How Your Business Can Use AI to Strengthen Customer Service

These days, customers expect fast and personalized service and support from the businesses they patronize. AI can help you meet their high expectations without overburdening your employees. But as in other contexts, AI in customer service is usually only as effective as how it’s trained and used. To improve responsiveness and give employees more time to resolve complex issues, you must use AI properly.

5 potentially productive uses

AI can help your business:

1. Provide immediate answers, 24/7. AI-powered chatbots and virtual assistants can answer common questions, day or night. You might train them to explain return policies, provide store hours, check order status and troubleshoot simple problems. To deliver helpful answers, your AI tool should draw from accurate, regularly updated sources — such as your website and product or service instructions. To reduce the likelihood that AI will provide inaccurate or inappropriate responses, set clear limits on where it may gather information and what it may discuss with customers.

2. Classify and route requests. AI can analyze incoming phone calls, emails, chat messages and support tickets to help determine your customers’ needs, issue types and urgency levels. Then, it can route requests to employees who can address their concerns. A billing question, for example, might be routed to accounts receivable. Meanwhile, a technical problem might be assigned to a product specialist. Some AI systems feature sentiment analysis to identify frustrated customers and prioritize their cases.

3. Support customers on social media. Customers often turn to Facebook, Instagram and other social media platforms to ask questions, report problems or post complaints. AI tools can monitor direct messages and comments made to your accounts, provide automated greetings, and acknowledge messages. You might also instruct your AI model to draft responses for employee approval. Facebook, for instance, supports automated Messenger greetings. However, you should instruct your AI tools to alert an employee about any sensitive or confidential messages, rather than responding automatically.

4. Empower service staffers. AI doesn’t have to communicate directly with customers to be valuable to your business. It can work behind the scenes to summarize a customer’s history or locate answers for staffers to convey. During a live customer service interaction, AI may recommend troubleshooting steps or identify appropriate actions. It can also prepare call notes and update records. This support may shorten response times and help employees provide better service.

5. Identify recurring problems. Customer conversations generally contain many different pieces of information about your business’s products or services. AI can analyze these interactions to uncover recurring complaints, common questions and emerging trends. AI conclusions can help you take corrective action by improving your offerings, revising product instructions, and updating sales and support training. And AI can analyze which issues consume the most support time, helping you decide where improvements may yield the greatest return.

Understand potential shortcomings

Of course, AI isn’t always the best option for customer service. It can misunderstand requests, overlook context and generate confident-sounding but incorrect answers. And customers may become frustrated if they can’t reach a live person quickly. In addition, keep close tabs on privacy and security issues, particularly if conversations contain payment, health or other sensitive information.

Finally, your business should regularly test its AI systems, restrict their access to confidential data and establish escalation rules. Employee intervention is especially important if the system can’t resolve an issue or a supervisor believes something requires human judgment. Instruct employees to take any AI concerns to their managers immediately.

An extension, not a replacement

Ultimately, AI works best as an extension of — not a replacement for — your customer service team. Its greatest strength is automating routine tasks so employees can focus on nuanced or complicated matters. Contact FMD to discuss costs and potential savings of AI tools.

If You Have a Loved One with a Disability, Consider a Special Needs Trust

Estate planning can take on added significance when a child, spouse or other loved one has a disability. Leaving assets directly to that person — even with the best intentions — could interfere with his or her eligibility for certain means-tested government benefits. A special needs trust (SNT), sometimes called a “supplemental needs trust,” may be the answer.

Assist without jeopardizing eligibility

An SNT can help a loved one with a disability maintain eligibility for means-tested government programs while providing additional financial support. Supplemental Security Income (SSI) provides monthly payments to qualifying individuals with limited income and resources, while Medicaid can provide valuable health care coverage. For SSI purposes, an individual generally may have no more than $2,000 in countable resources. Medicaid eligibility rules vary by state and eligibility category.

Not all property counts toward the SSI resource limit. For example, a home used as the beneficiary’s principal residence generally is excluded, as is one vehicle used for transportation. Certain life insurance policies, burial funds and spaces, household goods, and personal effects may also be excluded, subject to applicable requirements. Because the rules governing which assets count can be complex, evaluate eligibility based on the beneficiary’s particular circumstances.

Word the trust carefully

A properly structured SNT allows assets to be held and managed by a trustee for the benefit of a person with a disability without being treated as the beneficiary’s countable resources for SSI purposes. The beneficiary generally can’t have unrestricted access to or control over the trust assets. Instead, the trustee determines when and how distributions are made according to the trust agreement and applicable benefit rules.

With those limitations in mind, an SNT’s assets can pay for virtually anything government benefits don’t cover, such as unreimbursed medical expenses, education and training, transportation (including wheelchair-accessible vehicles), insurance, computers, and home modifications. It can also pay for “quality-of-life” needs, such as travel, entertainment, recreation and hobbies.

Keep in mind that the trust must not pay money directly to the beneficiary. Rather, it must distribute funds — on behalf of the beneficiary — directly to the third parties providing goods and services to him or her.

Choose the right trustee

Selecting the right trustee is an important part of establishing an SNT. The trustee will manage and invest trust assets, make distributions, maintain records, and comply with the trust document.

Just as important, the trustee should understand your loved one’s individual circumstances and how trust distributions may interact with public benefits. You might choose a trusted family member, a professional trustee or a combination of individuals and professionals, depending on your situation.

Coordinate the trust with your estate plan

Creating an SNT is only one part of the process. Your other estate planning documents and beneficiary designations should be coordinated with the trust. For example, a will or revocable trust can direct a beneficiary’s inheritance into the special needs trust rather than to the individual outright. Life insurance and certain other assets may also be structured to provide funding for the trust.

Other family members and friends should also be aware of the plan. Those who want to make gifts or donations should do so directly to the trust and not to the loved one with special needs.

Plan for long-term support

An SNT can help provide financial security while preserving access to important benefits. But the rules governing these trusts and government programs are complex. FMD can help determine how an SNT fits into your overall plan and can best support your loved one for years to come.

Assessing Your Business’s Fraud Risks

Fraud risks change as your business and its external market conditions evolve. Controls that were previously effective may no longer be appropriate if, for example, you’ve added employees, revised your payment methods, switched vendors or opened new locations. Moreover, fraud perpetrators may use increasingly sophisticated schemes to gain access to your systems. A formal fraud-risk assessment can help you identify control gaps and fortify your defenses against asset misappropriation, financial misstatement and corruption schemes.

Review records and controls

Forensic accountants are often engaged to conduct a focused, objective review of fraud risks and the controls designed to address them. This assessment may include discussions with management and employees to understand how transactions are authorized, processed and recorded. Examples of documents that forensic accountants may review are:

• Bookkeeping records,

• Invoices,

• Bank statements,

• Payments,

• Journal entries, and

• Financial reports.

The assessment may also cover vendor and payroll files, electronic payment records and user-access logs. Management can assist by ensuring easy access to records and personnel. Unexplained delays, inconsistent explanations and missing or incomplete documents can be red flags that warrant further attention.

The engagement’s scope should reflect your business’s size, systems, industry and risks. Although a fraud-risk assessment can help you identify and address vulnerabilities, it won’t uncover every instance of fraud. So ongoing vigilance is essential.

Follow the transactions

Depending on the risks identified, forensic accountants may look for altered, forged or missing documents, management overrides, unusual transaction patterns, and other anomalies. For example, unusual or unsupported journal entries may warrant closer scrutiny, particularly if they’re inconsistent with normal business activity or posted by unexpected individuals. Unreconciled accounts and differences between the general ledger and subsidiary ledgers also warrant attention. An independent count of inventory or cash can help identify missing assets.

Payroll deserves particular attention. Missing or unaccounted-for workers could indicate “ghost” employees — nonexistent workers whose pay is diverted by a perpetrator. Management can help identify these schemes by reconciling payroll to human resources records and tax filings, confirming active workers with supervisors, reviewing duplicate bank accounts or addresses, and independently approving payroll changes.

Management should also watch for behavioral red flags. For instance, fraud perpetrators may avoid taking vacation or sick time for fear someone will uncover their activities, or they may become defensive. Such behavior isn’t necessarily proof of wrongdoing and should be evaluated alongside transactional evidence and other facts.

