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Give Executive Fraud Risk Your Full Attention
Occupational fraud can occur at any level of an organization. But misconduct by owners and senior executives can be particularly costly because they usually have greater authority and can override internal controls.
According to the Association of Certified Fraud Examiners’ (ACFE’s) Occupational Fraud 2026: A Report to the Nations, owners and executives account for 16% of all occupational fraud perpetrators. Yet they cause nine times the median loss associated with nonmanagerial fraudsters. Even if you trust your leadership team, strong safeguards can help protect your business and its reputation.
Why it happens
Forensic accountants commonly use the “fraud triangle” to understand occupational fraud. It focuses on three factors that generally need to be in place for people to steal from their employers: pressure, opportunity and rationalization.
Pressure can be personal or professional. An executive facing financial difficulties or aggressive performance targets may be tempted to manipulate financial results. The ACFE found that perpetrators experiencing excessive organizational pressure are associated with a median fraud loss of $532,000 — the highest among the behavioral warning signs identified.
Opportunity exists when someone has the access or authority to commit and conceal wrongdoing. Executives pose an elevated threat because they may approve transactions, influence employees, or override established procedures. More than half of the ACFE report’s cases involve either inadequate or overridden controls.
Rationalization occurs when perpetrators can justify their dishonest behavior. Executives might, for example, believe they’re entitled to steal because their compensation is inadequate or that manipulating results is acceptable because it will eventually benefit the business.
You can help reduce fraud risk by keeping this triangle in mind and promoting an antifraud culture. For instance, try to set realistic, achievable performance goals and intervene if executives seem excessively entitled or secretive.
Strengthen safeguards at the top
Internal controls that protect key functions — such as your accounting, and shipping and receiving departments — are also essential. But preventing executive fraud may require additional measures. For example:
Establish clear rules for overriding controls, including requiring a second approval and documentation explaining why the exception is necessary,
Mandate fraud awareness training for employees, including executives,
Conduct management reviews, surprise audits and financial monitoring activities, and
Offer tiplines or web portals that enable employees to anonymously report suspected wrongdoing.
Reporting systems are especially important because tips remain the most common way to detect occupational fraud. The 2026 ACFE study found that 43% of cases are uncovered through tips, and employees provide more than half of them (other tips come primarily from vendors and customers). Because of the risks of retribution, confidentiality is critical if you want workers to blow the whistle on crooked executives.
Allegations involving a senior executive or other influential individual may warrant engaging an independent fraud specialist to help ensure an objective investigation, including evidence gathering and witness interviews. If fraud is confirmed, your organization should respond based on the circumstances, applicable laws and its own policies, not the perpetrator’s position.
Promote accountability
Executive fraud may never be completely preventable, but you can make it harder to commit and easier to detect. To promote accountability, implement strong controls, effective employee training and confidential reporting mechanisms. Contact FMD for help assessing fraud risks and strengthening the safeguards that will protect your business.
A Closer Look at Shareholder Advances
Shareholders sometimes provide funds to their businesses outside of their initial investment or regular capital contributions. These transfers — commonly referred to as shareholder advances — raise an important accounting question: Under U.S. Generally Accepted Accounting Principles (GAAP), should the business report the advance as a liability or as equity?
The term “shareholder” technically refers to an owner of a corporation. However, the same basic accounting issue can arise when an owner of a partnership, limited liability company or other noncorporate entity advances funds to the business. For simplicity, this article uses the terms “shareholder” and “shareholder advance” broadly to include owners and owner advances regardless of the entity’s legal structure.
Look beyond the label
When evaluating a shareholder advance, it’s important to consider the substance of the arrangement rather than relying solely on how the transaction is labeled. To determine the appropriate classification under GAAP, the facts and circumstances of the arrangement should support whether the advance represents an obligation to repay the owner (a bona fide debt) or an equity contribution. Relevant considerations may include:
Intent to repay. Open-ended understandings between related parties about repayment may indicate that an advance is an equity contribution rather than a loan to the business. For example, a lack of repayment activity or evidence that repayment wasn’t expected may weigh against debt classification.
Terms of the advance. Debt classification may be more appropriate when the parties have signed a written promissory note that bears reasonable interest, has a fixed maturity date and establishes repayment terms. A history of repayments consistent with those terms may provide additional support for debt treatment. Subordination to bank debt or other creditors may also be relevant to the analysis, but that alone doesn’t warrant equity classification for an advance.
Ability to repay. Relevant factors include the business’s historical and future debt-service capacity, credit standing and ability to secure other forms of financing. The business’s ability to meet the stated repayment terms may also provide evidence about the substance of the arrangement. However, financial difficulty alone doesn’t necessarily mean an advance should be classified as equity.
How an advance is treated in tax filings and other records may provide additional evidence about the parties’ intentions. However, tax treatment doesn’t determine the appropriate classification for financial reporting purposes.
Deciding whether to classify advances as debt or equity matters for financial reporting purposes. It may affect your debt-to-equity ratio and other metrics that outside lenders and investors use to evaluate your business’s financial condition.
Be transparent
Detailed footnote disclosures can help stakeholders better understand the nature of shareholder advances. Accounting Standards Codification (ASC) Topic 850, Related Party Disclosures, generally requires disclosure of material related-party transactions. Depending on the circumstances, disclosures may include:
The nature of the relationship,
A description and dollar amount of the transactions, and
Amounts due to or from related parties, including settlement terms when they aren’t otherwise apparent.
If your business engages in numerous related-party transactions, a tabular format may make the disclosures easier to understand.
Changes to an advance can introduce additional accounting complexity. Shareholders sometimes forgive loans or convert them to equity. The accounting for forgiveness, conversion or other restructuring depends on the specific facts and terms of the transaction, including the shareholder’s relationship to the business and the nature of the instruments involved. These transactions may require different accounting from the original advance and appropriate disclosure to help financial statement users understand their effects.
Document from the start
Shareholder advances can look straightforward when the cash changes hands, but their accounting treatment may not be so simple. Clear documentation of the parties’ intentions and the terms of the arrangement at the time funds are advanced can help support the appropriate treatment and avoid uncertainty later. Contact FMD for help documenting and classifying shareholder advances and preparing any required disclosures.
If Your Spouse Died This Year, Should You File a Joint Federal Tax Return Next April?
The death of a spouse brings significant personal and financial changes, including important tax considerations. One question surviving spouses face is how to file their federal income tax returns for the year of death.
In many cases, a surviving spouse can file a joint return with the deceased spouse for that year, potentially preserving lower tax rates and other benefits. However, special rules apply, and understanding the filing requirements can help avoid complications and ensure available tax benefits aren’t overlooked.
Filing a final return
When a person dies, his or her executor (called a “personal representative” in some states) must file an income tax return for the year of death (as well as any unfiled returns for previous years). For purposes of the final return, the tax year generally begins on January 1 and ends on the date of death. The return is due on April 15 of the following calendar year unless the executor requests a six-month filing extension.
Income that’s included on the final return is determined according to the deceased’s tax accounting method. Individuals usually use the cash method, in which case the income tax return will report only income actually or constructively received before death and deduct only expenses paid before death. Income and expenses after death are reported on an estate tax return.
