Professional Accounting Blog

    Accounting For Your Prosperity

    Bill Smith

    Bill Smith is a Vice President of the Assurance Services Group. In his spare time Bill enjoys golf, boating and volleyball.

    Recent Posts

    Managing Your Balance Sheet – Your Cash Cycle

    Posted by Bill Smith on May 9, 2014 12:39:00 PM

    Topics: Small Business

    Most owners are always anxious to receive the monthly financial on how their company is doing.  Almost inevitably they turn immediately to the income statement and go to the bottom line to see what the net income was.  Then they spend a lot of time reviewing the sales levels and margins and look for variations in expense accounts.  This is all well and good, but oftentimes their review stops there and they ignore the balance sheet and other financial information. Although net income is an important driver of the business, cash flow is probably an even more important driver and nothing affects cash flow more than the balance sheet.

    The Balance Sheet can be a “Cash Sponge”

    If the balance sheet isn’t managed, it can soak up cash flow. Increases in sales can result in accounts receivable and inventory increases, but those increases should be in proportion to the sales increase.  Oftentimes, to meet the demand of increased sales, inventory and sales procedures take a back seat and vendors are paid sooner resulting in substantial drains in cash flow as the cash is locked up in the balance sheet accounts. 

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    Small Business Success: 5 Tips For Managing Your Balance Sheet

    Posted by Bill Smith on Nov 26, 2013 3:21:00 PM

    Topics: Small Business

    Most owners are always anxious to receive the monthly financial on how their company is doing. Almost inevitably they turn immediately to the income statement and go to the bottom line to see what the net income was for the month. Then they spend a lot of time reviewing the sales levels and margins and look for variations in expense accounts. This is all well and good but often times their review stops there and they ignore the balance sheet and other financial information.

    The balance sheet amounts do not seem to change much period to period so they often get ignored. But delving deeper into the balance sheet and its relationships to the income statement can help answer the following questions.

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    Tax Strategy for Taking Advantage of Foreign Sales

    Posted by Bill Smith on Oct 1, 2013 9:08:00 AM

    Topics: Tax Planning & Strategies

    With the economy moving more to a global footing, many family and middle-market companies are seeing an increase in foreign sales.  However, many of these companies are not aware of a tax strategy taking advantage of their foreign sales that can result in substantial tax savings.  This strategy is an IC-DISC.

    What is an IC-DISC

    An IC-Disc company is a tax entity that can be set up to receive a commission on foreign sales from the “producer” company (your existing company).  The “producer” company receives a tax deduction for the foreign sales commission at regular ordinary rates (maximum rate 35% for C-corporations and 39.6% for flow thru entities).  The IC-DISC company is a tax free entity that pays no tax on the commission income received from the “producer” company until it is distributed out to the owners.  When the income is distributed out it is taxed at qualified dividend rates which are lower than ordinary tax rates (15% - 23.8% depending on income levels).  This savings is a “play” between the regular rates (maximum of 35% - 39.6%) and the qualified dividend rates (23.8% - 15%) that results in a permanent tax savings that can be quite substantial (11.2% - 20%).   For example the tax savings on a $100,000 foreign sales commission could save $11,200 to $20,000.

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