Protect the investigation

If a fraud-risk assessment uncovers suspicious activity, a separate investigation may be appropriate. Management should preserve relevant evidence and consult legal counsel and a qualified forensic specialist before confronting a suspected employee. A documented investigation plan can help maintain confidentiality, protect evidence, and address legal and employment considerations. Management also shouldn’t assume that one employee acted alone because fraud may involve collusion among employees or people outside the business.

Warning signs don’t always indicate fraud. Accounting irregularities may stem from genuine errors or an ill-designed process. Honest mistakes can be corrected and avoided in the future with better training, process improvements or more effective controls.

Make reporting safe and accessible

According to the Association of Certified Fraud Examiners’ Occupational Fraud 2026: A Report to the Nations, tips were the initial detection method in 43% of the cases studied, and more than half of those tips came from employees. The median fraud scheme lasted 12 months before detection, reinforcing the value of giving people practical ways to speak up.

If your business hasn’t established a process for employees, vendors, customers and others to report suspected misconduct, consider doing so. Your reporting process should provide accessible channels, route allegations away from anyone who may be implicated, prohibit retaliation consistent with applicable law and protect confidentiality to the extent reasonably possible.

Turn findings into stronger controls

A fraud-risk assessment should conclude with an action plan: Assign responsibilities, set deadlines for correcting deficiencies and follow up to confirm that revised controls are working. An external forensic accountant can provide an independent perspective, but management remains responsible for the business’s fraud controls and response procedures. Periodic reassessment can help those controls keep pace as the business and its fraud risks change. Contact FMD to discuss your business’s fraud risks and determine whether your existing controls adequately address them.

New Law Extends Tax Relief for Disaster-Related Personal Casualty Losses and More

President Trump recently signed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act (LaMalfa Act) into law. Among other things, it extends tax relief for victims of certain federally declared disasters. That relief temporarily removes two significant barriers to claiming the personal casualty loss deduction. This means victims of presidentially declared disasters in recent years who normally couldn’t claim a casualty loss deduction may now be able to claim one. It also extends certain relief for wildfire victims.

Timing of the LaMalfa Act’s provisions

The LaMalfa Act generally extends tax relief provided by the Federal Disaster Tax Relief Act, signed into law in December 2024, and briefly extended by the One Big Beautiful Bill Act (OBBBA). Specifically, the new law extends the relief to qualifying disasters whose incident periods begin before January 1, 2027.

Important: Relief provided by the act doesn’t apply to disasters declared only at the state level, even if they now qualify as eligible disasters under the OBBBA for purposes of the personal casualty loss deduction in general.

Overall, the LaMalfa Act generally applies to tax years beginning after December 31, 2024, superseding the earlier temporary provisions for those years. It covers qualifying federally declared disasters whose incident periods begin on or after December 28, 2019, and before January 1, 2027.

Tax relief extended by the LaMalfa Act

A casualty loss deduction can offset some unreimbursed costs if an eligible disaster damages your home or personal property. However, there are several rules and limits to the deduction. For example, the deductible loss is generally the smaller of the property’s adjusted tax basis or decline in value, reduced by any insurance or other reimbursement. If reimbursement covers the entire loss, you can’t claim a casualty loss deduction.

If your insurance doesn’t cover the entire loss, then without the tax relief extended by the LaMalfa Act, you generally must subtract $100 (per casualty event) from the uncovered amount. But under the extended relief, you must subtract $500 per qualifying casualty event. This may sound like a negative, but the relief makes two other changes that, for many taxpayers, will provide tax benefits that far outweigh any negative impact of this $500 reduction.

First, the relief eliminates the income-based floor. Without the relief, a floor equal to 10% of adjusted gross income (AGI) applies. So you can deduct only the uncovered loss (reduced by $100 per casualty event) that exceeds 10% of your AGI for the year you claim the loss deduction. If, say, you had one casualty loss event, your AGI is $100,000 and your casualty loss (after subtracting insurance proceeds and $100) is $11,000, you can deduct only $1,000 on your federal income tax return.

For a qualified disaster-related personal casualty loss under the relief extended by the LaMalfa Act, the 10% floor doesn’t apply. So under the same example, your casualty loss deduction would be 10,600(11,000 − the additional $400 per casualty loss you must subtract).

Second, the relief allows taxpayers to claim a qualified disaster-related personal casualty loss without having to itemize deductions. Itemizing is beneficial only if your total itemized deductions exceed the standard deduction for your filing status. So without the relief, if your total itemized deductions don’t exceed your standard deduction, losses otherwise eligible for the casualty loss deduction won’t provide any tax benefit.

Expanded tax relief for wildfire payments

Generally, certain wildfire relief payments can be excluded from federal taxable income. Under the LaMalfa Act, the exclusion may apply even if you don’t receive compensation until years after the wildfire. Previously, qualifying payments generally had to be received in 2020, 2021, 2022, 2023, 2024 or 2025. The LaMalfa Act eliminates that 2025 payment cutoff, extending the potential tax benefit to later payments.

The exclusion generally covers qualifying payments made to compensate individuals for losses, costs or damages associated with certain federally declared wildfire disasters. Eligible expenses and losses may include additional living costs, wages lost and not reimbursed by an employer, and financial damages related to personal injury, death or emotional distress. To qualify, the wildfire must have been part of a federally declared disaster occurring after December 31, 2014, and before January 1, 2027.

There are important limitations. The exclusion applies only to losses or expenses not reimbursed by insurance or another source. In addition, taxpayers generally can’t receive a double tax benefit: Expenses covered by an excluded wildfire relief payment can’t also be used to claim a deduction or credit, and the tax-free payment can’t be used to increase the basis of affected property.

Do you qualify under the new law?

Recovering from a natural disaster can bring significant financial challenges, particularly when insurance doesn’t cover the full extent of the damages. The LaMalfa Act provides relief by allowing more affected taxpayers to deduct qualifying personal casualty losses or exclude wildfire relief payments. Because eligibility and timing depend on the circumstances of the disaster and the loss, contact FMD to determine whether a deduction or exclusion is available and how best to claim it.

Don’t Overlook the GST Tax when Transferring Wealth to Younger Generations

If your estate plan includes gifts, bequests or other transfers to grandchildren, great-grandchildren or other beneficiaries decades younger than you, the generation-skipping transfer (GST) tax deserves careful attention. Without proper planning, transfers that skip a generation can potentially trigger a significant federal tax in addition to gift or estate taxes.

GST tax rules at a glance

The GST tax is designed to prevent families from avoiding transfer tax at one or more generational levels. Generally, this tax applies to certain transfers to a “skip person.” A skip person may be a grandchild or another family member who’s two or more generations below the person making the transfer. An unrelated individual generally is considered a skip person if he or she is more than 37½ years younger than the transferor.

GSTs generally fall into three categories: direct skips, taxable distributions and taxable terminations. Depending on the circumstances, the GST tax may apply to an outright gift or bequest to a skip person, a distribution from a trust, or a termination of a beneficiary’s interest that leaves only skip persons with interests in the trust.

The GST tax rate is 40%. Fortunately, a $15 million GST tax exemption is available. It’s separate from the $15 million gift and estate tax exemption.

But under the annual gift tax exclusion, you can exclude from gift tax certain gifts of up to the annual exclusion amount — $19,000 per recipient for 2026 (twice that if your spouse elects to split the gift with you or you’re giving community property) — without using up any of your gift and estate tax exemption. And annual exclusion gifts are generally also exempt from the GST tax.

Beware of a few pitfalls

Automatic allocation rules for the GST tax exemption can reduce the risk that you’ll inadvertently fail to allocate it to GSTs. For example, the GST tax exemption generally will be automatically allocated to certain direct skips and to transfers to trusts that meet the definition of a “GST trust.”

Automatic allocation can be useful, but it doesn’t always produce the desired result. For example, depending on the trust’s beneficiaries and your estate planning objectives, the exemption may be allocated to a trust that has little chance of generating a GST tax, wasting your exemption.

To avoid this result — and preserve your exemption for transfers that are more likely to trigger GST taxes — elect to opt out of automatic allocation on a timely filed gift tax return. If you neglect to opt out, you may still be able to obtain relief from the IRS. Doing so allows you to make a late election so long as you can demonstrate that you acted reasonably and in good faith.