Filing a joint return
The surviving spouse is generally treated as married for the tax year his or her spouse died, unless he or she qualifies as unmarried under special rules. So filing as single or head of household usually isn’t an option. The surviving spouse does have the option to file a joint return with the deceased spouse — if the executor agrees. And the surviving spouse alone can elect to file a joint return if an executor hasn’t yet been appointed by the filing due date. (However, a court-appointed executor may later revoke that election.)
A joint return generally includes the deceased spouse’s income and deductions through the date of death, along with the surviving spouse’s income and deductions for the entire tax year. Filing jointly can be advantageous because joint filers typically have access to more favorable tax brackets and may qualify for deductions and credits that are reduced or unavailable to married taxpayers filing separately.
When filing separately may make sense
There may be disadvantages to filing jointly. For example, higher adjusted gross income (AGI) may reduce the tax benefits of expenses, such as medical bills, that are deductible only to the extent they exceed a certain percentage of AGI. In this case, filing separately may provide more tax savings. Similarly, filing separately sometimes may produce a better result because of the couple’s particular mix of income, deductions and other tax attributes.
Filing a separate return may also be appropriate when the surviving spouse has concerns about the accuracy of the deceased spouse’s tax information or about previously undisclosed income, questionable deductions, unpaid taxes or other potential tax problems. In some situations, filing separately may help limit the surviving spouse’s exposure to liabilities associated with items reported (or not reported) on the deceased spouse’s return, though the extent of that protection depends on the facts and circumstances.
Look beyond the final joint return
The year of death may not be the end of the potential benefits of joint filing. Under certain conditions, a surviving spouse with a dependent child may qualify to use qualifying surviving spouse status for the two tax years following the year of death. This status generally provides the same tax brackets and standard deduction available to married couples filing jointly.
There are many factors to consider when deciding whether to file jointly or separately after a spouse’s death. FMD can compare the alternatives, explain the potential risks and benefits, and help ensure that required returns are filed properly during a difficult time.
How a Lockbox (or Other) Service Can Benefit Accounts Receivable
For decades, businesses have used bank lockbox services to speed up collections and reduce administrative work involved in processing customer checks. Today, the basic idea remains the same, but modern lockbox services can automate your accounts receivable processes. Automated clearing house (ACH), credit card and instant-payment services can also provide efficient collections. So the question is: With multiple tools available, which service will best save your employees time, improve cash flow and strengthen payment controls?
Traditional vs. contemporary
With a traditional lockbox arrangement, customers send payments to a designated address controlled by a business’s bank or another service provider. The provider collects payments, deposits checks and sends payment information electronically to the business.
Contemporary systems can capture information from checks and accompanying remittance documents, including customer and invoice numbers. That data generally is transmitted to your accounting or enterprise resource planning system to help automate the process of matching payments with outstanding invoices. The result can be faster processing and less manual work for your workers. Instead of opening envelopes, recording payments and depositing checks, your staff can focus on exceptions and other higher-value tasks.
Don’t overlook fraud risk
Security, particularly of paper checks, is another factor that favors lockbox services. According to the Association for Financial Professionals’ 2025 Payments Fraud and Control Survey, 63% of organizations experienced attempted or actual check fraud the previous year. Although lockboxes don’t eliminate check fraud, moving receipt and check processing away from your workplace can reduce payment handling and allow for more controlled procedures.
ACH and other electronic payment methods typically offer lower processing costs and also eliminate some of the fraud risks associated with paper checks. Instant payments are another option. Participating financial institutions can provide payments that settle within seconds, 24 hours a day, seven days a week.
Checking the math
Lockbox pricing varies by financial institution and service level and may include recurring and transaction-based charges. To determine whether the service makes financial sense, compare those fees with what you’re spending internally to process payments. Weigh factors such as:
The number of paper checks you receive,
Time spent processing and reconciling payments,
How quickly payments are currently deposited,
The value of accelerating access to cash,
Ease of integration with your accounting system, and
Fraud prevention benefits.
If your business receives a large volume of checks, a lockbox may make sense. But if your volume is relatively low, you may reap greater benefits by encouraging customers to use electronic payment methods.
Discuss your options
Talk to your bank about available lockbox and electronic receivables services and their costs. Also contact FMD. We can help quantify your current payment-processing costs, evaluate potential cash-flow and control benefits, and determine whether a lockbox (or other option) may be right for your business.
A QPRT may be the Right “Home” for Your Primary or Secondary Residence
As property values continue to rise, homeowners with large estates may be looking for ways to preserve family wealth while minimizing future estate tax exposure. One strategy that may help accomplish these goals is a qualified personal residence trust (QPRT).
QPRT specifics
A QPRT is an irrevocable trust that allows you to transfer ownership of your primary residence or a secondary residence (such as a vacation home) to it while retaining the right to live in (or personally use) the home for a specified number of years. At the end of that term, ownership of the home typically transfers to the QPRT beneficiaries.
When you transfer a home to a QPRT, it’s generally removed from your taxable estate. But the transfer of the remainder interest going to the beneficiaries is a taxable gift.
The IRS Section 7520 rate, which is updated monthly, is used to calculate the value of the gift for gift tax purposes. The lower the Sec. 7520 rate, the smaller the remainder interest and the lower the gift tax liability. If the appreciation on the home during the term outperforms the Sec. 7520 rate and you survive the term, the excess value will be transferred to the beneficiaries gift- and estate-tax-free. For August 2026, the rate is 5.2%.
You can apply a portion of your available lifetime gift and estate tax exemption to the transfer. For 2026, the exemption is $15 million, reduced by any exemption you already have used during your life.
You must appoint a trustee to manage the QPRT. Commonly, the trust grantor (which would be you) will act as the trustee. Alternatively, you can name another family member, friend or professional advisor.
While you live in the home, you must continue to pay the monthly bills, such as property taxes, maintenance and repair costs, and insurance. Because the QPRT is a grantor trust, as the grantor, you’re entitled to deduct qualified expenses on your income tax return, within the usual limits.
What if you want to sell the home during the term? You generally can do so as long as you reinvest the proceeds in another home that will be owned by the QPRT and subject to the same trust provisions.
Be aware of the risks
A QPRT isn’t without drawbacks. Because the trust is irrevocable, you can’t simply change your mind and reclaim ownership of the home after the transfer. However, you can continue to live in the home after the term ends if the beneficiaries agree and you pay fair-market rent to them.
In addition, the strategy works best if you survive the term. If you die before the term expires, the home is generally included in your taxable estate, largely eliminating the intended estate tax benefits.
The longer the trust term, the smaller the value of the remainder interest for tax purposes. But it’s generally better to choose a term that’s shorter than your life expectancy. Doing so will reduce the chance that you’ll die before the end of the term, causing the home to be included in your taxable estate.
There are also income tax considerations. Unlike property inherited at death, a home transferred through a QPRT generally doesn’t receive a step-up in basis when the trust term successfully ends. As a result, the beneficiaries could face larger (in some cases, much larger) capital gains taxes if they later sell the home than they would have had they inherited it. So it’s important to weigh potential estate tax savings against potential future income tax liability.
