today by developing goals and seeing them through.

Summer Reading List for Personal Finances

Summer Reading List for Personal FinancesSince it’s summer and reading lists are at the top of your mind, now’s the perfect time to expand your knowledge of money management and wealth building. So, whether you’re a retiree, a beginning saver, or even a child, we’ve got a book for you.

The Classics

If you haven’t had a chance to dive into these titles, you might want to grab them, starting with The Millionaire Next Door. Authors Thomas J. Stanley and William D. Danko published this in 1996 and learned something critical: most millionaires were those who don’t blatantly flash their wealth but live below their means and save, save, save. Other great books like The Psychology of Money and Same As Ever, both by Morgan Housel, explore how human emotions trigger spending decisions that aren’t always the best for us. (Not surprising, right?) Finally, The Intelligent Investor by Benjamin Graham advocates a “disciplined approach to investing.” He’s someone who you might want to listen to – he was a mentor to Warren Buffet.

New Books

For those who want to align their personal values with their financial decisions, The Social Justice Investor by Andrea Longton is a good read. Her thesis is simple: she reminds us that no matter how big or small, every investment impacts humanity. Another new book by an author who has a big presence on social media, Kyla Scanlon, is In This Economy? How Money and Markets Really Work. Using the model of short, bite-sized clips made famous by TikTok, she presents macroeconomic concepts like interest rates in digestible chunks. Even if you’re not into the socials, you can glean important fiduciary principles in a short time – especially if you have a busy life.

For Young Folks

Check out this powerful title, Stop Acting Rich…and Start Living like a Real Millionaire, also by Thomas J. Stanley. In a nutshell, this is a cautionary tale that details the pitfalls of overspending on a house or other major purchases while also emphasizing that just because you look rich doesn’t mean you are. Another great pick is Financially Stupid People are Everywhere – Don’t Be One of Them by Jason Kelly. This narrative shines the spotlight on dangers that parents might not discuss with their kids, such as consumer debt and large mortgages. It shares how “not to be a sucker.”

For Students and Kiddos

This is a long one: Debt Free U – How I Paid for an Outstanding College Education Without Loans, Scholarships or Mooching Off My Parents by Zac Bissonnette. According to the reviews, the story is motivating and inspiring for high school students and does an excellent job of paying off the title. For younger children, there is Lily Learns About Wants and Needs by Lisa Bullard, who reads it weekly to her kids. In her story, she focuses on gratitude and succeeds in explaining that “budgeting” isn’t negative but a necessity for success. From the sounds of this narrative, other age groups might benefit from it, as well.

These are just a few books you can pack into your suitcase or beach bag this summer. If you don’t finish them, you can take them with you for the rest of the year. Learning how to be smart about your finances never goes out of season.


Personal-Finance Books to Put on Your Summer Reading List (

Must-Know Backlinks for Boosting Your SEO

What is a Back Link?Backlinks are a crucial part of search engine optimization (SEO) strategies. They act as votes of confidence from one site to another and signal to search engines that the content is credible and valuable. Understanding the various types of backlinks is important for crafting an effective SEO strategy that enhances your website’s visibility and authority.

What Are Backlinks?

Backlinks, also referred to as inbound or incoming links, are hyperlinks from one website to another. They serve as endorsements, indicating that the linked content is worth checking out. Search engines use backlinks to assess a website’s credibility and relevance, impacting its ranking on search engine results pages (SERPs).