Another potential issue can arise when a trust has both skip-person and non-skip-person beneficiaries and the GST exemption has been allocated to only part of the trust. The trust then will have an “inclusion ratio” between zero and one.

A trust’s inclusion ratio refers to the portion of a trust’s assets that will be subject to the GST tax if a taxable event occurs. If you haven’t allocated any of your exemption to a trust, its inclusion ratio is 1.0. If the exemption protects a trust’s assets, its inclusion ratio is 0.0. So, if the inclusion ratio is, for example, 0.5, then only 50% of the distributions to skip persons will be exempt from the GST tax.

In some situations, it may be possible to divide, or sever, a trust into separate trusts so that one has an inclusion ratio of zero and the other has an inclusion ratio of one. This approach may make it easier to administer the trusts and direct GST-exempt assets toward skip persons.

Review your GST tax strategy regularly

If your estate plan includes multigenerational trusts or significant transfers to grandchildren or other younger beneficiaries, review your GST exemption allocation, trust provisions and previous gift tax returns periodically. FMD can help determine whether your current strategy is using the available exemption effectively and identify opportunities to minimize unnecessary GST tax exposure.

A Small Business Primer on Expense Deductions

Whether your small business is new or you’ve run it for decades, you may not fully understand which expenses are potentially tax-deductible and which aren’t. After all, that’s why you have a tax advisor! But it’s worth keeping up with tax law because your daily decisions could significantly reduce your business’s taxable income — and increase its profitability.

The basics

Deductible business expenses must be both ordinary (common and accepted in your field) and necessary (helpful and appropriate for your business). Expenses don’t, however, need to be indispensable to qualify as necessary.

The cost of inventory is recovered through “cost of goods sold,” so it’s not generally deducted immediately. And the cost of buildings, equipment and other capital assets is usually recovered over time through depreciation or amortization. Personal expenses aren’t deductible at all. However, the business portion of mixed-use expenses, such as internet and phone service or vehicle costs, may qualify as deductible if you can support your cost allocation.

Travel and vehicle costs

Reasonable expenses for business travel away from your tax home — including transportation, lodging and certain incidental costs — may be deductible. Convention expenses may also qualify when attendance benefits your business, but restrictions apply to events held outside North America.

If you use your own vehicle for business travel, you may deduct eligible costs using either the actual expense method or the IRS standard mileage rate method. Either way, maintain a mileage log that records dates, destinations, distances and business purposes. Note that ordinary travel between your home and regular workplace is considered a nondeductible personal commuting expense. This is true even if you work on your laptop or make business calls during the trip.

Historically, small business owners recovered the cost of vehicle purchases over several years through depreciation. Current tax law may allow certain qualifying vehicles to be written off more quickly and, in some cases, fully in the first year, through 100% bonus depreciation or Section 179 expensing. To claim either tax break for the 2026 tax year, you generally need to place the vehicle in service before year end. Passenger-vehicle limits, Sec. 179 limits and business-use requirements may restrict the deduction.

New meal and entertainment rules

Beginning in 2026, most meals provided to employees through an employer-operated eating facility or for the employer’s convenience aren’t deductible (with limited exceptions). Recreational events primarily benefiting non-highly compensated employees — such as holiday parties or company picnics — remain fully deductible under the applicable rules.

Business meals are typically 50% deductible so long as:

• They aren’t lavish or extravagant,

• The owner or an employee is present, and

• They have a valid business purpose.

However, entertainment expenses, including event tickets and most club dues, aren’t deductible. But if you purchase food during an entertainment activity with a business purpose, you may be able to deduct it if the bill itemizes costs separately.

Business gifts usually are deductible up to $25 annually per recipient. You may exclude incidental engraving, packaging and shipping costs from that limit if they don’t add substantial value to the gift.

Documentation is critical

We can apply these expense deduction rules for your business, but only you can supply the facts and documentation supporting each expense. Hold on to itemized receipts, mileage logs and other business records (and don’t rely solely on bank or credit card statements). Contact FMD for help claiming deductions available to you and identifying tax-saving opportunities throughout the year.

Non-U.S. Citizens Face Unique Estate Planning Challenges

Estate plans are often designed around rules that assume spouses and other family members are U.S. citizens. When one spouse isn’t a citizen — or when an individual owns U.S. property but lives abroad — those assumptions can create unexpected estate tax consequences.

Citizenship, domicile, and the location and type of property owned can all affect how U.S. gift and estate taxes apply. For families with international connections, understanding these distinctions is an important first step toward avoiding unnecessary taxes.

Domicile matters more than you might think

Noncitizens can become subject to U.S. gift and estate taxes if they’re domiciled in the United States. Under IRS guidelines, an individual becomes domiciled in a country “by living there, for even a brief period of time, with no definite present intention of later removing therefrom.”

The IRS considers several factors in determining “present intention,” including:

• The amount of time spent in the United States;

• Green card or visa status;

• Location of business interests and residences;

• Location of health care providers, jobs, places of worship and community ties;

• Place where vehicles are registered and where the individual is licensed to drive;

• Place where the person is registered to vote; and

• The domiciles of friends and family members.

Noncitizens who are deemed to be domiciled in the United States are subject to U.S. gift and estate taxes on their worldwide assets, much like U.S. citizens. And, like U.S. citizens, these U.S. “domiciliaries” are eligible for the federal gift and estate tax exemption ($15 million for 2026) and the gift tax annual exclusion ($19,000 per recipient for 2026).

Marriage to a noncitizen changes the rules

A significant difference between U.S. citizens and noncitizens, and a potential tax trap for the unwary, is that the marital deduction isn’t available for transfers to noncitizens, even if they’re U.S. domiciliaries. Ordinarily, married couples can transfer an unlimited amount of assets between each other — during their lifetimes or at death — without triggering gift or estate taxes. However, estate planning strategies that rely on the marital deduction may not be available to noncitizen domiciliaries.

There are ways to manage this limitation. For example, during life, an individual can make tax-free gifts to his or her noncitizen spouse using a special annual exclusion. For 2026, up to $194,000 of qualifying present-interest gifts may be transferred to a noncitizen spouse without gift tax. This is substantially higher than the regular $19,000 annual exclusion. Larger transfers may also be possible by using the donor spouse’s available gift and estate tax exemption.

Beware of a tax trap

A person who’s neither a U.S. citizen nor a U.S. domiciliary — that is, a “nonresident alien” — is subject to U.S. gift and estate taxes only on assets that are “situated” in the United States. Intangible property — such as corporate stock, bonds or promissory notes — is generally deemed to be situated in the United States for estate tax purposes (but typically not for gift tax purposes) if it’s issued by a domestic corporation or by a U.S. citizen or the U.S. government.

Here’s where the potential tax trap comes into play: The exemption amount for U.S.-situated assets owned by nonresident aliens is only $60,000, compared with $15 million for U.S. citizens or domiciliaries. Depending on the value of a person’s property in the United States, this can result in significant gift and estate taxes.

In some cases, tax treaties between the United States and a nonresident alien’s country of citizenship may provide some relief. Otherwise, one strategy to avoid these taxes may be holding the assets through a properly structured and operated foreign corporation.

Turn to us for help

If you or your spouse is a noncitizen, talk to us about the potential gift and estate planning ramifications. FMD can evaluate your citizenship, domicile, asset ownership and family circumstances and develop a plan that addresses the special tax rules that may apply.

4 Tips to Help Seasonal Businesses Enhance Cash-flow Management

Most businesses experience cash-flow fluctuations, but the swings can be especially intense for seasonal businesses. Revenue may rise sharply during busy periods and fall in slower seasons, yet many expenses continue year-round — and some must be paid months before sales peak.

This timing mismatch can leave an otherwise profitable business short on cash. Here are four ways to make cash flow more predictable and reduce the risk of a shortfall.

1. Map your cash-flow cycle

Start by identifying when cash typically flows in and out of your business. For example, a lawn-and-garden distributor might purchase materials and build inventory in the fall, ship products in the spring and wait until early summer to collect customer payments. In the meantime, it must cover payroll, storage, utilities, transportation and other overhead costs.