Is a QPRT right for your estate?
If you have a home that’s appreciating rapidly and a large enough estate that estate taxes are a concern, a QPRT is worth a look. However, because it involves complex tax rules, strict IRS requirements and long-term commitments, a QPRT should be executed only after a thorough review of your financial circumstances and estate planning objectives. FMD can help you determine if this type of trust is right for you.
Professional Valuations Provide Businesses with more than a Number
Are you selling your business, soliciting new investors, updating a buy-sell agreement, pursuing litigation or drafting an estate plan? An accurate business valuation prepared by a valuation professional is critical to the success of these and many other activities. Knowing some fundamentals about the process can help you understand your valuator’s conclusions, what drives business value and where to invest resources. Here are some basic concepts you should know.
Fair market and fair value
Although they sound similar, these two terms can have different meanings. Fair market value is the valuation standard used for tax, transaction and planning purposes. It represents the price at which a business or ownership interest would change hands between a hypothetical willing buyer and a hypothetical willing seller. It assumes that both parties are acting independently, have reasonable knowledge of the relevant facts and are under no pressure to complete the transaction.
Fair value, on the other hand, is a legal standard that generally depends on state law and court precedent. It’s commonly used in shareholder disputes, divorce proceedings and certain litigation. Fair market value can serve as a starting point for an appraisal, but fair value generally requires adjustments to reach an equitable outcome. For example, when minority shareholders are forced out of a business through a merger, courts often rely on the fair value standard because those shareholders are neither hypothetical nor willing participants.
Going concerns
Another essential concept is going concern value. This refers to the value of a business that’s expected to continue operating into the foreseeable future.
A going concern is typically worth more than the sum of its individual assets because it includes valuable intangible assets. These might include an experienced workforce, established customer relationships, proprietary processes, operating systems, licenses and a proven ability to generate earnings. In today’s economy, such intangible assets often account for a significant portion of a business’s value.
Premiums and discounts
Valuations aren’t simply based on the numbers contained in a business’s financial statements. Professional valuators also usually consider the ownership interests being appraised. For instance, a business may be more valuable because the owner can independently direct management decisions and influence the organization’s future. This additional value is known as a valuation premium (in this case, for control reasons).
Conversely, a valuation professional may apply a valuation discount when circumstances reduce the appeal of an ownership interest. One of the most common examples is a discount for lack of marketability. This reflects the difficulty of quickly selling an interest in a privately held business. Depending on the facts, other discounts, such as those related to minority ownership, may also be considered when appropriate.
Risks and opportunities
Even if you aren’t facing litigation or don’t plan to sell your business soon, consider obtaining a valuation. Professional valuations often review historical and projected financial performance, economic conditions, key-person risk, competitive position, and other qualitative and quantitative factors. Periodic valuations may alert you to potential threats and measure progress toward long-term goals. Contact FMD for help determining what your business is worth and identifying practical steps to enhance its value.
Making Smarter Capital Investment Decisions
Whether you’re buying equipment, automating processes, launching a new product line or expanding your facilities, capital investment decisions shouldn’t be based on intuition alone. Your management team may identify several promising growth opportunities. Which ones can your business realistically support today with available cash flow, financing and staffing — and which ones can wait?
A comprehensive financial analysis can help you compare alternatives and allocate resources where they’ll likely have the greatest long-term benefit.
Develop financial projections
Start by evaluating how a proposed investment is likely to affect your business’s financial results. Historical financial statements typically serve as a baseline for financial projections.
Use your most recent income statement to develop realistic assumptions about 1) how much additional revenue (or cost savings) the project is expected to generate, and 2) what incremental expenses it will incur. In some cases, qualifying property may be eligible for special tax savings — such as 100% bonus depreciation or Section 179 expensing — that should be factored into the decision.
A proposed investment may also affect your balance sheet and statement of cash flows. For example, a project may require additional working capital and fixed assets. Preparing comprehensive financial projections helps you determine how much cash the project will need each period and whether internal resources will be sufficient to finance it. Some projects will require the business to tap its line of credit or obtain additional loans or capital contributions.
Financial projections are only as reliable as their underlying assumptions. So consider how the projected results would change if implementation is delayed, costs exceed estimates or expected cash flows fall short. Comparing best-case, worst-case and most-likely scenarios can reveal which assumptions pose the greatest risk to the investment.
Evaluate competing opportunities
Once you’ve estimated the projected cash flows, it’s time to analyze the results and prioritize competing investment alternatives. For example, you might have $50,000 to invest in either a new machine or IT upgrades. Which option is better from a financial perspective?
Three common financial tools for evaluating such decisions are:
1. Payback period. This tells you how long it will take for a project to recoup its initial investment without considering the time value of money. For example, suppose a new machine that costs $48,000 is expected to generate $12,000 of incremental cash flow annually. Its payback period would be four years ($48,000 / $12,000).
2. Net present value (NPV). When calculating NPV, you discount each period’s projected cash flow to its present value. The sum of the present values for all the periods, including the cost of the initial investment, equals the project’s NPV. If NPV is greater than zero, the project is expected to create value and generally warrants further consideration. If not, the project may not be worthwhile. Typically, management uses the business’s cost of capital or a discount rate that reflects the project’s risk profile to discount projected cash flows.
3. Internal rate of return (IRR). This is the discount rate at which a project’s NPV equals zero. Management typically has a preset hurdle rate that a project must exceed to be considered. For example, if management sets its hurdle rate at 15%, any project with an IRR below 15% will be less likely to move forward.
When applying these financial tools, it’s also important to consider qualitative factors. For example, IT upgrades might strengthen cybersecurity, improve efficiency, enhance customer service and reduce business risk — benefits that may be difficult to quantify in financial projections.
Need help?
Strong investment decisions combine sound financial analysis with strategic objectives, operational considerations and risk management. Contact FMD to help you evaluate potential capital investment projects and identify which opportunities make the best use of your business’s resources.
Ideas for Negotiating Smarter, Not Harder
Business negotiations aren’t about squeezing every possible concession from the other side. Both parties should leave the table believing they’ve protected their interests and gained something of value. This approach not only supports the current transaction, but also lays the groundwork for future deals. The reason is simple: Business owners with a reputation for fairness tend to attract more opportunities.
Before the conversation begins
Every successful negotiation starts before anyone sits down to talk. First, define what success looks like for your business and identify the point at which a deal no longer makes financial or operational sense. Establishing your minimum acceptable terms ahead of time helps prevent emotion-based decisions.
Price often dominates business negotiations. But bear in mind that other factors may matter just as much, including delivery schedules, payment terms, warranties, service levels and future opportunities. Occasionally, something with little value to your organization may be highly valuable to the other party. For example, discounted excess inventory could help solve a customer’s problem while reducing your carrying costs.
When appropriate, establish basic ground rules before negotiations begin. This can be especially helpful when dealing with language barriers, cultural differences or potentially contentious situations where expectations need to be clearly defined.
Making strategic concessions
Once negotiations begin, don’t immediately agree when a concession is requested and try to avoid making the first one. Taking time to consider requests demonstrates that what you’re giving up has real value.
