Rolling financial budgets

This past fall we worked with several businesses in creating an annual financial budget for the 2012 fiscal year.

And now that many businesses have finalized their new fiscal year annual budgets and have loaded everything into their accounting software and set up their key performance indicators (based upon those annual budgets)... let me say, Let's do it again in 90 days!

Yes, all the effort to generate the annual budget, maybe your first one developed in years may need to be revisited in 90 days... Yes, 90 days! Why go through an entire budget process again after only three months? Because the market and customer needs and demands change quickly and relying on your "annual budget" may cause you to miss opportunities for ever greater success. And sticking to your annual budget may very well be simply an excuse to reach for mediocrity and predictability rather than life changing transformation for you and your business.

Here is an article from Harvard Business Review on rolling budgets.

In an attempt to not overwhelm you or over dramatize the exercise of updating a budget, keep a broad perspective on the major budget areas or business drivers that are impacted and adjust accordingly. Ongoing communication with your team members will help to keep them engaged and focused on the priorities you see emerging on a much more current basis.

Let me know if you would like to explore this idea more fully in your business... scott@kregel-cpa.com or 215-703-3098.

Pennsylvania based employers - Local Withholding tax changes

The Local Tax Enabling Act, signed into law in 2008 establishes changes to the Employer local tax wtihholding that will be effective January 1, 2012. Outlined below are the three (3) primary changes to Act 32 of The Local Tax Enabling Act.

1) Employers in PA must withhold local earned income taxes based upon the greater of the employees resident township or borough rate or the rate imposed by the township or borough of the employer's location. See the Municipal Statistics Tax Reports to identify the applicable tax rates based upon your employee's resident jurisdiction. 

2) Employers in PA are required to obtain a completed Local Earned Income Tax Residency Certification Form from each and every employee of the company. Employers are to maintain this form as part of their permanent employee records.

3) Employers in PA with 25 or more employees are required to electronically file their local earned income tax returns.

Act 32 places the burden of complying with these new requirements on the employer. Therefore, if the employer fails to obtain and withhold the correct rate of local tax on their employees, the employer will be held responsible for the underwithheld taxes.

If you have questions about your particular local tax withholding requirement, feel free to contact our office and we'd be happy to help.

A Slap in the face... Innovation & College costs

I was blown away at an article I recently read in Money Magazine, Stop the Tuition Madness. The article took a very real and practical reality for many young families and showed that a college education experience does not have to look like it did when we went to school. This was encouraging and hopeful as we see so many clients and friends deal with the financial demands of college for their children.

In the accounting and tax industry, we are experiencing significant technological shifts in how "traditional" accounting and tax functions are performed and how we provide real value to a changing marketplace. What was encouraging to see for universities and aspiring college graduates was similar inspiration for doing things differently.

A provost of a large public university said "Sometimes you have to be slapped in the face by innovative ideas". One innovative idea allowed a young web developer to trade a 10% interest in his business for a full-tuition scholarship (read about it here). Another innovative idea that is gaining popularity is for Community Colleges to link themselves with public universities to provide a four-year track for students who maintain good grades... giving the student a degree from the university while significantly lowering the students overall four-year costs.

Technology continues to influence the mode of education through open-source e-textbooks and the utilization of skill drill testing at tutor staffed computer labs and learning centers. Accountability is also encroaching on the tradtional college/university plan. Over the next year or so most for-profit universities will be required to disclose data on graduate job placement and overall student debt burdens... revealing outcomes that the $40,000+ that is spent at the school is paying off... or not. Check out the National Survey of Student Engagement for data on student experiences in reasoning and critical thinking.

It is innovations like this in traditional industries that encourage me to continually look for ways to make smart changes in our interactions and service delivery for clients and friends.

2011 Compensation Survey - Medical Practitioners

The physician recruiting group of The Medicus Firm conducted its annual compensation survey of medical health practitioners. Overall income for physicians have remained flat since the 2010 survey. While insurance reimbursement rates remain a key practice concern, the rise of overhead costs is becoming more of a concern for the current year.

No doubt reimbursement rates will continue to be a challenge for primary and specialty care providers, but the rise of overhead costs could be a problematic sign of inefficiences in a practice. Now is as good of time as ever to review your budget and overall spending plans.

Is your CPA giving you planning advice? Is your practice organized in the most tax efficient way? Take the time to bring a fresh perspective to your practice finances and tax planning... this might be the best move you can make to address concerns of flat or decreasing incomes of physicians.

The Giving Pledge - Update

The Giving Pledge celebrates it first anniversary here in July 2011. This idea developed by Bill and Melinda Gates and Warren Buffet seeks to encourage philanthropy from the billionaires of the world. At this point, 69 billionaires have signed on to The Giving Pledge with a commitment to give at least 50% of their wealth to charity during their life or at death.

There is generational money represented from the Rockefellers and Hiltons, but the majority of those who have made the pledge are those from self-made wealth... and they are young. Mark Zukerberg (Facebook) and Pierre & Pam Omidyar (Ebay) are leading our generations interest in serving others and serving the common good.

Dustin Moskovitz and Cari Tuna (Facebook) have recently begun intentional "metaphilanthropy" (the work of philanthrophy) as their full-time pursuit.

Not only are these individuals generous, they are passing along their wealth in a tax efficient manner. For charitable gifts that they make during their lifetime, they receive a federal tax deduction at their hightest marginal tax rate (up to 35% tax rate). Upon their death, gifts made to charity are deducted from their taxable estate which saves them even more in estate taxes. There is a good reason why these individuals have amassed such significant wealth... they know how to strategically allocate their resources in mutually beneficial ways.