Don’t confuse profit with available cash. A credit sale may appear as revenue on the income statement weeks before the customer pays. Conversely, purchasing inventory reduces cash but generally doesn’t produce an immediate expense, and repaying loan principal reduces cash without affecting your bottom line.

Because an income statement doesn’t show the timing of cash receipts and payments, use it in conjunction with a rolling cash-flow forecast. A 13-week forecast can provide a detailed short-term view and can be supplemented by a 12-month forecast covering the full seasonal cycle. Update the forecasts using current revenue, receivables, inventory, payroll and upcoming payments.

A forecast reflects the conditions management expects and the actions it plans to take. You might also prepare cash-flow projections based on hypothetical assumptions to explore “what-if” scenarios. For instance, what would happen if demand falls short, customers pay late, costs rise or bad weather shortens your selling season? Projections can help you decide in advance which expenses you could defer or reduce in a pinch.

2. Make data-driven spending decisions

A short selling season leaves little time to recover from excess spending. Use prior-year sales, current orders and other relevant data to develop realistic inventory and staffing plans. Track how quickly products are selling throughout the season. This gives you time to adjust future orders or promote slow-moving items before they lose value.

When planning seasonal staffing, consider the full cost — not just hourly wages. Recruiting, training, payroll taxes, workers’ compensation insurance and lower initial productivity may add to the cost of temporary workers.

Apply similar discipline to marketing. Establish a preseason budget and decide how you’ll measure results. Compare each campaign’s cost with the revenue and gross profit it helps generate, where measurable. This analysis can show which marketing activities are paying off and which should be adjusted or discontinued.

3. Monitor working capital closely

Small changes in working capital can substantially affect available cash. To enhance collections, be sure to:

• Invoice customers promptly,

• Provide clear payment terms, and

• Follow up consistently on overdue balances.

Depending on the business, deposits or advance payments on large orders may bring in cash before related bills are due. Early-payment discounts are another option, but weigh the cash-flow benefit against the effect on profit margins.

Also review vendor terms and volume discounts carefully. Buying more than you need ties up cash and may leave you with inventory that becomes obsolete or must be marked down. If your forecast indicates that you won’t have enough cash to pay an invoice on time, contact the supplier before it’s due to request an extension or payment plan. Delaying payment without a vendor’s approval could damage the relationship or trigger late fees.

Current accounting records are essential. Regularly review receivables and payables aging schedules, inventory reports, bank balances and upcoming obligations. Reconcile bank and credit card accounts promptly so you can investigate errors or unexpected charges.

4. Build reserves and arrange financing early

Ideally, cash retained from the peak season will cover slow-season expenses and help you prepare for the next cycle. Establish a reserve target that includes a cushion for unexpected costs or weaker-than-anticipated demand. Consider designating a separate account for those funds to discourage discretionary spending.

If your reserves aren’t enough to cover your next cycle, consider applying for a line of credit before cash becomes tight. Lenders may request current and historical financial statements, cash-flow projections, tax returns, debt information, inventory reports, and receivables and payables aging schedules. Accurate, timely records can strengthen your application.

Review interest rates, fees, collateral requirements, repayment terms and financial covenants carefully. A line of credit should cover temporary working-capital gaps, not ongoing operating losses.

Are you ready for your next busy season?

After the busy season, compare actual results with your budget and forecast. Review revenue, gross margins, labor costs, inventory levels, collections and marketing performance. Apply what you learn to your next cycle.

FMD can help you analyze your operating cycle, prepare rolling forecasts and maintain accounting records that provide a clearer view of your cash-flow needs. Contact us to get started.

IRS Releases Guidance on the Paid Family and Medical Leave Tax Credit

Offering paid family and medical leave (PFML) can help businesses attract and retain employees while providing workers with financial support when they need time away to care for themselves or their families. The Section 45S PFML tax credit can help eligible employers offset some of the costs.

The One Big Beautiful Bill Act (OBBBA) made the credit permanent and expanded it beginning in 2026, potentially making it available to more employers. The IRS has issued Notice 2026-28 to provide guidance on the expanded credit. Employers that offer PFML should familiarize themselves with the new rules to determine whether they qualify and how best to take advantage of the credit. Employers that don’t currently provide PFML may want to consider whether doing so might now be more feasible because of the expanded credit.

What’s the PFML tax credit?

The PFML tax credit was created by the Tax Cuts and Jobs Act (TCJA) and is available to employers that provide qualifying employees with paid leave consistent with the Family and Medical Leave Act (FMLA), regardless of whether the FMLA applies to them. Under the TCJA, eligible employers can claim a general business credit for a portion of the actual cost of PFML wages that have been paid out, with the percentage depending on how PFML wages compare with the employee’s normal wages.

If PFML wages are 50% of normal wages, the credit is 12.5% of PFML wages paid. The rate climbs to 25% ratably as PFML wages increase from 50% of normal wages to 100%. The amount of PFML wages for which an employer can claim the credit is limited to 12 weeks per employee per year.

A qualifying employee is a full- or part-time employee who’s worked for the employer at least one year. The employee also can earn no more than 60% of the “highly compensated employee” limit (for 2026, no more than $96,000).

The credit is available only for leave taken after the employer has a written PFML policy in place. Among other things, the policy must provide at least two weeks of PFML annually (prorated for part-time employees), FMLA protections and a PFML rate of payment of at least 50% of normal wages. Under the TCJA, leave paid by a state or local government or required by state or local law wasn’t taken into account when determining whether an employer’s written policy includes a PFML rate of at least 50% of normal wages.

Notably, an employer must reduce its deduction for wages (or salaries) paid or incurred by the credit amount. Also, wages used to determine any other general business credit may not be used to calculate the PFML credit.

What are the changes under the OBBBA?

The OBBBA modifies the PFML credit in several critical ways. Here are some of the most important:

• Instead of calculating the credit based on actual PFML wages paid, an employer can opt to calculate the credit based on premiums paid or incurred for insurance policies that provide PFML for qualifying employees — regardless of whether any leave is actually taken in the tax year.

• Leave required by state or local law or paid for by state or local governments is taken into account when determining the amount of PFML the employer provided for purposes of determining eligibility for the credit but not when calculating the amount of the credit.

• Qualifying employees are limited to those customarily employed for at least 20 hours per week.

• Employers can elect to include employees after six months of employment.

• Employers can’t claim a deduction for the portion of premiums paid or incurred that’s equal to that portion of the PFML credit claimed.

The new guidance focuses on the OBBBA’s “premium method” (as opposed to the “wage method”) for determining the credit amount.

The premium method guidance

The guidance explains that an employer can claim the PFML credit only for a premium that funds a benefit for which a credit would be available under the wage method if the benefit were actually paid — what’s referred to as “creditable coverage.” If any portion of a premium funds leave that wouldn’t qualify for the credit under the wage method, that portion also isn’t eligible for the credit under the premium method.

The following types of coverage aren’t considered creditable:

• Coverage for leave that isn’t PFML,

• Coverage for leave that would be payable to a nonqualifying employee (evaluated at the time the premium is paid or incurred),

• Coverage for leave required by state or local law or paid for by a state or local government, and

• Coverage that provides a benefit other than wages.

The guidance also addresses the allocation of a premium for coverage that 1) provides both qualifying PFML and other types of leave, or 2) applies to both qualifying and nonqualifying employees. In such circumstances, an employer can use any “reasonable” allocation method that’s consistent with the policy terms and supported by contemporaneous records.

The IRS will allow an employer to use the wage method for some leave and the premium method for other leave. But the employer can’t use the wage method to claim the credit for wages paid if it also claims a credit using the premium method for coverage that funds such benefits (or vice versa).

Relying on the guidance

The IRS expects to issue proposed regulations that will mirror this guidance. These regulations will apply prospectively, but taxpayers can rely on the current guidance for tax years beginning after 2025 and before the proposed regulations are issued. If you have questions regarding the PFML credit, contact FMD.

Prepare a Successor to Lead Your Family Business

Are you planning to retire or move on from your family business in the next five to ten years? If so, and you know who’ll succeed you, start preparing that person to lead. To reveal knowledge gaps, minimize friction among relatives and employees, and give everyone greater confidence in the next leader — and the business’s future — you should begin the preparation process as early as possible.