The concessions you do make should be relatively small and deliberate. Large early compromises may signal that your original position wasn’t realistic and encourage the other side to push for more. Also remember that several small concessions can add up, so monitor the cumulative impact throughout the discussion.
Perhaps the most important principle is to never concede something without receiving something in return. Effective negotiations rely on balanced exchanges rather than one-sided compromises. Instead of responding with a simple “yes,” consider saying, “I’d be willing to do this if you can help us by…” This approach keeps negotiations collaborative while protecting your interests.
Protect the relationship
After receiving a concession, resist the temptation to immediately ask for more on the same issue. Overreaching can quickly erode trust and jeopardize an otherwise favorable agreement. Also, be careful about stating potentially unreasonable demands or ultimatums. Maintain a positive tone by focusing on what you can do for the other party instead of simply rejecting proposals.
If negotiations seem to be deteriorating, be prepared to walk away. Assuming you want to preserve the relationship, suggest returning to the discussion another day.
Stronger future deals
Whether you’re negotiating with customers, suppliers, lenders or strategic partners, a positive outcome depends on preparing well before the meeting and keeping a cool head during it. Remember that negotiations should establish trust, credibility and a foundation for future business. FMD can help you get ready for negotiations by identifying reasonable financial parameters and integrating them into your negotiating strategies.
As a Single Parent, You Need an Estate Plan that Achieves these Key Objectives
According to a 2026 Worldmetrics report, there are between 14.5 and 15 million single-parent households in the United States. If your family falls into this category, it’s critical that your estate plan:
Appoints a guardian. Your plan must designate a suitable, willing guardian to care for your children if the other parent is unavailable to take custody of them in the event you become incapacitated or die suddenly.
Choose the best person for the job and designate an alternate if that person can’t fulfill the duties. Frequently, a single parent will name a married couple who are relatives or close friends. If you take this approach, ensure that both spouses have legal authority to act on the child’s behalf. Also, select someone who has the necessary time and resources for this immense responsibility.
Establishes a trust. Trust planning is one of the most effective ways to provide for your children. Trust assets are managed by a trusted individual or corporate trustee for the benefit of your children.
If your trust will provide for your children into adulthood, consider an incentive trust. By linking asset distribution to specific goals or behaviors, it can encourage your heirs to live responsibly while ensuring your estate is managed according to your wishes. An incentive trust can promote financial responsibility, encourage education or career development, discourage harmful behaviors and support charitable values.
Addresses incapacity. It’s important for your estate plan to include documents that specify your health care preferences if you become incapacitated and designate someone to make medical decisions on your behalf. You should also have a revocable living trust or durable power of attorney to manage your finances if you’re unable to do so.
Implements a gifting strategy. If your estate is large enough that gift and estate taxes are an issue, it’s important to begin tax planning as early as possible. As a single parent, you won’t enjoy the benefit of the unlimited marital estate tax deduction, so you’ll need to rely more heavily on other tax-reduction strategies.
For example, you might take advantage of the $19,000 per recipient (for 2026) gift tax annual exclusion to regularly make tax-free gifts to your children or to a trust for their benefit. By using the gift tax annual exclusion judiciously, you can transfer assets to your children and other family members and reduce the size of your taxable estate without eroding your federal gift and estate tax exemption. Be aware that each year you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year.
Creating a comprehensive estate plan is one of the most important steps you can take as a single parent to protect your young children. Unlike households with two parents, there may be no automatic backup decision-maker, financial provider or caregiver if the unexpected happens. If you have questions regarding your estate plan, don’t hesitate to contact us. FMD would be pleased to review your plan and help make any necessary updates.
Accounting Teams Need More Than Number Skills
In addition to mastering accounting and tax rules, today’s accounting professionals must work through financial decisions with customers, vendors, lenders, business partners and internal stakeholders. Topics may range from payment terms and budgets to technology investments and contract renewals.
Developing strong negotiation skills can help your accounting team resolve billing issues and achieve favorable pricing and contract terms. Over time, these skills can add real value by strengthening business relationships and improving your business’s overall financial performance. Here’s how to help your internal accounting team become confident, effective negotiators.
Start by earning trust
The first step in any negotiation is establishing rapport with the other party. Although difficult to measure, rapport is the trust-based connection that enables people to communicate openly and work toward common goals. Ways to establish and maintain it include:
Asking open-ended questions and avoiding interruptions,
Restating key points to demonstrate interest in what the other party said,
Paying close attention to your tone of voice and word usage, and
Maintaining eye contact, smiling and being mindful of body language, such as crossed arms, that may send subtle yet noticeable signals about your level of engagement.
If you want someone to trust you, that person must feel like they’re being heard and not judged or looked down upon. While building rapport, it can also help to communicate your commitment to fairness and transparency. Setting an ethical tone signals integrity and helps lay the foundation for a more productive exchange.
For example, rapport building remains critical when following up on overdue customer invoices. Automated payment reminders and online customer payment portals can often resolve routine issues. If additional outreach is needed, your accounting staff should begin with a calm, friendly phone call or video conversation that acknowledges the customer’s situation while reviewing the invoice amount and payment status. If the customer remains unresponsive after your normal collection timeline has passed, the employee should follow your company’s escalation policy for involving management, document all outreach and get approval before changing terms or pursuing additional collection steps.
If your business doesn’t already have a formal escalation policy, now is a good time to draft one. Your staff should operate within clear approval limits and know when to involve management and outside advisors.
Focus on shared objectives
When negotiating, it’s easy to view the exercise as a win-lose proposition, meaning one person’s gain comes at the other's expense. While some negotiations can produce just one winner, in many cases, it’s possible to collaborate and reach a mutually beneficial outcome. A win-win scenario is more likely when both parties openly discuss their priorities and constraints.
For instance, when discussing a long-term agreement with a supplier, primary considerations are price, payment terms and contract length. But vendor negotiations often extend beyond cost. Additional issues to consider include service expectations, delivery performance, technology integration, cybersecurity responsibilities and communication protocols. Sharing appropriate forecasting or inventory data can also help suppliers improve planning and minimize disruptions. Businesses that build collaborative relationships with key vendors may be better positioned to negotiate favorable pricing and receive priority service.
Invest in your team
Business owners play a critical role in developing employee skills. By modeling strong communication skills, emphasizing collaboration and practicing ethical negotiation techniques, you can show your accounting team firsthand how these skills translate into stronger business relationships and better financial outcomes.
Building “people” skills doesn’t happen overnight, but the payoffs from nurturing and mentoring your team may include lower costs, stronger cash flow and a more empowered team. Contact FMD for guidance on strengthening your accounting team's negotiation skills so they can handle key business discussions more effectively.
Have Concerns About A Beneficiary Mismanaging an Inheritance? A Spendthrift Trust May Be the Answer
An important decision you must make when creating your estate plan is who’ll inherit your assets. While many of your beneficiaries are likely capable of managing an inheritance responsibly, others may be vulnerable to financial pressures, creditor claims, poor spending habits or other challenges that could erode the wealth you’ve worked hard to build.
One estate planning tool that can help safeguard an inheritance is a spendthrift trust. By placing assets in this type of trust, you can provide financial support for beneficiaries while adding a layer of asset protection.
