Does Your College-age Child Need an Estate Plan?

Many parents assume an estate plan is only necessary for older adults or those with substantial wealth. However, once your child turns 18, he or she legally becomes an adult, and that change can create unexpected complications for your family. Without basic estate planning documents in place, you may be unable to help your child during an emergency when he or she is away at school. If your child recently graduated from high school and is planning to attend college in the fall, consider these estate planning documents before he or she leaves home.

Health-care-related documents

Perhaps the most critical estate planning document for a college-age child is a health care power of attorney. Because children age 18 or older are usually treated as adults, without a health care power of attorney, you might have no say in your child’s medical treatment should he or she become incapacitated. This document (sometimes referred to as a “health care proxy” or “durable medical power of attorney”) allows your child to appoint someone, such as you, to make health care decisions on his or her behalf.

Your child’s health care power of attorney should provide guidance on how to make medical decisions. Although it’s impossible to anticipate every potential scenario, the document can provide guiding principles.

Another important health-care-related document for college students is a HIPAA release form. Federal privacy laws, including those under the Health Insurance Portability and Accountability Act, prevent doctors and hospitals from sharing medical information with parents once a child reaches adulthood.

If your child is injured in an accident or becomes seriously ill, you may not be able to access information about his or her condition or treatment options. A HIPAA authorization form signed by your child allows you to communicate with his or her health care providers and stay informed during a medical crisis.

Financial power of attorney

Financial matters are another important consideration. College-age students typically have bank accounts and credit cards, and they may also have car loans, apartments or part-time jobs. If an illness or accident prevents your child from handling financial responsibilities, you may not automatically have the legal authority to step in.

A financial power of attorney appoints an individual, such as you, to make financial decisions or execute transactions on your child’s behalf under certain circumstances. For example, a power of attorney might authorize you to handle your child’s affairs while he or she is studying abroad or, in the case of a “durable” power of attorney, incapacitated.

Will

Speaking of financial matters, it isn’t too early to have a will drawn up for your college-age child. It allows your child to specify how personal belongings, financial accounts and digital assets should be distributed in the event of his or her untimely death. It also gives your child the opportunity to express personal wishes.

Without a will, state laws determine how assets are handled. This can create unnecessary complications for your family during an already difficult time.

Peace of mind while away from home

A simple estate plan for your college-age child can help ensure you can provide support when it matters most. If you have questions about any of the documents discussed, don’t hesitate to contact FMD.

Managing Overhead Costs Today

Persistent inflation, elevated interest rates and volatile energy costs continue to squeeze profit margins for many small and midsize businesses. While implementing price increases may seem like the simplest response, that’s not always necessary — and, in today’s competitive markets, price increases can even cause some of your customers to search for lower-cost providers. Sustainable pricing decisions start with disciplined cost controls. One broad area to target for operational inefficiencies is overhead expenses.

Learn what counts as overhead

Overhead costs are a part of every business. These accounts frequently serve as catch-alls for any expense that can’t be directly tied to revenue-generating activities, including:

• Equipment maintenance and depreciation,

• Rent and building maintenance,

• Administrative and executive salaries,

• Insurance, and

• Utilities.

These are sometimes called indirect costs because they support your operations as a whole. Generally, these costs are fixed over the short run, meaning they won’t change appreciably as your revenue ebbs and flows. However, some overhead costs can rise with increased activity levels, energy usage or staffing demands.

For many small businesses, overhead grows gradually over time. And, because it isn’t directly tied to a single product, job or service, you may underestimate how much these costs affect your overall profitability.

Choose an allocation method that fits your business

The key to controlling overhead — and unlocking hidden profit potential — lies in allocating these costs to your products, services, projects or clients. Overhead allocations are typically associated with manufacturers. But a thoughtful approach, even if it’s informal, can help many businesses evaluate profitability. For instance, construction companies can assign equipment, supervision and office expenses to projects, restaurants can assign operating costs across menu items or locations, and professional service firms can assign administrative costs across client engagements.