Types of Backlinks

  1. Editorial Backlinks
    Editorial backlinks are highly valued in SEO. These links are given freely by other websites when they find your content valuable and relevant. For example, a blog post referencing your blog as a credible source would generate a natural editorial backlink. These highly prized links signify organic recognition of your content’s quality.
  2. Free Tool Backlinks
    Free tool backlinks are a powerful strategy for gaining attention and enhancing SEO. By offering a valuable tool for free, such as a cost calculator relevant to your industry or a free version of a commercial app, you can attract significant and lasting backlinks. To generate backlinks, market the free tool on websites with a similar readership.
  3. Sponsored or Paid Links
    Sponsored or paid links involve paying for backlinks on other websites to boost SEO. While these links can quickly enhance visibility and traffic, they must be handled cautiously due to search engine guidelines. Google, for example, requires sponsored links to be marked with a “sponsored” attribute to prevent manipulation of search rankings. Failing to disclose paid links can lead to penalties. Thus, while effective, it is crucial to adhere to guidelines to avoid negative impacts on SEO.
  4. Nofollow vs. Dofollow Backlinks
    Backlinks can have a “nofollow” or “dofollow” attribute. Dofollow links pass on SEO value, contributing to your site’s authority, while nofollow links do not. Although nofollow links don’t directly boost SEO, they can still drive traffic and increase brand visibility, making them useful in a well-rounded link-building strategy.
  5. Contextual Backlinks
    Contextual backlinks are links placed within the content of a page rather than in footers or sidebars. These links are more valuable because they are surrounded by relevant content, making them more likely to be clicked by users. For instance, a link within an article linked to a detailed guide is highly beneficial.
  6. Guest Posting Backlinks
    Guest posting involves writing articles for other websites in your niche, often in exchange for a backlink. This strategy not only helps in building backlinks but also positions you as an authority in your field. Best practices for guest posting include targeting reputable sites, providing high-quality content, and ensuring the backlink is placed naturally within the article.
  7. Backlinks from High-Authority Sites
    High-authority sites, such as well-known news outlets, academic institutions, or established industry blogs, provide highly valuable backlinks. Earning these backlinks often requires high-quality, unique content or innovative research. Such backlinks significantly enhance your site’s credibility and SEO performance.
  8. Social Media Backlinks
    Social media platforms can be a great source of backlinks. While links from social media are often nofollow, they can drive significant traffic and engagement to your site. Sharing content on platforms like Facebook, Twitter, LinkedIn, and Pinterest can increase visibility and indirectly boost your SEO.
  9. Backlinks from Niche Directories
    Niche directories are specialized directories relevant to a specific industry or field. For example, a directory dedicated to eco-friendly products is ideal for a green business. These backlinks help improve your site’s relevance within its niche, enhancing its SEO effectiveness.
  10. Broken Link Building
    Broken link building is about finding broken links on other websites and suggesting your content as a replacement. This strategy helps the website fix a broken link and earns you a valuable backlink. The process involves using tools to find broken links, reaching out to the site owner and proposing your content as a suitable alternative.

Avoiding Bad Backlinks

Bad backlinks come from spammy sites, link farms, or unrelated content and can harm your SEO efforts. It’s essential to regularly monitor your backlink profile and disavow any harmful links using tools like Google Search Console. Maintaining a clean backlink profile protects your site’s reputation and ranking.

Quality vs. Quantity in Backlinks

In backlinking, quality triumphs over quantity. High-quality backlinks come from reputable, authoritative sites and are contextually relevant to your content. Factors such as domain authority, relevance, and link placement determine its quality. Evaluating backlinks involves using tools like Moz, Ahrefs, or SEMrush to assess these factors.

Monitoring and Analyzing Backlinks

Tracking and analyzing your backlinks is crucial for maintaining an effective SEO strategy. Tools like Google Search Console, Ahrefs, and SEMrush allow you to monitor your backlinks, assess their quality, and understand their impact on your SEO. Regular analysis helps you adapt your strategy and optimize your backlink profile.


Understanding the different types of backlinks and their roles in SEO is vital for building a robust online presence. Focusing on high-quality, relevant backlinks and continuously monitoring your backlink profile will significantly enhance your website’s authority and ranking on search engines. 

Supporting Tibet, Exposing Hidden Fees and Protecting Judges Amid Rising Threats

Supporting Tibet, Exposing Hidden Fees and Protecting Judges Amid Rising ThreatsPromoting a Resolution to the Tibet-China Dispute Act (S 138) – This bill was introduced by Sen. Jeff Merkley (D-OR) on Jan. 30, 2023. It establishes a statutory definition of Tibet that includes areas currently claimed by China. The legislation also expands efforts to combat Chinese government propaganda, such as disinformation about Tibet’s history and institutions. The bill passed in the Senate on May 23 and in the House on June 12. It is currently awaiting enactment by the president.