You set the distribution parameters
A spendthrift trust prohibits a beneficiary from directly tapping its funds or transferring rights to someone else. The trust also generally can deny access to creditors or a beneficiary’s ex-spouse.
Under a spendthrift clause, the trust beneficiary relies on a trustee to provide payments based on the trust’s terms. These could be in the form of regular periodic payouts or on an “as needed” basis. The trust document spells out the nature and, if applicable, frequency of the payments.
One of the primary advantages of a spendthrift trust is creditor protection. If a beneficiary experiences financial difficulties, such as a lawsuit, bankruptcy or significant debt, creditors generally can’t force the trust to distribute assets to satisfy those obligations. Because the beneficiary doesn’t own the trust’s assets outright, those assets usually can remain protected until distributions are made.
Trustee acts as a gatekeeper
The role of the trustee is a critical one. Depending on the trust’s terms, he or she may be responsible for making scheduled payments or have wide discretion as to whether funds should be paid, how much and when. For instance, the trustee may be authorized to withhold payments upon the occurrence of specific events (such as if the beneficiary exceeding a debt threshold or declaring bankruptcy).
Designating the trustee is an important consideration, especially in situations where he or she will have broad control. A good choice can be an attorney, financial or investment advisor, or someone else with the requisite experience and financial acumen. You should also name a successor trustee in the event the designated trustee dies before the end of the term or otherwise becomes incapable of handling these duties.
Other considerations
Keep in mind that the protection offered by a spendthrift trust isn’t absolute. Depending on applicable law, government agencies may be able to access the trust’s assets — for example, to satisfy a tax obligation.
It’s also essential to establish how and when the trust should terminate. It could be set up for a term of years or for termination to occur upon a stated event, such as your child or grandchild reaching a certain age.
A valuable planning tool
A spendthrift trust isn’t necessary for every estate, but it can be an effective solution when protecting assets and preserving wealth are priorities. Whether you’re concerned about creditors, divorce or financial inexperience, or you simply want greater oversight of how an inheritance is used, a spendthrift trust may help strengthen your estate plan. Contact FMD with questions. We can help you determine if a spendthrift trust is right for your family’s circumstances.
TRUMP ACCOUNTS: WHAT YOU NEED TO KNOW!
Trump Accounts were created under the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025. The website went live on July 6th at https://trumpaccounts.gov/.
For those taxpayer’s who have been looking for ways to begin funding a retirement program via an IRA (or Roth IRA) for their children or grandchildren, the new Trump Accounts provide a pathway that was not available in the past. Trump Accounts can be established for any U.S. citizen child under the age of 18. Specific rules under IRC Section 530A govern these accounts.
Annual contributions are limited to $5,000 per year (adjusted for inflation beginning in 2028) until the year the beneficiary turns 18. All contributions must be made in cash. Contributions are treated as completed gifts to the beneficiary in the year they are made, and do not require the filing of a gift tax return.
Employers may also include Trump Account contributions as an option, within their Section 125 Cafeteria Plans. Employers may make tax-free annual contributions of up to $2,500 to the Trump Account of an employee’s eligible dependent.
In addition to the annual contribution, IRC 6434 establishes a Pilot Program that provides a $1,000 tax free government contribution for each U.S. citizen child born during calendar years 2025 through 2028.
In addition, Michael Dell has pledged $6.25 billion to provide an additional $250 contribution for the first 25 million children born between 2016 and 2024 who open Trump Accounts, and reside in a ZIP code with a median household income of $150,000 or less.
There are restrictions on how Trump Account assets may be invested. Funds must be invested in eligible low-cost U.S. equity index funds or ETFs with expense ratios capped at 0.10%. Individual stocks and active management strategies are not permitted while the child is a minor. These requirements are intended to keep investment costs low while encouraging longterm investing. The overall goal is to give every child in the United States “skin in the game” and an opportunity to benefit from long-term tax deferred stock market growth.
Distributions are not permitted during the “Growth Period” which ends on January 1 of the calendar year in which the beneficiary turns 18. After age 18, distributions are generally taxable under IRC Section 72, similar to a nondeductible IRA, with basis established by:
Qualified general contribution
Government contributions received under the IRC Section 6434 Pilot Program
Employer contributions made through a Section 125 Cafeteria Plan
No distributions are permitted before age 18 unless the beneficiary dies.
If you have questions about how these new provisions may affect your tax planning strategies, contact your FMD Advisor. We can help you determine whether a Trump Account fits your family’s goals and develop a plan to invest in your children’s, and grandchildren’s future.
The Right Financial Guidance Can Help Maximize Your Business’s Potential
Financial information is the foundation for every important business decision. Whether your goal is to improve cash flow, launch a new offering, hire additional workers or expand into a new market, accurate data enables you to make decisions confidently. An experienced advisor can help prepare this data and ensure your business is poised to capitalize on growth opportunities.
Organized records
Many business owners don’t realize they need bookkeeping support until problems surface. Are you frequently behind on invoicing, scrambling to prepare tax returns or struggling to reconcile bank accounts? If so, it may be time to seek help.
Professional bookkeeping keeps your records organized. It also provides reliable information that allows you to make informed decisions throughout the year and avoid costly mistakes. Accurate books improve tax compliance, too, and make it easier to apply for financing when you need additional capital.
Key reports
Once your bookkeeping’s in order, review key financial reports regularly. At a minimum, you should always be familiar with your business’s most recent:
Profit and loss statement,
Balance sheet,
Cash flow statement, and
Accounts receivable and payable reports.
When prepared carefully, these reports can provide early warning signs if they show, for example, that revenue or cash flow is slowing. Rather than reacting to financial surprises, you can address issues before they become major problems.
Sustainable growth
Growth creates exciting opportunities, but it also introduces challenges. Before investing in expansion, get a clear picture of your business’s current financial position. Decisions made without accurate information can strain cash flow or increase debt beyond what you can comfortably support.
On the other hand, reliable records allow you to confidently evaluate and pursue your next objective, such as acquiring another business, launching a new marketing campaign or expanding your facilities. Each option may carry financial and tax consequences that deserve careful analysis.
Better cash flow
Even profitable businesses can struggle if cash isn’t managed effectively. Late-paying customers, for instance, are a serious problem when your business needs to pay its own employees, office rent and suppliers on time. Without careful planning, temporary cash shortages can interrupt critical operations.
In addition to suggesting best practices for billing and collections, your financial advisor can help you identify any seasonal trends and develop realistic cash flow forecasts and cash reserve targets. Financial professionals can also recommend ways to control expenses and how to determine when outside financing makes sense (and where to find it).
Informed decisions
Successful businesses don’t grow through guesswork. They flourish because owners thoroughly understand their financial position and use that knowledge to make informed decisions. By working with FMD, you can reduce risk and prepare your business for long-term success.
IRS Issues Guidance on QOZ Program Changes
The Qualified Opportunity Zone (QOZ) program provides tax incentives to invest in designated low-income communities across the United States. Tax law changes enacted last year made the program permanent and altered it, with implications for investors under both the original and renewed programs. With proposed, and eventually final, regulations on the way, the IRS has released some transitional guidance for investors, Qualified Opportunity Funds (QOFs) and Qualified Opportunity Zone businesses (QOZBs).