Build experience

Your chosen successor should understand the family business from the ground up. Rotating through key functions provides firsthand knowledge of how decisions affect customers, employees, cash flow and profitability. It also helps this future leader earn employees’ respect instead of appearing to have been handed the top job because of family connections.

Customer-facing work is particularly valuable. The successor candidate should accompany salespeople in meetings to learn how to identify customer needs, prepare proposals, discuss pricing and maintain critical relationships. Time spent in customer service can help build empathy and demonstrate how reliability, accuracy and timely communication influence customer loyalty. Marketing experience can develop skills in project management, brand stewardship, market analysis and measuring the return on promotional spending.

Financial training is important, too. Your successor must know how to:

• Read financial statements,

• Prepare and monitor budgets,

• Manage cash flow,

• Comply with tax obligations,

• Evaluate capital expenditures, and

• Work effectively with internal and external financial specialists.

To make effective strategic decisions, the successor will further need to understand how compensation, employee benefits and other operating costs affect the business.

Finally, exposure to HR can prepare a future leader to recruit, retain and evaluate workers. It can also prepare your successor to handle sensitive employee matters.

Standards and progress

Assuming the successor candidate is a family member, you may feel uncomfortable conducting candid performance discussions. Reduce subjectivity during the mentoring process by establishing written qualifications, development goals and a timetable for increasing responsibility. It’s important to evaluate your successor using the same clear standards you’d apply to a nonfamily candidate.

Provide regular feedback and consider appointing an experienced nonfamily executive, outside professional or advisory board member to help assess progress. Gradually transfer decision-making authority, beginning with smaller projects and advancing to responsibility for a department, major customer relationship or strategic initiative. This approach gives your successor room to make real decisions and demonstrate judgment while you’re still available to advise.

Outside perspective

Experience beyond the family business can strengthen a successor’s independence and professional credibility. Specifically, working elsewhere helps future leaders learn different systems, management approaches and workplace expectations. And it allows them to succeed without family connections.

Don’t make a certain number of years of outside employment an inflexible requirement, though. The right approach depends on your successor’s experience and your timeline. What matters most is that the individual gains meaningful responsibility and brings useful ideas back to your organization.

Real decisions

As you train your successor, don’t leave employees wondering who’s in charge. Establish a detailed timeline for stepping down, including a departure date. FMD can help you create a succession plan that addresses key tax and estate planning issues while protecting family relationships and the business you’ve built.

Build Credibility with Audited Financial Statements

A financial statement audit can give lenders, investors and other stakeholders greater confidence in your business’s financial reporting. But not every private business needs an audit — and you must weigh the potential benefits against the cost and time involved.

Understand what an audit provides

Most businesses maintain an in-house accounting system to manage their financial records. The documents your staff prepares through this system are called “internally prepared financial statements.”

Depending on your business’s needs, internally prepared financial statements may follow U.S. Generally Accepted Accounting Principles (GAAP), a tax basis, a cash basis or another financial reporting framework. However, internal statements may not include all the adjustments, disclosures and other elements required under the applicable framework.

During an external audit, an independent CPA performs risk assessment procedures and obtains evidence about amounts and disclosures in your financial statements. The goal is to obtain reasonable assurance that the statements are free from material misstatement, whether caused by error or fraud. Management remains responsible for preparing the financial statements and maintaining appropriate internal controls.

If the auditor issues an “unmodified” opinion — sometimes called an “unqualified” opinion — the auditor has concluded that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

A qualified opinion means the statements are presented fairly except for a specific material matter. It may result from a material departure from the applicable reporting framework or the auditor’s inability to obtain sufficient appropriate evidence about a particular issue. Depending on the circumstances, material and pervasive issues could lead to an adverse opinion or a disclaimer of opinion.

Balance the benefits and costs

U.S. public companies generally must issue audited annual financial statements. External stakeholders often influence a private business’s decision to prepare audited financial statements. For instance, lenders and investors might ask for audited financial statements before providing financing. Similarly, audited financial statements may be a prerequisite for obtaining surety bonds or bidding on certain government contracts.

Even when an audit isn’t required, audited statements may strengthen the credibility of your financial reporting and help stakeholders evaluate your business. For example, audited financial statements can help you prepare for a business sale, merger or initial public offering.

From an internal perspective, an audit may also identify needed accounting adjustments, disclosure issues or weaknesses in internal controls that deserve management’s attention. Auditors use risk-based procedures, which may include inspecting records, confirming information with third parties, observing certain activities and testing selected transactions. However, an audit doesn’t examine every transaction or guarantee it will detect all errors or fraud.

Despite these potential benefits, your business shouldn’t pursue an audit without careful consideration. An outside audit requires a financial investment and substantial time and effort from you and your employees. You’ll need to gather and provide extensive documentation and respond to the auditor’s questions and requests for evidence.

Ready, set, audit

Whether an audit is required or voluntary, early preparation can make the process more efficient. Audit planning often begins months before fieldwork starts. If your business operates on a calendar year, now is a good time to review your accounting records, reconcile key accounts, gather supporting documentation and address accounting or internal control issues that could complicate the audit process. Contact FMD to discuss your upcoming audit and identify steps you can take to get your books and records audit-ready.

When Your Will Needs an Update, Follow the Formalities

Laws governing the execution of a valid will vary by state, but they generally require certain formalities. For example, a will typically must be signed by the person making it — known as the testator — and witnessed according to state law. Some estate planning documents may also require or benefit from notarization.

Following these requirements is critical. If a will isn’t properly executed, a court could later determine that all or part of it is invalid. But what happens if your will has been executed and you later need to make a change? Perhaps you’ve welcomed a new child or grandchild, experienced a marriage or divorce, acquired significant property, or simply changed your mind about how your assets should be distributed.

Handwritten revisions can cause trouble

It may seem easy to pull your will out of the file cabinet, cross out an outdated provision, write in the desired change and add your initials. But altering an executed will by hand is generally a bad idea.

For one thing, handwritten revisions may raise questions about when and why you made them. Beneficiaries or other interested parties might challenge the changes, alleging that you lacked testamentary capacity or were subject to undue influence. Even if the revisions accurately reflect your wishes, resolving such disputes can consume time and money and potentially damage family relationships.

More important, a handwritten change may not be legally valid. The requirements depend heavily on your state’s laws.

Holographic wills add another wrinkle

Some states recognize “holographic” wills, which are wills written primarily or entirely in the testator’s handwriting. Depending on state law, these wills may be valid without the witnesses normally required for a typewritten will, provided they satisfy certain requirements.

But the fact that your state recognizes holographic wills doesn’t necessarily mean you can safely make handwritten changes to an existing typewritten will. State laws differ significantly regarding whether such modifications are enforceable and what formalities must be followed.

Attempting a do-it-yourself revision can therefore create ambiguity. In some cases, the original provision might remain effective despite your handwritten change. In others, an alteration could complicate the will’s interpretation or validity.

Use a codicil or consider a new will

A safer approach is to work with your attorney. For a relatively minor change, an attorney may recommend a codicil — a separate legal document that amends specific provisions of an existing will. A codicil generally must be executed with the same formalities required for a will.

For more extensive changes, creating and properly executing a new will may be preferable. This can reduce confusion by putting your current wishes in one document rather than requiring your executor and beneficiaries to reconcile multiple amendments.

Make changes the right way

Your will is intended to distribute your property according to your wishes. Don’t jeopardize the execution of those wishes for the sake of convenience. If circumstances have changed since you executed your will, contact your estate planning attorney to help ensure that any necessary revisions comply with applicable law.

Maintaining Customer Relationships After an Acquisition

When a business is acquired, its customers don’t necessarily transfer their loyalty to the buyer. Customers may worry about future pricing, service, product quality and whether the business’s new owner understands what they value. If their concerns go unanswered, competitors may see and exploit an opening. If you’re anticipating making an acquisition, plan how you’ll protect new customer relationships.

Why they may leave

Some customers have strong ties to a former owner, salesperson or service representative and may not immediately trust your team. The acquisition process can also strain relationships. Employees may leave, systems may change, and ordering, billing or fulfillment processes may temporarily struggle.