No Hidden Fees on Extra Expenses for Stays Act of 2023 (HR 6543) – Introduced on Dec. 1, 2023, by Rep. Young Kim (R-CA), this bill requires providers of short-term lodging (e.g., hotels, motels, inns, and short-term rentals) to include each mandatory fee when displaying or advertising the price for a reservation. This largely bipartisan bill passed in the House on June 11, 2024, and currently lies in the Senate.

Wastewater Infrastructure Pollution Prevention and Environmental Safety Act (HR 2964) – This bill mandates that certain premoistened, nonwoven wipes (e.g., baby wipes, cleaning wipes, personal care wipes) be labeled “Do Not Flush” with an accompanying symbol. The bill was sponsored by Rep. Lisa McClain (R-MI) on April 27, 2023, with three Democrat co-sponsors. It passed in the House on June 11 and is currently under consideration in the Senate.

Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025 (HR 8070) – Introduced by Rep. Mike Rogers (R-AL) on April 18, this bill passed in the House on June 14 and currently lies with the Senate. It is an annual budgetary must-pass bill to reauthorize funding for the nation’s military defenses. The current bill that passed in the House is laden with amendments that will likely sink in the Senate, such as prohibiting services for gender transition, eliminating offices focused on diversity, and prohibiting funding for the Countering Extremist Activity Working Group (focused on preventing extremism in the military). However, some form of this bill will likely pass both Houses and be sent to the president before the end of the fiscal year (Sept. 30, 2024).

Countering Threats and Attacks on Our Judges Act (S 3984) – The purpose of this bill is to create a new resource center to provide threat monitoring and training to help protect the safety of judges and others who work in state courthouses nationwide. The legislation was crafted in response to a rising number of threats to the judiciary. This bipartisan bill was sponsored by Sen. John Cornyn (R-TX). It passed by unanimous consent in the Senate on June 12 and currently lies with the House.

Billie Jean King Congressional Gold Medal Act (S 2861) – This legislation was introduced by Rep. Kirstin Gillibrand (D-NY) on Sept. 20, 2023, with more than 60 co-sponsors across both aisles. The bill would award a Congressional Gold Medal to former professional tennis player Billie Jean King, in recognition to her devotion to championing equal rights for all, both in sports and in society. The bill passed in the Senate on May 8 and is now in the House.

Forgotten Heroes of the Holocaust Congressional Gold Medal Act (HR 537) – This bill would award a Congressional Gold Medal to 60 diplomats posthumously in recognition of their brave and vital service of saving Jews during the Holocaust. It was introduced on Jan. 26, 2023, and sponsored by 295 co-sponsors (155 Democrats, 140 Republicans). It passed in the House on June 11 and currently lies with the Senate.

The Differences Between Conclusion of Value and Calculation of Value

The Differences Between Conclusion of Value and Calculation of ValueWhen a business is looking for a valuation, it needs to decide whether to use the calculation of value approach versus the conclusion of value option.

The conclusion of value calculation is a more rigorous and resource-intensive calculation of value. Both approaches are similarly dependable, and despite the calculation of value’s less in-depth approach, business owners can still benefit from this knowledge for their short- and long-term projection needs. However, there are some distinctions between the two approaches. 

Calculation of Value

This method can be conducted annually or once every 24 months. It’s often applied for internal needs, such as the owner looking to retire, selling the business or for critical strategy development. Calculation of value also can be used for planning purposes, such as the settlement stage of a divorce. However, since it’s not an opinion of value, it’s not seen during litigation. 

Calculation of value aims to get the company’s fair market value via comparable companies. It is an approximate value, calculated through either a single figure or a range.

Conclusion of Value

This is more comprehensive and has stricter standards that can meet those required by the IRS, lawsuits, the Department of Labor, potential business buyers, M&A activity, etc. Conclusion of value can take as long as six weeks to complete due to stricter reporting standards.  

It’s up to the discretion of the analyst, and the results can be a single figure or a range. There are three accepted forms of valuation: market, income and asset-based, necessitating additional time. These three approaches are defined further below.

