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July 2019

Five Financial Planning Trends You Should Know

When it comes to investing, it’s rarely a good idea to jump on a trend. But we do see certain trends in financial planning surface from time to time, and it can benefit you to understand them. Here are five trends to be aware of in today’s market.

1. Older people are working longer.

According to the American Association of Retired Persons, by 2022, the number of American workers age 50 or older is due to increase by 62%. They will consist of 35% of our workforce. Don’t automatically assume that won’t be you.

2. Increased longevity demands more financial planning.

According to the Social Security Administration, the average life expectancy of a man who is currently 65 years old is 84.3. For a woman who has reached age 65, her life expectancy is 86.7. That means ensuring you don’t outlive your portfolio is more challenging than ever.

3. Second marriages require more estate planning.

The American Psychological Association reports that 40% to 50% of married couples in the United States divorce, and many remarry. As a result, more of us must balance the legacy we leave our children with the needs of our new spouse.

4. Financial technology doesn’t replace the financial planner.

Technology plays an increasing role in managing financial tasks, from tracking spending to helping with investments. Certainly, take advantage of these innovations. But remember, a computer can’t replace the knowledge of your individual financial circumstances that a personal financial planner possesses. Don’t miss out on everything your financial professional has to offer by relying solely on tech to manage your portfolio.

5. Tax cuts create opportunities.

The Tax Cuts and Jobs Act brought sweeping changes to our tax laws in 2018. Tax brackets declined, alternative minimum tax exemptions increased, and a new 20% deduction for pass-through business income was revealed. Learn to make the most of these opportunities.

ACCOUNTING

How to Account

for Renovated Business Space

When small businesses lease office or retail space, unusual bookkeeping measures are inevitable. Additions or changes to rented space create unfamiliar accounting situations. Untangling the tax treatment for these scenarios typically triggers a cascade of questions regarding improvements, depreciation, and repairs.

Improvements: The tenant, rather than the landlord, generally pays for customization of rented space. As a tenant, you cannot designate your cost for changes to rented property as an expense. Rather, the amount spent appears on the balance sheet in an asset account called “Leasehold Improvements.” These include structural modifications such as adding walls or plumbing. The costs are depreciated over time.

Depreciation: Each element of improvement should be separately identified along with its cost. Depreciation periods vary depending on whether the improvement is floor covering, part of the building structure, or an appliance attached to the building. In most cases, the depreciation recorded for company bookkeeping is the same as the standardized amount established under tax law. When you move prior to the end of a tax-allowable period, the not-yet-depreciated improvement costs are written off upon abandonment.

Repairs: Minor repairs and maintenance are exceptions to depreciation as leasehold improvements. You may expense the cost to fix a floor tile or paint a room. Routine maintenance that makes the building fit to occupy counts as an expense on the income statement of your business, but a landlord will often pay for these measures. In addition, when the landlord pays for some of the tenant finish-out, that part of the leasehold improvements cost isn’t counted as a depreciable cost for your business.

Leadership and learning are indispensable to each other.

John F. Kennedy

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Financial planning is a continuous job, requiring careful decisions in an often complex market. Most of us could use a little inspiration from time to time.

That inspiration can take many forms. Some may enjoy reviewing charts or graphs, while others may be deeply affected by the successes and tragedies of friends and colleagues. At times, wakeup calls can come from the words of others. With that in mind, we’ve compiled three quotes about finances that may help you stay on track.

“The Stock Market is designed to transfer money from the Active to the Patient.”

From noted investor Warren Buffett, this quote illustrates the fact that investors tend to underperform when they trade frequently. Not only do they pay high commissions and face short-term capital gains tax rates, they are also often influenced by knee-jerk reactions to market events, which can hurt performance. A long-term investing strategy is the best. Look for stocks you can hold onto for many years, through market ups and downs.

“Every time you borrow money, you’re robbing your future self.”

From Nathan W. Morris, a personal finance expert and noted author, this quote suggests that when you take on debt (via a home equity loan or credit card balance, for example), you’re risking your future financial security. When you carry debt, you’re paying interest with money that could have gone toward retirement savings or other important financial goals.

“When buying shares, ask yourself, would you buy the whole company?”

From Australian entrepreneur, investor, investment advisor, and stockbroker Rene Rivkin, this quote conveys the idea that when you buy a stock, you’re buying a portion of a company. You thus become a part owner of the company, so it’s worth considering how comfortable you would be owning the entire company. Do you have confidence in its future? Concentrate your dollars on your best ideas, or the best ideas from us your financial advisors.

Don’t be afraid to call us and ask before doing something you are unsure of!

A Bit of Inspiration for Your Financial Planning . . .

Welcome New Clients and Thank you for Referring

We love giving recognition to our new friends and our wonderful existing clients who are kind enough to refer their friends and relatives to us! We are all helping each other, which is the whole point. In the last month we were fortunate to welcome 53 new tax clients and 8 new business clients. They became members of our firm’s accounting and financial planning family. We’d like to welcome them and thank all the people who have referred business to us.

As you may know, marketing for new clients costs a great deal of money, time and energy. We, like any business, need to get new clients to stay in business. Over the years, we have found that marketing takes away from the time we would rather be spending with you. We have learned that by encouraging you to refer your friends and relatives to us works for all of us. We help you, and you help us. Thank you.

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GOSSIP!

[pic]Thank you for making SHRED DAY a success! We had a lot of positive feedback and hope to do another one this fall!!!

[pic]We like to congratulate all the graduates whether its pre-school or college it’s a job well done!!!

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Surveys, surveys, surveys, it seems like every time you turn around someone would like you to take a survey. This was the first time we have ever done anything like that. It has really helped us! We are grateful to all of you who took the time out of your busy schedules and did our survey!