The challenge is deciding how to allocate these costs using a relevant overhead rate. The rate is typically determined by dividing estimated overhead expenses by estimated totals in the allocation base (for example, direct labor hours) for a future time period. Then you multiply the rate by the actual number of direct labor hours for each product, project or service line to determine the amount of overhead to apply.

In some businesses, the rate is applied across all products. But if your operations are more complex, you may use multiple overhead rates to allocate costs more accurately. If one department is machine-intensive and another is labor-intensive, for example, multiple rates may be appropriate. In some situations, activity-based costing methods can improve accuracy by assigning overhead to activities that drive costs, such as machine setups, shipping volume or employee time supporting clients.

Cost allocations provide insight into which customers, services or business segments are the most profitable. This can help you identify underperforming products or services, evaluate expansion opportunities and make better-informed pricing decisions.

Review overhead regularly

There’s one problem with accounting for overhead costs: Variances from actual costs are almost certain. Fortunately, you can reduce the chance of overhead anomalies and improve the reliability of your financial reporting by:

• Conducting independent reviews of adjustments to overhead accounts,

• Studying significant overhead adjustments over different periods of time to spot anomalies, and

• Evaluating your existing overhead allocation methods and updating them when needed.

Allocating costs more accurately won’t guarantee that you make a profit. However, it can provide a stronger foundation for planning and budgeting.

You should also periodically revisit allocation assumptions as labor costs, supply chain expenses, technology investments and business operations evolve. Allocation methods that worked several years ago may no longer be relevant for your current operations.

Need guidance?

Accurate overhead allocation can provide valuable insight into profitability, pricing and operational efficiency. We can help you evaluate your current costing methods, strengthen internal controls and develop practical strategies to manage rising expenses. Contact FMD to learn more.

Looking for Funding? Consider SBA Loans

If you’re seeking financing to start or grow a small business, don’t forget to look at loan programs through the U.S. Small Business Administration (SBA). Down payments, interest rates and borrowing fees are typically lower, and application requirements may be more flexible than you’d find elsewhere. Some SBA loans also come with counseling and education, which can be particularly valuable if you’re a first-time business owner. But you’ll want to pay attention to the details because SBA loans may restrict how borrowers can use the funds. Here’s a quick overview of some of the more popular programs.

Borrowing basics

The SBA guarantees, but doesn’t actually make, its loans. To obtain an SBA loan, you’ll work with a bank, community development organization or other financial institution.

Your business generally will need to meet a few criteria to qualify. For example, you generally must operate for profit in the United States or its possessions, and you must have tried to use other financial resources (including your own assets) before applying for a loan. Your business also may need to meet specific income or size criteria. And some types of businesses, such as lenders and life insurance companies, generally aren’t eligible.

Although you’ll negotiate your loan’s interest rate with your lender, it can’t exceed maximums established by the SBA. Rates are calculated from a base rate, such as the prime rate (what commercial banks charge their most creditworthy corporate customers), plus a markup. The markup depends on factors such as loan size, repayment terms and your business’s financial profile. Lenders can also charge fees — for example, packaging and legal service fees, as well as out-of-pocket expenses.

7(a) program

The SBA’s most popular offering is the 7(a) loan program. Fixed- and variable-rate loans of up to $5 million are available and can be used to buy real estate, buildings, equipment and furniture, and to refinance existing debt, among other uses. The SBA guarantees 85% of loan amounts up to $150,000 and 75% of loan amounts greater than that.

To qualify for a 7(a) loan, your business must fall within the SBA’s size standards. In general, this means your business is considered “small” within its industry. Depending on the industry, this may be expressed by either the number of employees or your annual revenue. You’ll typically repay the loan in monthly payments of principal and interest.

The SBA also has a 7(a) Working Capital Pilot program designed for growing smaller businesses. Loans are in the form of monitored lines of credit. Borrowers and their lenders receive one-on-one counseling with the SBA’s subject-matter experts.