QOZ basics
The QOZ program was created by the Tax Cuts and Jobs Act (TCJA). It generally allows taxpayers to defer — and possibly reduce or eliminate — short- or long-term capital gains from the sale of their investments by reinvesting the gains in a QOF within 180 days.
QOFs must maintain at least 90% of their assets in QOZ property. Qualifying investments include those in QOZBs and in new or substantially improved commercial buildings in QOZs.
Under the TCJA, the tax benefits from investing in a QOF are generous. Taxes on the “rolled over” capital gains are deferred until the earlier of 1) the sale or exchange of the taxpayer’s investment (an “inclusion event”), or 2) December 31, 2026. Investors receive a 10% step-up in basis for the investment after five years, so only 90% of the rollover gain is taxable. After seven years, the step-up increases to 15%. Gains on investments left in a QOF for at least 10 years are fully tax-exempt.
The One Big Beautiful Bill Act (OBBBA) established a permanent QOZ program with rolling 10-year QOZs. The first round of newly designated zones eligible for investment will begin January 1, 2027. It’s expected that about 6,500 new zones will be designated. The original QOZ designations generally expire on December 31, 2028.
Under the permanent program, rollover gains can still be deferred, with a 10% step-up at year five. At that point, though, the rollover gains must be recognized. And the additional step-up at seven years has been eliminated. But the permanent exclusion of gains on the QOF investment itself after 10 years remains intact, for up to 30 years after investment. The OBBBA also created a new kind of QOZ for rural areas, with a 30% step-up on the rollover gain after five years.
What’s in the guidance?
The guidance in IRS Notice 2026-40 addresses several issues of concern, including:
Treatment of existing QOF investments. Investors who hold a qualifying investment through December 31, 2026, must include the amount of remaining rollover gain from the investment in their income for the tax year that includes that date. Notably, they can’t defer that gain by rolling it into a new QOF.
Existing QOF investors can opt to continue to hold those investments. If investors reach the 10-year holding period and satisfy certain requirements, they can elect to adjust the basis at sale or disposition to the investment’s fair market value at that time, thus eliminating taxable gains after the date of the original investment.
The treatment of gains on an inclusion event that occurs before December 31, 2026, differs from that of gains where the investment is still held on December 31, 2026. In the former situation, the recognized gains may be eligible for deferral by making a new qualifying investment within 180 days. But the clock on the 10-year step-up in basis will start over and run from the date of the new investment.
Tangible property acquired after 2026. Under the OBBBA, property acquired by a QOF or QOZB after December 31, 2026, generally can’t be treated as QOZB property unless it’s acquired for use in a QOZ designated after July 4, 2025. That means tangible property acquired after 2026 generally can’t qualify as QOZB property if it’s in one of the originally designated QOZs.
However, the guidance outlines two exceptions that allow tangible property acquired by QOZBs after 2026 in an original QOZ to qualify:
Working capital safe harbor. The safe harbor applies if an entity acquires the property under a written working capital plan that was adopted before December 31, 2026. The QOZB also must have received at least 10% of the estimated working capital assets designated by the plan before December 31, 2026, and expended at least 5% by that date.
Ordinary course of business exception. This exception applies when a QOF or QOZB acquires tangible property in an existing QOZ, in the ordinary course of its business, to replace existing tangible business property (if other requirements are met). Covered replacements include the replacement or modernization of property necessary for the business. Property acquired to expand a business or transition to a new business doesn’t qualify.
QOZBs and QOFs that are active in existing QOZs should ensure they can satisfy one of these requirements before the end of 2026.
Seize the opportunities
In addition to the above, the IRS guidance provides transitional rules, including safe harbors for how QOFs and QOZBs can continue to treat a location as if it were in a QOZ after an existing designation expires. Questions? FMD can provide further details on the new QOZ guidance and explain how it can benefit your tax situation.
Turn Raw Data into Actionable Insights with Dashboard Reporting
Business owners have access to more financial and operational data than ever before. The challenge is identifying the most useful information and presenting it in such a way that enables better decision-making. Dashboard reports consolidate your key metrics into an easy-to-read format, helping management monitor performance, identify trends and respond more quickly to changing business conditions.
Focus on what matters most
Everything in a dashboard report can typically be found elsewhere in your financial reporting systems, albeit in a less user-friendly format. Rather than providing new information, a dashboard report captures the most critical data — based on the nature of your operations — and presents it clearly and succinctly.
A dashboard report may compare your results with budgets, prior periods or industry benchmarks so you can see whether you’re falling short or exceeding expectations. It can also provide an early warning system for potential problems, allowing you to pivot as needed to minimize losses and capitalize on emerging opportunities before they pass.
To maximize the effectiveness of dashboard reports, make them accessible to appropriate managers across your organization via your internal website or weekly email blasts. Widespread availability allows your management team to quickly identify trends that require immediate attention. Additionally, businesses that are struggling during a reorganization or debt restructuring sometimes share selected dashboard reports with their lenders or investors to demonstrate performance and confirm compliance with financial expectations.
Choose relevant metrics
When deciding which information to target, look at your business’s loan covenants — lenders usually have a good sense of which metrics are worth monitoring. Then conduct your own risk assessment. What’s relevant varies depending on your industry, general economic conditions and the nature of your business operations.
In addition to tracking cash balances and receipts, useful financial measures may include the following ratios:
Gross margin [(revenue – cost of sales) /revenue],
Current ratio (current assets / current liabilities), and
Interest coverage ratio (earnings before interest and taxes / interest expense).
From here, consider adding a handful of business- or industry-specific metrics. For example, a warehouse might report daily shipments and inventory turnover. A hotel might track net operating income, average room rates and occupancy rates compared to the previous week or month. A law firm might report each partner’s realization rate. Retailers may focus on sales per square foot and average transaction value, while service businesses might track utilization rates and revenue per employee.
Avoid information overload, however. A limited number of well-defined metrics is generally more useful than a cluttered report that recreates the underlying financial statements. Review your dashboard metrics periodically as your business’s goals, risks and operating conditions change.
Complement rather than replace
While financial statements provide a comprehensive view of your business’s financial position and results, dashboard reports deliver timely insights that help management monitor day-to-day performance and respond quickly when conditions change. Contact FMD for help identifying key financial metrics and developing a dashboard report that’s tailored to your business.
How to Build a Stronger Workforce with a Strategic Onboarding Process
U.S. Bureau of Labor Statistics data shows that hiring has slowed in recent months. Even so, thousands of people continue to start new jobs, and every new hire represents a significant investment of time and money for organizations. With labor costs remaining a concern for many businesses, it’s more important than ever to help employees become productive members of your workforce as quickly as possible. An effective onboarding process can help you do this.
Start before day one
Successful onboarding begins before a new hire’s first day on the job. Once a candidate accepts your job offer, explain what to expect before, during and after the first day. A welcome email can provide practical details, such as where to park (for on-site employees), when to arrive and to whom to report. Whenever possible, give new hires digital access to employment forms, benefit information and introductory training materials so they can complete administrative tasks in advance and arrive better prepared.