Silence and conflicting messages only create more uncertainty. In fact, customers generally handle M&A-related change better when you clearly tell them what to expect. As soon as feasible, communicate information about new customer contacts, contract terms, products or services, technology, and prices.

Make retention a central goal

You probably won’t retain every customer, but a plan that identifies integration retention risks and assigns specific individuals to address them is critical. Prioritize customers based on revenue, profitability, growth potential, strategic importance and likelihood of departure. When appropriate, ask your acquisition’s owner or the business’s account representatives to introduce customers to your team.

Once you can publicly disclose your pending transaction, communicate with customers. They’re likely to care less about the deal’s financial rationale than about how it affects them. Be ready to address questions such as:

• What’s going to change?

• How will it benefit us?

• Do we need to transfer our current account or establish a new one?

• Who’s our service contact during and after the acquisition?

Avoid making promises you aren’t sure you can deliver. After your transaction closes, monitor complaints, declining orders, slower renewals and other signs that relationships may be at risk. Early intervention can help prevent customers from leaving.

Retaining trust

Customer and employee retention go hand in hand. If key salespeople, account managers or service employees leave after an acquisition, customer relationships and institutional knowledge may go with them. Identify your acquisition’s essential employees before the deal closes and offer incentives for them to remain. Compensation and retention bonuses can help, but employees also typically value career opportunities and stability. Explain as early — and clearly — as possible how the transaction could affect their jobs, supervisors, benefits and workplaces.

You may also want to use confidentiality, nonsolicitation and noncompete agreements to preserve employee relationships and proprietary information. Note, however, that enforceability of such contracts varies significantly by state, so you’ll need to work with your legal counsel.

Protect what you paid for

To keep customers on board, plan acquisition integration as early as possible. Assess your acquisition’s customer concentration, retention risks and any potential financial impact of customer losses. FMD can help crunch the numbers and isolate threats so you’re better equipped to preserve transaction synergies and realize your return on investment.

Understanding Deferred Taxes: Why Book Income and Taxable Income Don’t Always Match

Deferred taxes remain one of the more misunderstood areas of financial reporting. Deferred tax assets and liabilities generally reflect temporary differences between when items are recognized for book and tax purposes. Here’s a practical overview of how deferred taxes work and why they matter.

Who must report deferred taxes?

Not every business reports deferred taxes. The accounting rules for deferred taxes generally apply to businesses subject to entity-level income taxes that prepare financial statements under U.S. Generally Accepted Accounting Principles (GAAP). Many S corporations, partnerships and other pass-through entities don’t record federal income taxes at the entity level, though exceptions may apply. Small businesses that use the cash or tax basis of accounting don’t usually report deferred taxes either.

C corporations and other businesses subject to entity-level income taxes pay tax on “taxable income” as determined under applicable tax law. However, for GAAP purposes, total income tax expense generally includes 1) current tax expense or benefit, reflecting taxes payable or refundable for the current year, and 2)  deferred tax expense or benefit for changes in deferred tax assets and liabilities.

Where do deferred taxes come from?

Each year, taxable income and pretax book income may differ. A common reason for a temporary difference is depreciation expense. For federal income tax purposes, businesses may be able to use accelerated depreciation methods to reduce taxable income in the early years of an asset’s useful life. Some businesses also may elect to claim Section 179 deductions and bonus depreciation in the year an asset is placed in service.

For GAAP reporting purposes, businesses frequently use straight-line depreciation. Early in an asset’s useful life, this divergent treatment usually makes taxable income significantly lower than accounting pretax income. However, as the asset ages, the temporary difference in depreciation expense reverses itself.

Using different depreciation methods for book and tax purposes typically causes a business to report a deferred tax liability. In effect, the business pays less tax today because it claims larger depreciation deductions upfront. However, those deductions won't be available later, resulting in higher taxable income in future years.

Depreciation is just one type of accounting event that may give rise to deferred tax items. Other common examples include certain loss contingencies, charitable contribution carryforwards and accounting estimates (such as warranty costs and allowances for credit losses).

It’s important to distinguish temporary differences from permanent differences. Temporary differences reverse over time and create deferred taxes. Permanent differences, such as certain nondeductible expenses or tax-exempt income, may affect the business’s effective tax rate but don’t result in deferred tax assets or liabilities.

How are deferred taxes reported on the balance sheet?

When temporary differences exist between taxable income and accounting pretax income, your business generally must record deferred tax assets, deferred tax liabilities or both on its balance sheet. You must record deferred tax assets for expected future tax benefits from deductible temporary differences and from carryforwards related to capital losses, net operating losses or tax credits. Conversely, you must record deferred tax liabilities for the additional future amounts your business will owe.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply when the related temporary differences reverse, or carryforwards are used. Because deferred taxes reflect future tax consequences, changes in tax law or tax rates can affect their reported amounts, with the impact generally recognized in income from continuing operations in the period of enactment.

Under GAAP, deferred tax assets and liabilities are generally presented as noncurrent items on the balance sheet. They may be netted only when they relate to the same tax-paying component and tax jurisdiction.

Deferred taxes also aren’t discounted for the time value of money. Instead, they’re recorded based on the applicable tax rate and the expected future tax effects of temporary differences.

Deferred tax assets may be reduced by a valuation allowance that reflects the possibility they’ll expire before the business can use them. Management must evaluate all available positive and negative evidence when determining whether a valuation allowance is necessary. Deciding how much deferred tax valuation allowance to book requires significant judgment and is often one of the more challenging aspects of income tax accounting. Changes in the allowance generally flow through to the income statement.

Look beyond today’s tax bill

The rules surrounding deferred taxes can be complex, but understanding them is important for maintaining accurate financial statements. Because deferred tax balances may affect both the income statement and balance sheet, they may also impact ratios that lenders and other external stakeholders use to evaluate your business’ financial results. FMD can help you account for deferred taxes and explain what they mean for your business. Contact us to learn more.

How Should Life Insurance Fit into Your Estate Plan?

Life insurance can provide critical financial protection for the people who depend on you or help you achieve other estate planning goals. But to serve its intended purpose, the coverage amount, policy type, ownership structure and beneficiary designations must all be carefully considered.

Determine how much coverage you need

There’s no universal formula for calculating the appropriate amount of life insurance. Your needs depend on your income, debts, family responsibilities, assets and long-term objectives. Begin by estimating the financial obligations that might remain after your death. These may include:

• Funeral and other final expenses,

• Mortgage balances and other debts,

• Income replacement for a surviving spouse or partner,

• Child care and education costs,

• Support for a dependent with special needs, and

• A desired inheritance or charitable gift.

Next, subtract resources available to meet those obligations, such as savings, investments, retirement benefits and existing insurance policies. The difference can provide a starting point for determining how much additional coverage you need.

Warning: Don’t assume employer-provided insurance is sufficient. Group coverage is often limited to a multiple of salary and may end when you leave your job.

Select coverage that matches your objectives

Term life insurance generally provides coverage for a specified period and may be appropriate for temporary needs, such as replacing income during your working years or paying off a mortgage. It typically costs less initially than permanent coverage.

Permanent insurance, such as whole life and universal life, is designed to remain in force for life as long as the required premiums are paid. It may also accumulate cash value. This type of policy can be useful when the need for coverage is expected to continue indefinitely, such as providing estate liquidity, supporting a lifelong dependent or funding a legacy.

Affordability matters. A policy offers little protection if rising premiums or changing circumstances may make it difficult to keep the coverage in force. Review policy guarantees, projected values, fees and premium requirements carefully before you buy.

Coordinate life insurance with your estate plan

Life insurance can replace income, equalize assets among children active and inactive in a family business, provide cash to pay estate tax, or serve as a vehicle for passing leveraged funds free of estate tax.

Policy proceeds generally aren’t subject to income tax. But if you own the policy, the proceeds will be included in your taxable estate. If your estate is large enough that estate taxes are a concern, some or all of the proceeds could be subject to estate tax.

Ownership depends on several factors, including who has the right to name the beneficiaries of the proceeds. Generally, to reap maximum tax benefits, you must sacrifice some control and flexibility as well as some ease and cost of administration.