Market-Based Valuation

This looks at charted data of transaction values to calculate a business’ financial worth. This works similar to how those in the real estate industry determine comparable business’ worth, which is based on substantially similar conditions.

Regardless of the type of business, it looks at financial metrics such as the client service model, business location, profitability, percentage of periodic revenue projections, overall revenue, growth rates, mean account sizes, etc.  

Income-Based Valuation

This type of analysis establishes fair value by looking at historical, present and projected future cash flows. It also looks at reasonable projected returns on future investments.  

Valuing investments via the discounted cash flow method (DCF) involves looking at after-tax, discretionary, and/or operating cash flow types. This approach is often utilized with businesses that have no to limited earning growth projections.

The Capitalization of Earnings/Cash Flow Method

This begins with determining the cash flow for a discrete period. Then, the cash flow is divided by the capitalization rate over the same period. The capitalization rate is determined by taking a property’s net operating income and dividing it by the present market value. Looking through a real estate lens, it’s interpreted as the percentage of return an investor is likely to obtain from an investment. It’s often calculated for mature/established businesses that grow at a reasonable/predictable rate.

Excess Earnings Valuation Methodology

This can be defined as looking at how much tangible and intangible assets earn for a company over a discrete period of time. 

Asset-Based Valuation

This values a company by looking at the net value of assets within a company or the post-liability deduction of the fair market value of the company’s total assets. It’s one way to determine how much a company would cost to re-create. 

While each business has its own needs for valuation, be it for internal or external audiences, understanding how to accomplish them and when to use each type is extremely helpful for overall operations.

Marrying a Non-U.S. Citizen? No Tax Honeymoon for You

Marrying a Non-U.S. Citizen? Taxes for Marrying a Non-U.S. CitizenMarriage is a major life event. One that comes with all kinds of change, including financial. After getting married, there is so much to consider, from merging bank and brokerage accounts to setting up a will; from changing your withholding to updating retirement account beneficiary forms. If this seems like a lot to consider, it’s important to keep in mind that when a U.S. citizen marries a non-U.S. citizen, the situation gets even more complex.

Among some of the more complex tax considerations of mixed citizenship marriages are gift and estate taxes, which we will dive into below.

Gift and Estate Tax Overview

Before getting into the details on non-citizen spousal situations, here is a recap of the basics on U.S. estate and gift taxes. In the United States, estate and gift taxes are essentially a type of transfer tax, with the tax paid by the giver. Tax rates range between 18 percent and 40 percent of the assets transferred, but there are exemptions (with lifetime limits) that can reduce or even cancel out these taxes. Currently, the lifetime exemption is $13.61 million per person; however, this is set to drop to about $7.5 million starting January 1, 2026.

Gifting – No Free Ride in Marriage

When both spouses are U.S. citizens, there is an unlimited gift tax exemption, meaning no gift tax period. In the case where the recipient spouse is a U.S citizen, this still applies; however, when the spouse receiving the gifts is a non-U.S. citizen, then it’s different.

In the case where the U.S. spouse gifts to the non-citizen spouse, there are annual limits. For 2024, the annual aggregate limit for tax-free gifting is $185,000. Gifting beyond this amount starts to eat into the total lifetime exclusion.

Leaving Assets to Heiring Spouses

Leaving a bequest to a non-citizen spouse is very similar to gifting in that it also does not benefit from the uncapped marriage exemption. When a U.S. citizen dies and leaves assets to the non-citizen spouse, the estate tax can apply. After using up the lifetime limit, taxes on these bequests can be up to 40 percent. While each situation it unique, estate planning maneuvers such as setting-up trusts can prevent or mitigate the tax hit.

Reporting Requirement – It’s About More Than Just Paying Taxes

The concept of not needing to pay tax due to exemption limitations or gift/estate tax strategies is distinct from the reporting requirements. Here, the reverse situation is the tricky one: When the non-U.S. citizen makes a gift or bequest to the U.S. spouse. Despite having no tax implications, the U.S. spouse may need to comply with informational reporting requirements if the gifts or bequests are technically foreign-sourced and more than $100,000 (in any given year). Failure to comply with reporting standards can yield serious penalties.