The first day should combine orientation with a personal welcome. Designate a specific person — ideally the employee’s direct supervisor — to guide the new hire through a structured agenda. For on-site positions, ensure the workspace is fully set up with the necessary equipment before arrival. For remote employees, verify that technology and systems access are working properly. In either setting, introduce new employees to teammates and other key colleagues to help them begin building relationships immediately.
Investing in career development
Supervisors play a central role in helping new employees succeed, but experienced peer mentors can make the transition smoother. A mentor can answer day-to-day questions, explain workplace norms and help new hires navigate your organization’s culture. These informal connections often build confidence and accelerate integration into the team.
Training should begin immediately after orientation and continue beyond the first week. Avoid taking a one-size-fits-all approach or assuming employees will simply learn as they go. Instead, develop structured training programs tailored to each role, with clear learning objectives and opportunities for ongoing professional development. Employees who receive meaningful training are generally more confident and productive.
Continuous improvement
Many organizations assume their onboarding programs are effective until negative feedback reveals otherwise. Like any critical business process, onboarding should be regularly evaluated and refined.
Encourage supervisors to check in with new hires throughout the onboarding period, which typically lasts one to two weeks. These discussions should emphasize active listening and honest feedback. If your organization uses peer mentors, ask them to share observations as well. The insights you gather can help you identify weaknesses and improve your onboarding program.
Welcome, prepare and support
Employees who feel welcomed, prepared and supported from their first day on the job are more likely to become enthusiastic contributors and deliver stronger long-term performance. Contact FMD for help evaluating your onboarding process, measuring its return on investment and aligning it with your business objectives.
Where to Look When You Need to Improve Profit Margins
Increasing revenue isn’t the only way to strengthen your business’s financial performance. Another option is to take a closer look at operating expenses and determine whether every dollar you spend delivers value. A systematic review of major expense categories can uncover opportunities to reduce waste and protect your bottom line without sacrificing long-term growth. Here are some tips to help you use financial data to cut selectively.
Review compensation and benefit costs
Evaluate your total employment costs. These include salaries, wages and employee benefits, such as health insurance and retirement plan contributions. Benefits account for more than 30% of total employee compensation, according to the U.S. Bureau of Labor Statistics.
As you seek to offer competitive pay and benefits, compare your total compensation for each position with what others in your industry pay for similar roles. Consider adjustments if your compensation differs significantly from these benchmarks. Sometimes you can offset salary reductions by adding cost-effective benefits and perks that your workers might value — such as flexible work arrangements and professional development opportunities — to help maintain morale and minimize turnover.
Evaluate vendor and subscription spending
Gather all your vendor contracts so your management team can review them together. These may include contracts with suppliers, insurers, professional services providers, cleaners, landscapers, technology firms and software subscription providers. Determine if you’re paying for overlapping services from multiple providers. If so, eliminate unnecessary vendors. Next, evaluate the services you’re purchasing from each provider and whether they’re necessary. For instance, you might be paying a vendor to perform a service that your staff could accomplish with technology you already have in place.
Finally, designate a preferred provider in each expense category and negotiate the best price with this vendor. Require employees to use preferred vendors unless there are extenuating circumstances that are approved by a manager. Also consider leases for equipment and property that could be renegotiated on more favorable terms. Before changing vendors or renegotiating contracts, it’s important to review cancellation penalties and renewal deadlines.
Measure marketing ROI
Work closely with your marketing team or agency to measure the effectiveness of your current campaigns. Some businesses spend thousands of dollars a month on advertising, digital marketing and other promotional efforts that deliver few, if any, results. Ask your marketing team to estimate the return on investment (ROI) of campaigns across channels, including search, social media, email and traditional advertising. Based on this analysis, reduce or eliminate spending on ineffective campaigns and consider diverting these funds to campaigns with stronger ROIs.
Also, consider putting your advertising account out to bid if you haven’t done so in the past year or two. Many agencies automatically increase their rates annually. Tell your current agency that you’re shopping around and ask them for their best price. If you decide to switch to a new agency, you might benefit from fresh ideas and new perspectives on increasing revenue.
Keep borrowing costs under control
If your business borrows money for equipment, real property or working capital needs, interest expense is probably a significant item on your income statement. Although commercial interest rates have eased from their recent highs, borrowing costs remain elevated for many businesses. If you have variable-rate loans, financing costs may still be adversely affecting your profitability.
Your business operations should generate returns that exceed the cost of your debt. If not, high interest costs could lead to financial distress. To avoid this pitfall, brainstorm ways to lower borrowing costs and improve cash flow.
For instance, you might be able to lower your interest rate by shopping around for fixed-rate loans or refinancing existing debt if more favorable terms are available. Shorter terms may reduce total interest costs but increase monthly payments. Alternatively, you may need to draw less from your line of credit by managing inventory and receivables more efficiently. Also consider setting aside some operating cash to pay down your outstanding loans, rather than taking dividends or paying bonuses.
Take a targeted approach
Reducing expenses doesn’t mean cutting costs across the board. The goal is to eliminate spending that isn’t contributing to your success while continuing to invest in the people, technology and resources your business needs to grow. Contact FMD for guidance on performing a comprehensive expense review. We can help you analyze margins and identify strategies to improve profitability without undermining your long-term business goals.
IRS Provides Gift Tax Reporting Relief for Sec. 530A Account Contributions
Section 530A accounts, also known as “Trump accounts,” are available for contributions as of July 4, 2026. Created by last year’s One Big Beautiful Bill Act, they’re custodial, tax-advantaged accounts opened by a parent or guardian for an eligible child under age 18. In late June, the IRS issued Revenue Procedure 2026-25, which, among other things, allows qualifying 530A account contributions to be treated as completed gifts rather than gifts of a future interest. The upside is that your contributions can qualify for the gift tax annual exclusion and you may not have to file a gift tax return (Form 709) — but only if certain requirements are met.
How do 530A accounts work?
A 530A account can be set up for anyone who’ll be under age 18 at the end of the tax year and who has a Social Security number. Annual contributions of up to $5,000 can be made until the year the beneficiary turns age 18. In addition, U.S. citizen children born from Jan. 1, 2025, through Dec. 31, 2028, can potentially qualify for an initial $1,000 government-funded deposit.
530A account contributions aren’t deductible, but earnings grow tax-deferred as long as they’re in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Withdrawals generally can’t be taken until the child turns age 18, when the account becomes a traditional IRA, subject to traditional IRA rules. Distributions will generally be at least partially taxable, and IRA early withdrawal penalties could also apply.
What’s in the IRS guidance?
Under safe harbor rules included in the June IRS guidance, 530A account contributions will be eligible for the gift tax annual exclusion and you won’t be required to file a gift tax return if all these requirements are met:
Your cash contributions to a 530A account for a beneficiary under age 18 are your only taxable gifts for the calendar year,
The total amount of each beneficiary’s gift (including contributions to the 530A account) doesn’t exceed the gift tax annual exclusion amount ($19,000 per recipient for 2026) or your available lifetime gift and estate tax exemption ($15 million for 2026, less any exemption you’ve already used during your life), and
A gift tax return for the year isn’t otherwise required to be filed by you.