504 program

The 504 loan program provides long-term, fixed-rate loans designed to help borrowers purchase major assets that help promote business growth and job creation. The maximum loan amount is $5.5 million. Your business should be able to repay the loan from projected operating cash flows, generally over a 10-, 20- or 25-year period.

Again, you’ll need to meet a few requirements to qualify for a 504 loan. Among them, your business’s tangible net worth must be less than $20 million, and its after-tax net income must have been less than $6.5 million during the preceding two years. 504 loans are available only through Certified Development Companies.

Microloan program

The microloan program is designed to help small businesses and qualified nonprofit child care centers establish operations and grow. The maximum microloan amount is only $50,000. However, the average microloan is for much less — $13,000. You can use these funds for everything from working capital to inventory to equipment purchases.

Interest rates depend on intermediary lenders (certain community-based nonprofit organizations), but they’re usually in the 8% to 13% range. The maximum repayment term allowed by the SBA is seven years.

How to apply

Most lenders ask for extensive information before they’ll lend a business money, and the SBA is no exception. For instance, to apply for a 7(a) loan, you’ll generally need to supply a current income statement, balance sheet and cash flow projection.

In some cases, you’ll also need to provide a personal financial statement. Owners with at least a 20% stake in the business may need to sign a personal guarantee. In addition, larger loans usually require some form of collateral.

Get guidance

The SBA’s website can guide you through the process of selecting the most appropriate loan program for your situation — or contact us for help. We can advise you on best practices when borrowing money, including calculating how much your business needs and how you’ll repay your loan.

How to make Financial Reports Easier for Stakeholders to Understand

Financial statements are essential tools for evaluating performance, planning for growth and managing risk. Yet many business owners, board members, donors and investors don’t have formal accounting training. Presenting financial information in a clear, approachable way can help stakeholders better understand results and make informed decisions.

Know your readers

The people who rely on your organization’s financial statements probably come from different walks of life. Some may have financial backgrounds, but others might not. And it’s this latter group you need to keep in mind as you supply financial data.

This is especially true for nonprofits, such as charities, religious organizations, recreational clubs and social advocacy groups. Their stakeholders may include board members, volunteers, donors, grant makers, watchdog groups and other members of the community. But it also may apply to for-profit businesses that share financial data with their boards, employees and investors.

Don’t assume all your stakeholders understand accounting jargon; consider providing definitions of key financial reporting terms. For instance, a nonprofit might explain that “board-designated net assets” refers to assets set aside by the board for a particular purpose or period. Examples include safety reserves or a capital replacement fund, which aren’t subject to external restrictions imposed by donors or the law. While this definition might seem obvious to a nonprofit’s management team, stakeholders might not be familiar with it. You could also provide internal stakeholders with some basic financial training by bringing in outside speakers, such as accountants, investment advisors and bankers.

Turn numbers into visuals

In addition to providing numerical information from your income statement, balance sheet and statement of cash flows, consider presenting some information in a graphical format. Long lists of numbers can overwhelm financial statement users. Pictures may be easier for laypeople to digest than numbers and text alone.

For example, you might use a pie chart to show the composition of your business’s assets. Likewise, a line or bar graph might be an effective way to communicate revenue, expenses and profit trends over time. Additionally, dashboard-style reports can help highlight key performance indicators (KPIs), cash flow trends and operational metrics.

Focus on key ratios

Financial ratios show relationships between key items on your financial statements. While ratios don’t appear on the face of your financial statements, you can highlight them when communicating results to stakeholders. For instance, you might report the days in receivables ratio (accounts receivable divided by annual revenue multiplied by 365 days) for the current and prior reporting periods to demonstrate your efforts to improve collections. Or you might calculate gross profit margin (revenue minus cost of goods sold, divided by revenue) from the current and prior reporting periods to show how increases in materials, labor and operating costs have affected your business’s profitability.

Another useful tool is the current ratio (current assets divided by current liabilities). It’s a common measure of short-term liquidity. A ratio of 1:1 means an organization would have just enough cash to cover current liabilities if it ceased operations and converted current assets to cash.