Gift-Splitting is Different

Gift-splitting is a technique that allows a married couple to pool their individual annual gift limits and give more tax-free money to the same person. For example, each spouse gets an annual gifting limit of $18,000 they can give to any one recipient (per calendar year), without any tax considerations or use of the lifetime limits. Gift-splitting lets each spouse give this amount to the same person, effectively doubling the amount they can give together to any one person to $36,000. This is not allowed when one spouse is a non-U.S. citizen.


In the end, there is almost always an issue when the U.S. citizen spouse gifts or bequests to the non-U.S. citizen spouse (not the other way around). Keep these details in mind when tax planning and you’ll be on the right path. Also, it’s important to remember that these are the U.S. tax rules and regulations. Any tax implications for the non-U.S. citizen spouse in their country is beyond the scope of this article.

How to Develop a Credit Policy

How to Develop a Credit PolicyA credit policy explains how a company will manage lines of credit for client accounts and what procedures to follow for severely outstanding invoices. It helps a business promote a robust foundation for its working capital level.

Defining a Credit Policy

Unlike personal credit scores, business scores range from 0 to 100; the scores from the FICO Small Business Scoring Service range from 0 to 300. According to the U.S. Small Business Administration, a first step to establishing business credit is to sign up for a Dun & Bradstreet (DUNS) number for each business location.

There are three components to a company’s credit policy. First, develop an effective system of following up on past-due invoices. Second, define when, how much, and the terms of credit extended to customers. Third, establish how the business underwrites a client’s creditworthiness and put guidelines in place to determine when to increase or decrease lines of credit for clients.

Memorializing a Company’s Credit Policy for External and Internal Uses

The reason why it’s so important to have a credit policy in writing is because 6 in 10 workers in large American business workplaces have found it challenging to get information from their fellow co-workers, according to a report by YouGov and Panopto. This same report found that processes that are not documented result in employees wasting an average of 5.3 hours/week either looking for the right person or waiting for a response.

Internally, it enables employees to understand the policy inside and out, creating more efficient workers. Externally, it sets clear ground rules and reduces the likelihood of mismatched customer expectations.

Considerations Before Writing Out a Credit Policy

Depending on the interest rate environment, clients may have a hard time obtaining financing. If they are able to obtain financing in a high-interest rate environment, it will come with a higher cost for the customer. The business may need to have more stringent policies.

Terms of Sale May Not be One-Size-Fits-All

It is imperative to explain how payment terms work before the company engages with clients. Be it net 15, 30, or 60 days, etc., consider how payment timeframes may incentivize pre-payment or early payment discounts. From there, determine when and how the company takes action to deem when payment is “delinquent,” and when it’s considered uncollectable and finally written off and sold to a debt collector.

Depending on the size/revenue/etc. of the company writing the policy, it is not ideal to treat smaller companies the same as larger/more established companies. For example, giving a company a net 45 term versus a net 30 or net 15 has two available outcomes.

Larger companies may be able to pay faster, but if they are given more time to pay, it can negatively impact the receiving company’s cash flow. And while giving small companies similar terms can create more goodwill, it also can cause a company to take it for granted. This presents the potential to never receive payment for outstanding invoices if the small business faces bankruptcy. Similarly, depending on the type of business and/or sector it’s in, risk should be rated appropriately.

Determine Roles/Responsibilities

Ensure each department and person within each department has a defined role within the credit approval process. The sales department can help craft payment terms to reduce late payments and maximize sales. The credit department can handle reviewing to extend, lower, and increase credit limits. The accounts receivable (AR) department should follow up on late invoices, collect payments, and record incoming payments.    

While there’s no boilerplate form for a business’ credit policy, having a policy in place will help a business navigate its internal and external needs more effectively.


eBook: Valuing Workplace Knowledge

Pre-Retirement Planning Guide

Pre-Retirement Planning GuideStep 1: Develop a Budget

Once you are truly good and retired – no phase-out, no gig jobs, no income-earning hobbies – most people end up living on a “fixed income.” While that income may fluctuate somewhat based on cost-of-living increases and investment gains, those increases may be few and far between. What you really need to work on before you retire is a “fixed budget.”