When these conditions are met, the IRS will generally treat the contributions as completed gifts rather than future interests in property. But if just one of the conditions isn’t met, your contributions will be treated as gifts of a future interest, which means they won’t be eligible for the annual exclusion and you must file a gift tax return for every account beneficiary who receives a contribution. The gifts can still be tax-free, but you’ll have to apply your lifetime gift tax exemption — and your generation-skipping transfer (GST) tax exemption if the GST tax also applies (generally when a gift is made to a grandchild or someone else two generations or more below you).
Should you file a gift tax return?
If you’re planning to contribute to your children’s or grandchildren’s 530A accounts, the new IRS rules can potentially ease the tax-filing burden next year. However, there are situations where it’s advantageous to file a gift tax return even if one isn’t required. And if your 530A account contributions are only part of your overall gifting program, you’ll likely still be required to file a gift tax return — and you’ll need to factor the tax consequences of the contributions into your planning. If you’re unsure whether you must (or should) file a gift tax return, or you need clarification on the recent IRS guidance on 530A accounts, contact us.
Stress Testing: A Smart Way to Manage Today’s Business Risks
Business owners today face no shortage of uncertainty. Persistent inflation, evolving trade policies, cybersecurity threats and ongoing geopolitical tensions have made planning challenging. Although it’s impossible to predict every disruption, you can better prepare by evaluating how your business would respond under adverse conditions. One proven approach is stress testing, which helps organizations identify vulnerabilities before they become costly problems.
Some background
Stress testing gained widespread attention in the banking industry following the 2008 financial crisis. Regulators continue to require large financial institutions to evaluate how they’d perform under severe economic scenarios.
However, for most businesses, stress testing doesn’t need to be as complex as a bank regulatory model. Approach it as a practical planning exercise that uses realistic financial assumptions to answer questions such as: What would happen to operating cash flow if a major customer left, borrowing costs rose or a key supplier increased prices? By modeling the financial impact of potential disruptions, you can make more informed decisions and improve long-term planning.
Identify major risks
To launch your own stress-testing initiative, identify your business’s primary risk factors in the following categories:
Operational. These affect the day-to-day functioning of your business and may include supply chain disruptions, technology failures, cyberattacks, natural disasters, employee shortages and human error.
Financial. Risks related to cash flow, access to capital, interest rate fluctuations, fraud, customer credit issues and changes in borrowing costs all deserve attention.
Compliance. Such risks stem from evolving tax laws, industry regulations, data privacy requirements, labor laws and other government mandates.
Strategic. These relate to competitive pressures, changing customer preferences, market disruptions, technological innovation and broad economic shifts.
As you evaluate each risk category, be specific. The more realistic your assumptions, the more valuable the exercise will likely be.
Meet with your team
Once you’ve identified the most significant risks, meet with your leadership team and trusted professional advisors to discuss each scenario. Consider not only the likelihood of each event but also its potential financial impact and your business’s ability to respond.
The goal is to develop practical strategies to reduce exposure and improve resilience. For example, if your business operates in an area susceptible to natural disasters, a comprehensive disaster recovery and business continuity plan is essential. Other vulnerabilities may be less obvious. If your business depends heavily on a single executive with specialized knowledge, stress testing can highlight the importance of succession planning.
Value of continuous improvement
Risk management isn’t a one-time exercise. Economic conditions, customer behavior, technology development and regulatory requirements continue to evolve, creating new challenges and opportunities. So review your stress-testing program at least annually and update it whenever significant changes occur within your business, industry or in the broader marketplace.
Although stress tests won’t eliminate uncertainty, they can help your business respond more confidently when unexpected events arise. FMD can help you analyze potential scenarios and develop reliable financial projections. Contact us to discuss how stress testing can strengthen your risk management strategy.
How a Financial Statement Audit Strengthens Your Fraud Defenses
Fraud is a major threat facing small and midsize businesses. While audits aren’t designed to uncover fraud, they can help business owners identify anomalies and deter would-be fraudsters. Recent findings from the Association of Certified Fraud Examiners (ACFE) underscore the important role audits play, together with other controls, in a broader fraud prevention strategy.
Recent ACFE study
External audits can be effective antifraud controls. The ACFE’s Occupational Fraud 2026: A Report to the Nations analyzed 2,402 occupational fraud cases across 143 countries. Consistent with previous studies, the latest version of the ACFE’s report estimates that organizations lose approximately 5% of their annual revenue to occupational fraud. The study also found that a typical fraud scheme lasts 12 months before it’s detected.
More than half of the cases in the 2026 study involved either a lack of internal controls or management overriding existing controls. However, respondents with strong antifraud controls — such as external financial statement audits, management review, proactive data monitoring and surprise audits — generally experienced lower fraud losses and detected fraud more quickly than organizations without those safeguards.
Limits on audit assurance
The purpose of an audit isn’t to detect fraud. Instead, it provides an express opinion about whether the financial statements are fairly presented, in all material respects, in conformity with U.S. Generally Accepted Accounting Principles (GAAP) or another comprehensive basis of accounting.
An audit provides a reasonable level of assurance that the business’s financial statements are free from material misstatement and conform with GAAP. However, external audits don’t provide guarantees against intentional financial statement fraud or inadvertent errors.
The role audits play in fraud detection
Auditors play a crucial role in supporting the integrity of financial reporting. Here’s how certain audit procedures may help reveal suspicious activity and identify weaknesses in your business’s controls.
Risk assessments. These assessments identify high-risk areas for misstatement or errors. They help direct the auditors’ attention to the accounts and transactions that warrant more rigorous audit procedures. Auditors analyze the business’s operations, financial reporting processes, internal controls and industry environment to pinpoint potential risks. Then they develop audit plans focusing on these areas.
Audit fieldwork. Auditors perform various procedures during fieldwork to help them detect discrepancies that may indicate fraudulent activity. For example, they may test certain financial transactions and account balances to verify their accuracy and completeness. They may also examine supporting documentation, such as invoices, contracts and bank statements, to ensure that transactions are legitimate and properly recorded. And they might confirm accounts receivable, review pending litigation and physically observe year-end inventory counts. Auditors customize their procedures to fit each business’s risk assessment.
Auditors are trained to recognize the warning signs of fraud, including unusual transactions, inconsistencies in financial records and deviations from standard procedures. When auditors identify red flags, they may ask questions and conduct additional audit procedures to help ensure the financial statements are fairly presented and conform to GAAP.
Financial reporting compliance. Businesses must comply with a wide range of laws and regulations, including those related to financial reporting, taxes and corporate governance. Auditors consider laws and regulations that could have a material effect on the financial statements and may identify issues that warrant management’s attention or further review.
A stronger defense
No organization is immune to fraud. But an external audit can help reduce your business’s risk by examining financial reporting procedures, evaluating internal controls and identifying potential warning signs before they become larger problems. If you have questions about your business’s fraud risks or you’d like to discuss our audit and forensic accounting services, contact FMD. We can help you build a stronger fraud prevention strategy and investigate any suspicious activity.