It may also be helpful to provide industry benchmarks to show how your performance compares with others in your industry. This information is often available from industry trade publications and websites.

Keep the message straightforward

Clear communication can strengthen trust in your organization’s financial reporting and help stakeholders feel more confident about the decisions they make. Contact FMD for help developing financial reports and presentations that improve understanding while supporting transparency and credibility.

Add Flexibility to Your Estate Plan with Powers of Appointment

Powers of appointment allow a trusted individual (the “holder”) to adjust how assets are distributed after your death, based on changing circumstances. These might include marriages, births, financial needs, tax laws or evolving family dynamics. By incorporating powers of appointment into your trusts and other planning strategies, you can create an estate plan that balances long-term control with the ability to adapt over time.

Forms of powers of appointment

Powers of appointment come in a few forms. A testamentary power of appointment allows the holder to direct the distribution of your assets at his or her death through his or her own will or trust. (See “Postponing distribution decisions” below for an example.) An inter vivos power of appointment allows the holder to determine the disposition of your assets during his or her lifetime.

In addition, powers may be general or limited. A general power of appointment allows the holder to distribute assets to anyone, including him- or herself.

A limited power of appointment has one or more restrictions. In most cases, it doesn’t allow a holder to distribute assets for his or her own benefit (unless distributions are strictly based on “ascertainable standards” related to the holder’s health, education or support).

Typically, limited powers authorize the holder to distribute assets among a specific class of people. For example, you might give your daughter a limited power of appointment to distribute your assets among her children.

The distinction between general and limited powers has significant tax implications. Assets subject to a general power are included in the holder’s taxable estate — even if the holder doesn’t execute the power. Limited powers generally don’t expose the holder to gift or estate tax liability.

Postponing distribution decisions

Powers of appointment provide flexibility by allowing you to postpone the determination of how your wealth will be distributed until the holder has all the relevant facts. For example, let’s say that you and your spouse have three young children. Your plan calls for your wealth to be placed in a trust that benefits your spouse for life and then divides your assets equally among your children.

But it’s impossible to predict your children’s financial future, so you give your spouse a limited, testamentary power of appointment that allows him or her to distribute the trust assets according to the children’s needs. This way, if one child is financially independent, your spouse can reduce that child’s inheritance. Or if one child has developed a substance abuse or gambling problem, your spouse might direct that child’s inheritance into a trust that restricts his or her access to the funds.

Need more information?

If you’re interested in incorporating powers of appointment into your estate plan, contact FMD. We can review your plan and help determine which type is best for your situation.

What You Can Do to Protect Your Business from Rising Costs

For the 12 months ending in April 2026, the U.S. inflation rate was 3.8%, according to the U.S. Bureau of Labor Statistics. Prices for your business’s products, materials and other operating costs may have risen faster in recent months than you anticipated, making planning and forecasting challenging. How can your business counteract inflation? Start by making prudent cost-cutting decisions and acting swiftly when you spot opportunities.

First things first

Given that periods of elevated inflation are typically temporary, it can be tempting to assume inflation rates will fall in a few months. However, movements in inflation rates have been less predictable since the COVID-19 pandemic began. Waiting it out may work for some businesses, but inaction could also eventually lead to more difficult decisions. For example, delaying pricing adjustments could force you to make steeper increases later.

Although it’s always important to monitor expenses, frugal purchasing decisions become even more necessary when prices are rising. If raw material prices jump, consider whether new suppliers might offer discounts. If your cash flow and space can handle it, consider ordering some extra supplies and inventory to help mitigate the impact of future price increases. Also, review your business’s longer-term expenses. If a significant number of employees are working remotely, you might be able to reduce your office footprint or relocate to a less expensive part of the country.

Other ideas

Your ability to slash expenses and boost cash flow will depend largely on your industry and operations. But here are some ideas that most organizations can implement:

Assess the impact. Review the effect of inflation, product line by product line, to help determine whether you need to change your product mix. For instance, it may make sense to boost production or shelf space for items that will appeal to budget-conscious buyers.