Determining who should own the life insurance policy is a complex task because there are many possible owners, including you or your spouse, your children, your business, or an irrevocable life insurance trust (ILIT).

An ILIT can own one or more policies on your life, and it manages and distributes policy proceeds according to the terms you establish when you set up the trust. The trust keeps insurance proceeds, which could otherwise be subject to estate tax, out of your estate (and possibly your spouse’s). You can’t retain any powers over the policy, such as the right to change the beneficiary. The trust can be designed to make a loan to your estate to meet liquidity needs, such as paying estate tax.

To choose the best owner, consider why you want the insurance, such as to replace income, to provide liquidity or to transfer wealth to your heirs. You must also determine the importance of tax implications, control, flexibility, and ease and cost of administration.

Review your coverage

Life insurance shouldn’t be a “set it and forget it” decision. Many factors affect your need for life insurance, and these factors change over time. To make sure you’re not over- or underinsured, review your insurance needs periodically — especially when your life circumstances change. FMD can help you assess whether you have sufficient life insurance coverage for your needs and goals.

Inter Vivos and Testamentary Trusts can help You Achieve Different Estate Planning Goals

Trusts can serve many purposes in an estate plan, from managing assets during your lifetime to controlling how property passes to beneficiaries after your death. Two broad categories are inter vivos trusts and testamentary trusts. Although both can help manage assets, they differ in when they’re funded and take effect and how they’re used in estate planning.

Inter vivos trusts operate during your lifetime

An inter vivos trust is created while you’re alive. You transfer assets to the trust, and a trustee manages them according to the trust agreement.

Inter vivos trusts can be either revocable or irrevocable. With a revocable trust, you generally retain the ability to change or terminate the trust during your lifetime. You may also serve as trustee, allowing you to continue managing assets after you’ve transferred them to the trust. One of the biggest benefits is that, if you become incapacitated, a successor trustee can step in and manage the assets on your behalf.

A properly funded revocable living trust can also help assets avoid probate after your death. Instead of the assets going through probate and being distributed according to your will, the successor trustee distributes the assets or continues managing them according to the trust’s terms. This can potentially save time, increase privacy and simplify administration, particularly if you own real estate in more than one state.

Irrevocable inter vivos trusts serve different purposes. Depending on their design, they may be used for gift and estate tax planning, asset protection, charitable giving, life insurance planning, or other objectives. Because transferring property to an irrevocable trust can have significant tax and legal consequences, careful planning is essential.

Testamentary trusts begin after death

A testamentary trust, by contrast, is established through your will and generally comes into existence after you die and the will is admitted to probate. Your will specifies which assets you want to fund the trust, identifies the trustee and establishes the terms governing distributions.

Testamentary trusts can be especially useful when beneficiaries shouldn’t receive an inheritance outright. For example, a testamentary trust might hold assets for minor children until they reach specified ages. It can also provide a trustee with discretion to make distributions for education, health care and other needs.

Testamentary trusts may also be useful when beneficiaries have difficulty managing money or when you want to provide longer-term oversight of inherited wealth. However, because the trust is created under a will, the assets used to fund it generally must pass through probate first.

Different tools for different goals

Because of the differences between inter vivos and testamentary trusts, both types may have a place in your estate plan. Your assets, family circumstances and goals are key considerations. Trust provisions can also have important income, gift and estate tax consequences. FMD can help you evaluate the tax considerations and work with your estate planning attorney to determine what best fits your situation.

Take Control of Working Capital

A profitable business can still run short of cash. Receivables may take time to collect, inventory can tie up funds and bills may come due before customers pay. Effective working capital management can help your business maintain liquidity and remain prepared for growth opportunities or unexpected challenges.

What are the components of working capital?

Working capital is calculated by subtracting current liabilities from current assets. The math is simple, but the result requires context. Start by identifying the specific components that drive the calculation.

Current assets generally include assets expected to be converted to cash, sold or consumed within one year (or the business’s normal operating cycle, if longer). Common examples are:

• Cash and cash equivalents,

• Accounts receivable,

• Inventory,

• Certain short-term investments, and

• Prepaid expenses.

Not every asset that could eventually be sold or converted to cash qualifies as current. Classification depends on the asset’s nature and when the business expects to realize or use it.

Current liabilities generally include obligations due within the same timeframe. Examples include:

• Accounts payable,

• Accrued expenses,

• Short-term loans, and

• The current portion of long-term debt.

An outstanding balance on a line of credit may also be classified as current, depending on the arrangement’s terms and the business’s ability to defer repayment.

How can you manage it more effectively?

Although many items affect working capital, the following three levers often provide the greatest opportunities for improvement:

1. Receivables. Strong collection practices are critical. Review accounts receivable aging reports regularly, address disputed or overdue invoices promptly, and establish credit limits and payment terms based on customer risk. Early payment discounts may accelerate collections, but weigh the cash flow benefit against the cost of the discount.

You also can improve the collection process by issuing invoices quickly, offering electronic payment options, automating payment reminders and requesting deposits or milestone payments when appropriate. A bank lockbox may speed processing for businesses that still receive a significant volume of paper checks. Monitor customer concentration and recurring late payments, because receivables contribute little to liquidity if they can’t be collected on time.

2. Inventory. Excess or obsolete inventory can consume cash and generate unnecessary storage, security, insurance and handling costs. But reducing inventory too aggressively can lead to stockouts, production delays and lost sales. The goal should be to maintain enough inventory to meet expected demand while limiting slow-moving and obsolete items.

Regularly review inventory turnover and demand forecasts. Modern inventory systems can help identify purchasing trends and automate reorder points. When appropriate, sharing forecasts and other data with key customers and suppliers may improve planning and reduce supply chain disruptions.

3. Payables. Businesses often try to preserve cash by delaying payments, but consistently paying late can damage vendor relationships and lead to less favorable terms. Use the full payment period available under your agreements without exceeding the due date. Also evaluate whether early payment discounts provide a worthwhile return.

Prepare short-term cash forecasts so upcoming obligations don’t come as a surprise. If existing terms create liquidity pressure, consider negotiating longer payment periods, installment arrangements or other terms with vendors before balances become past due.

Are your improvements sustainable?

To maximize the benefits of your improvement efforts, adjustments to these three levers must be sustainable over the long run. This requires management’s ongoing attention. Include working capital in strategic planning and review relevant measures at regular management meetings. Common metrics include:

• The current ratio, calculated as current assets divided by current liabilities,

• Days inventory outstanding (DIO), the average number of days inventory is held before being sold,

• Days sales outstanding (DSO), the average number of days it takes to collect payment from customers, and

• Days payables outstanding (DPO), the average number of days a business takes to pay its suppliers.

The cash conversion cycle (DIO + DSO − DPO) estimates how long cash is tied up in your operating cycle. Your accountant can help you calculate these metrics, determine what’s most relevant for your operations and evaluate your results over time or against industry benchmarks.

At smaller businesses, the owner may need to lead the effort. At midsize businesses, working capital management should involve finance, sales, purchasing, operations and other functions that influence customer terms, inventory levels and vendor payments. Assigning clear responsibility can help prevent one department’s decisions from creating cash flow problems elsewhere.

Reliable technology is also important. Rather than assuming every business needs a full enterprise resource planning (ERP) system, evaluate whether your existing accounting platform and integrated receivables, payables and inventory tools provide timely, accurate information. More complex businesses may benefit from an ERP system, but the appropriate solution should reflect your business’s size, operations and reporting needs.

In addition, technology — such as electronic invoicing, customer payment portals, automated reminders and integrated payment processing — may shorten collection times and reduce manual data entry. Appropriate user permissions, approval controls, data backups and cybersecurity protocols can help safeguard these processes.

Keep liquidity in view

It’s common for business owners to focus on growing the top and bottom lines of their income statements, but the balance sheet deserves attention, too. Regularly monitoring the components of working capital can help reveal operational issues, such as slow-paying customers, obsolete inventory and unfavorable payment terms, before they become larger cash-flow problems. Contact FMD for help evaluating your existing processes and identifying strategies to strengthen your working capital management.

Which Products Really Drive Your Business’s Profits?