Tell me and I forget. Teach me and I remember. Involve me and I learn.

Benjamin Franklin

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HOW WELL DO YOU KNOW YOUR CUSTOMERS???

You can learn a great deal about your customers simply by talking with them. Don’t be afraid to call, email, or approach customers or prospective customers and engage with them about what they're buying or planning to buy in the future and what’s important to them about the purchasing experience.

Probe deeply to understand why and when they buy certain things, what they expect from you and your company, and what unmet needs they have that your business might fulfill. Their purchasing motivations may be related to pricing, convenience, selection, timing, or levels of service or it may be something you haven’t even considered.

Find out what brings top customers back again and again, what brings occasional customers in, and what prompts new customers to give your business a try. Be sure to ask people what they know and think about your competitors and why they might choose to purchase either from you or from another company. Inquire about what competitors may be doing to attract or reward customers and stay ahead of trends.

If yours is a B2B business, get to know whoever is responsible for the decision to buy your products or services, and be familiar with the company’s procurement processes and protocols.

If you know what drives your customers and the challenges facing them, you can address their needs and offer them solutions. Conducting your own market research can be as simple as just chatting with them.

Small-business owners don’t need an accounting or financial background to use a few key numbers to help their company thrive. To keep the business on the right path for ongoing success, entrepreneurs should regularly examine central measures in their company’s financial reports. This basic information can transform routine operations into productive actions.

This review begins with an assessment of overall profit trends as well as an examination of the profitability of specific products or projects. To do this, you must first ensure that the data being reviewed is providing useful and accurate information.

Keep in mind that you don’t have to be a numbers person to recognize whether you have solid financial reports. But before you can review what your figures convey, they must be understandable. If your bookkeeping procedures and formats are off track, evaluating them won’t help. If your books need a bit of organization, start with classifications.

Classify for Clarity

Your bookkeeper needs sufficient information to properly categorize all expenditures and revenue. Expense accounts should be grouped in a fashion that makes sense to you. You may want to generate reports by classification for various projects or product lines. This requires clearly identifying the classes for all amounts spent or earned. Some types of businesses may have recurring projects for ongoing clients. If you’re one of these, each client may be a classification.

Having the right classification system and the procedures for providing category information to your bookkeeper allows you to create functional income statements. Examine the report by class to ensure that all sales have been properly classified. Confirm that all expenses are appropriately applied to the correct classes.

Now you can easily identify the profitability of projects, product lines, or specific clients. Better yet, you can generate an income statement that compares the period that recently ended with the same period a month ago or a year ago. This gives you the opportunity to quickly see trends in revenue categories and types of spending.

Balance for Better Business

Accurate bookkeeping relies on double-entry accounting. This is a system where every increase in cash is the result of a balanced increase in either debt or profit (from adding revenue). Every decrease in cash is triggered by either a decrease in debt or less profit (due to an expense). The only exception is that some cash decreases may add a different type of asset other than money, such as equipment or other property.

Regardless of what classification applies to incoming or outgoing cash, your bank account is always impacted. Making sure you’ve captured all bank transactions is simply a matter of reconciling your bookkeeping with your bank statements. Asking your bookkeeper for this reconciliation report ensures that all transactions are recorded and reconciled.

The company balance sheet is therefore an important report to inspect. This is the summary of your assets balanced against your liabilities owed and your business capital. The latter includes your investments plus cumulative profits you have not taken out of the business. Obviously, your aim is to keep enough cash and incoming receivables to cover upcoming bills owed. And don’t let debt vastly overtake capital.

This ongoing evaluation of financial statements will provide the foundation needed to build a solid business that consistently delivers outstanding products and services.

ACCOUNTING BASICS

No Accounting Degree? No Problem

Quick Quiz

Each month I’ll give you a new question.

Just email me at Lisa@ or call 610-265-4122 for the answer.

This month’s question:

What hide was first used to cover baseballs in 1975?

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Customers act rudely or become angry for lots of reasons. Some are justified; some aren’t. The way you respond can make the difference between a customer who is satisfied with the outcome and one who goes on to trash your company on social media and cause you endless aggravation.

The next time you encounter a challenging client, try the following tips for coping with belligerent customers and diffusing tense situations.

Remain calm. When a customer is belligerent or acting rudely, there is nothing to be gained by responding in kind. That will only escalate hostilities. Maintaining control of yourself will go a long way toward gaining control of the situation.

Listen patiently. Usually an irate customer needs to vent and wants to feel validated in his or her complaint. Let the person get it off his or her chest. When the customer is done talking, reintroduce yourself, summarize what you’ve heard, and ask questions to further clarify the situation. Express sympathy for the unpleasant customer experience. Use the person’s name when possible.

Don’t take it personally. Don’t allow the exchange to become personal. Focus on the problem or situation that is causing the customer distress. Demonstrate respect and understanding. Body language is critically important here, so maintain eye contact, open posture, and uncrossed arms. Show that you’re paying attention to the problem.

Apologize gracefully. A simple, straightforward statement will usually suffice: “I’m sorry you had that experience with our product or service. Let’s see what we can do to make things right.” Don’t dwell on who’s wrong or whose fault it is. Your responsibility in that moment is to resolve the situation.

Learn from it. Dealing with obnoxious customers is never fun. It requires patience, skill, understanding, and poise. Sometimes, however, a rude customer experience will bring an important issue to your attention or provide valuable feedback about your products, processes, and services. Apply this input to create more positive customer experiences in the future.

CUSTOMER RELATIONS

What If the Customer Isn’t Always Right?

Clairmont, Paciello & Co., PC

250 Tanglewood Lane,

King Of Prussia PA 19406

This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.

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