A fixed budget is a line-item record of your living expenses, from housing and insurance to food and utilities to transportation and healthcare. Bear in mind that those are not exactly “fixed expenses” either. Seasonal changes and inflation can swell prices on household goods and insurance rates, while higher interest rates impact auto purchases and credit card debt. These are all factors a pre-retiree needs to consider when developing a post-retirement budget.

Retirement Income

However, the first step in developing a budget isn’t to add up your expenses, it’s to figure out how much money your retirement income sources will provide. Many folks pull from three basic sources of retirement income: Social Security, a pension, and personal savings – comprised of savings accounts, employer-sponsored retirement plans, and an investment portfolio. Bear in mind that with a few exceptions (e.g., savings accounts, Roth IRA), you’ll need to factor in paying taxes on distributions from these accounts during retirement. Add up how much post-tax income you will likely receive each month/year in retirement.

Retirement Budget

Depending on your retirement goals, you may need less or even more income than you earned while still working. One way to break down anticipated retirement expenses is to categorize them as essential (e.g., food, housing, transportation) and discretionary expenses (e.g., travel, entertainment). Calculate a monthly total with considerations for other outlying expenses, like paying for auto or home insurance and property taxes once a year to take advantage of discount savings.

Also factor in periodic expenses for home and auto maintenance. In addition to your monthly budget, consider how much you should retain in a liquid savings account for emergencies, such as the deductible for a major auto repair to replace the roof on your home or the occasional big-ticket appliance.

Reconcile Income with Expenses

Next, compare the total of your income sources with your total budgetary needs. Bear in mind that if your income comes up short, you have a few options. You can create a plan to reduce your essential expenses, perhaps by selling your home and moving into a smaller, cheaper-to-maintain home. You may want to take another look at your discretionary expenses and decide to cut out country club fees or travel abroad. It is possible to enjoy retirement while playing golf or tennis at public facilities and vacationing at the extraordinary locations that America has to offer.

One retirement strategy is to ensure that all of your essential living expenses in retirement will be covered by guaranteed income sources, such as Social Security, an employer pension, and an annuity. For discretionary expenses, plan to pay for them via an allocation of your retirement assets to other investments that are not guaranteed, but offer growth potential. In fact, you may be more inclined to invest these other retirement assets more aggressively when confident that your essentials are covered through guaranteed income sources.

Income Strategies

One of the more common ways retirees draw income is to simply spend down their assets. This basically means withdrawing however much you need each month above and beyond what you receive in Social Security and pension benefits. Bear in mind that if the amount you withdraw each year is too high, you risk running out of money in the later stages of retirement.

Some investors cap how much they withdraw each year at about 3 percent to 5 percent and adjust their budget to meet this limit. In doing so, they can ensure the rest of their investment portfolio has the opportunity to continue growing. To keep up with annual increases in the cost of living, you may want to allocate an equity component in your portfolio to allow for income growth opportunities throughout retirement. However, be aware that stocks can have down years so that 3 percent to 5 percent distribution might deliver less income when the market is volatile.

You also may consider ways to increase your retirement income. Developing a retirement plan a decade or so before you actually retire will give you time to max out your annual retirement account contributions and perhaps even create some form of passive income to help supplement retirement expenses. Many pre-retirees plan ahead by creating passive income sources, such as rental property or royalty payments on writing, music, or a patent on intellectual property.

The Social Security Caveat

Currently, the trust fund that supplements Social Security benefits is projected to fund 100 percent of total scheduled benefits until 2033. Thereafter, the fund will be able to supplement only 79 percent of scheduled benefits. The upcoming election is important for a lot of reasons, but what is currently under the radar is the need to reform how benefits are funded. The options include reducing benefits, increasing the retirement age, allowing people to invest their account funds privately, and increasing or removing the Social Security tax cap on individual wages ($168,600 in 2024).

Because the direction of Social Security reform is unknown, pre-retirees need to work harder to create their own income sources. While the federal government has the authority to make changes to shore up Social Security solvency, individuals, by contrast, have less flexibility to plug holes in their retirement income plans.