Robust sales don’t always translate into strong profits. A popular product could produce disappointing returns when you account for discounts, shipping, returns and support costs. At the same time, a lower-volume product could quietly generate an attractive profit margin.

How can you tell what’s working? The solution may be product-level analysis that shows where you’re generating profit and where strong revenue might be masking weak performance. This holds true whether your business manufactures, distributes or sells products through sales reps, online channels or brick-and-mortar stores.

Calculating the full cost

Start by identifying each of your product’s direct costs, such as materials, inventory purchases, production labor and packaging. Then consider expenses that might be easier to overlook, including:

• Freight, warehousing and inventory carrying costs,

• Sales commissions,

• Payment-processing charges,

• Promotions and discounts,

• Returns, spoilage and shrinkage, and

• Customer service and technical support.

Overhead expenses — including rent, insurance, technology and administrative salaries — also affect product profitability. However, allocating them solely by sales volume can distort results.

A product that requires, for example, customized packaging or extensive customer support should receive a greater share of those costs. Activity-based costing can provide a more realistic view by assigning expenses according to the activities that generate them.

Beyond gross margin

No single measurement tells the whole story. Gross margin shows how much revenue remains after covering cost of goods sold. Meanwhile, contribution margin subtracts variable costs from revenue. A positive contribution margin generally means a product helps cover fixed expenses and generate profit.

So if a product appears unprofitable after allocated overhead, don’t automatically discontinue it. Because many fixed costs will remain, eliminating the product could reduce your business’s overall profit. Instead, consider whether the product attracts new customers or supports sales of more profitable items.

Also evaluate product profitability by sales channel and customer segment. The same item may be profitable in a store but lose money through an online marketplace because of commissions, fulfillment expenses and returns. In a similar vein, a large customer’s discounts could erase the benefit of high sales volume.

Turn findings into action

Reliable product data can support better pricing, purchasing, marketing and inventory decisions. It can also help you negotiate supplier terms, adjust sales and distribution channels, and evaluate new products.

Product-level analysis shouldn’t be a one-time exercise. Market and economic conditions often change, so you should review margins regularly and investigate major variances. Also contact FMD. We can help you develop a practical approach to turning product data into profitable decisions.

Worker Misclassification Can Carry Serious Consequences

Hiring independent contractors provides your business with valuable flexibility, particularly when you require specialized expertise or help with a short-term project. But calling someone an independent contractor doesn’t automatically make them one. Worker status depends on your actual working relationship. And getting it wrong can expose your business to tax liabilities and other consequences.

What’s in a name?

Businesses generally must withhold federal income, Social Security and Medicare taxes for employees and pay the employer’s share of Social Security and Medicare taxes, as well as federal unemployment tax. These obligations typically don’t apply when you engage an independent contractor. So if you misclassify an employee as an independent contractor, your business could become responsible for unpaid employment taxes, penalties and interest. Depending on the circumstances, you may also be liable for unpaid payroll taxes.

Consequences can extend beyond taxes. Misclassified employees may be able to claim unpaid minimum wages, overtime pay and other workplace protections. State laws could impose additional requirements involving unemployment and workers’ compensation insurance, paid time off, and other benefits. All of these could lead to legal costs and other unplanned expenditures.

Working relationship

For federal employment tax purposes, the IRS looks at the entire relationship between a business and worker. No single factor determines classification. Instead, relevant facts generally fall into three categories.

The first is behavioral control, which concerns whether your business can direct what a worker does and how the work is performed. Instructions about when, where and how to work, as well as training your business provides, may point to the worker being an employee.

Second is financial control. This focuses on the business aspects of the relationship. Relevant considerations include:

• How you pay the worker,

• Whether you reimburse the individual’s expenses,

• Which party supplies tools and equipment,

• Whether the person offers services to other businesses, and

• The worker’s opportunity for profit or risk of loss.

Finally, the type of relationship matters. Employee status may be supported if you provide certain benefits to the worker or the person handles ongoing responsibilities that are central to your operations. A written agreement identifying someone as an independent contractor can be relevant, but it doesn’t override the facts of the relationship.

Remote work doesn’t change these basic principles. Someone who works from home or another location other than your business’s primary workplace isn’t automatically an independent contractor. The question remains how much control and independence exist in the actual working arrangement.

Different laws, different tests

Worker classification has become an especially important area to monitor because different laws can apply different tests. The IRS uses a common-law framework for federal employment taxes. Meanwhile, the U.S. Department of Labor proposed new independent-contractor regulations in February 2026 for federal wage-and-hour law purposes. The proposal would replace the agency’s 2024 rule with a streamlined “economic reality” test. As of this writing, the proposal hasn’t been finalized.

State tax, wage-and-hour and employment laws may apply their own standards as well. As a result, a classification that seems appropriate under one law may not be so under another. But this doesn’t mean you should wait for an audit, complaint or tax notice before reviewing your worker classifications.

Before problems arise

FMD can help you evaluate worker relationships under current rules and determine whether you need to reclassify anyone working for you. Addressing questions early can be far less costly than correcting them after a government agency or worker raises the issue.

Protect Your Business — and Your Estate — with a Buy-Sell Agreement

Do you hold an interest in a business that’s closely held or family owned? If so, a buy-sell agreement should be a component of your estate plan. It establishes how your ownership interest (and those of other owners) will be handled following certain triggering events, including death, disability, divorce, retirement, termination of employment or withdrawal from the business. But that’s not all.

Determining an ownership interest’s worth

Depending on its terms, a buy-sell agreement may give the business or the remaining owners the option — or obligation — to purchase the departing owner’s interest. Life insurance is often used to provide funding when an owner dies.

One of the most important provisions in a buy-sell agreement is the method used to determine what an ownership interest is worth. An outdated or poorly designed valuation provision can create financial problems — and potentially disputes — precisely when the agreement is needed most.

Buy-sell agreements generally use one or more of the following approaches:

Independent appraisal. A qualified business valuation professional determines the value of the ownership interest when a triggering event occurs.

A predetermined formula. The agreement calculates value using measures such as book value, revenue or a multiple of earnings.

A negotiated price. The owners agree on the value of the business or the departing owner’s interest.

An independent appraisal can provide a valuation based on the company’s circumstances at the time of the triggering event. A formula may be simpler, but it can become outdated as the business evolves. Changes in profitability, assets, industry conditions and other factors can cause a formula to produce a price that no longer reflects economic reality.

Negotiation offers flexibility, but it also carries risk. Reaching an agreement may be difficult after an owner’s death or during a contentious departure. One alternative is to allow the parties to negotiate first and require an independent appraisal if they can’t agree within a specified period.

2 buy-sell agreement types

The type of buy-sell agreement you use can have significant tax and estate planning implications. Two common options are redemption agreements and cross-purchase agreements. A redemption agreement permits or requires the company to purchase a departing owner’s interest, while a cross-purchase agreement permits or requires the remaining owners to purchase the interest.

A disadvantage of cross-purchase agreements is that they can be cumbersome, especially if there are many owners. For example, if life insurance is used to fund the purchase of a departing owner’s shares, each owner will have to purchase an insurance policy on the lives of each of the other owners. But redemption agreements may trigger a variety of unwelcome tax consequences.

Miscellaneous benefits

A carefully structured buy-sell agreement does more than establish what happens when an owner leaves the business. It can also help prevent ownership from unexpectedly passing to outsiders, provide a market for an ownership interest that might otherwise be difficult to sell and create liquidity for an owner’s estate.

For a family business, these provisions can be especially valuable. A buy-sell agreement may help keep control in the hands of family members or other intended owners while providing cash to an estate or beneficiaries who won’t participate in the business.

Under certain circumstances, an agreement may also affect how an ownership interest is valued for federal estate tax purposes. Because the tax rules governing these arrangements are complex, the agreement should be coordinated with the owner’s broader estate and tax planning.

Review your agreement regularly

Even a carefully drafted buy-sell agreement can lose its effectiveness as circumstances change. A business may grow significantly, new owners may join, existing owners may leave, insurance coverage may become inadequate or the owners’ estate planning goals may evolve.

So regular reviews are essential. FMD can help you develop a buy-sell agreement in conjunction with your estate plan or evaluate whether your existing agreement’s provisions still fit your business and estate planning objectives.