Rethink prices. Few customers welcome price increases, but many understand the need for them. Be sure to communicate new prices before they take effect so customers can adjust their budgets.

Consider credit. If your business anticipates needing additional liquidity, determine if it makes sense to secure a loan or a line of credit now. Adequate cash can provide breathing room and enable you to take advantage of unexpected opportunities.

Monitor accounts receivable. If you see customers falling behind on their payments, act quickly. You may need to update your terms and even consider dropping some slow- or nonpaying buyers.

Act on the margins. Be on the lookout for small savings. Can you renegotiate your business’s mobile phone package? Is it possible to reuse packaging materials? Can you place a moratorium on overtime work? Little amounts can add up quickly.

Surviving and thriving

Probably the most important quality for business leaders navigating an inflationary period is flexibility. Be prepared to discontinue lines and strategies if you can no longer contain their costs. Know when to jump on an opportunity that could expand your reach. Remain open to new business partnerships. FMD can help by reviewing your financial situation and proposing measures that will enable you to survive — and even thrive — in today’s volatile market conditions.

When Outstanding Invoices Indicate Underlying Operational Issues

Late customer payments don’t just create temporary cash shortages. Over time, inconsistent collections can disrupt budgeting, increase borrowing needs and make it harder to plan for growth. In response to cash flow challenges, many businesses focus heavily on increasing revenue while overlooking how efficiently they convert receivables into cash. But even a strong top line can mask underlying collection problems. Evaluating your receivables process from a broader perspective may reveal opportunities to improve liquidity and reduce financial strain.

Look beyond the invoice

When payments arrive late, the problem isn’t always the customer’s unwillingness to pay. In many cases, breakdowns elsewhere contribute to collection delays.

For example, unclear proposals, inconsistent pricing, incomplete project documentation or poor communication between departments can lead to disputes after invoices are issued. Customers who are confused about deliverables or billing details may postpone payment while seeking clarification.

Your business can reduce these issues by creating more consistent internal workflows. Sales, operations and accounting teams should communicate clearly about pricing terms, timelines, discounts and customer expectations before work begins. Strong coordination upfront often prevents collection problems later.

Review your payment policies

Some businesses use outdated billing practices simply because they’ve always done things a certain way. But customer expectations and payment technologies have changed significantly in recent years.

Review whether your current processes create unnecessary friction. Questions to consider include:

• Are invoices easy to understand?

• Do customers have convenient payment options?

• Are payment deadlines realistic and clearly communicated?

• Is your collection approach consistent across all accounts?

Modernizing payment methods may help accelerate collections. Digital payment portals, automated reminders and recurring billing tools can simplify the process for both your staff and your customers.

Reviewing collection trends may also help you segment customers based on payment behavior. Long-standing customers with reliable histories may deserve greater flexibility, while higher-risk accounts may require deposits, shorter payment terms or more frequent follow-up.

Proactively monitor warning signs

An accounts receivable balance can develop gradually, making it easy to overlook warning signs until cash flow problems become severe. Regularly reviewing aging reports may help identify trends before they escalate. For example, increases in partial payments, repeated billing questions or customers requesting extended terms may indicate elevated collection risk.

Also pay attention to operational metrics tied to receivables performance, such as the average collection period, the percentage of overdue accounts and the frequency of disputed invoices. Additionally, to gauge customer concentration risk, evaluate how much of your revenue each customer generates. Tracking these indicators over time can help you make more informed financial decisions and identify weaknesses in your collection process.

Formalize your collection procedures

Many business owners hesitate to follow up promptly on overdue invoices because they worry about damaging customer relationships. However, avoiding difficult conversations often allows collection problems to worsen.

Establishing a professional, consistent collection process can improve results while preserving goodwill. Staff members responsible for collections should understand when to send reminders, when to escalate concerns and when outside assistance may be necessary.

Document all payment discussions carefully, especially when customers request revised terms or promise future payments. Thorough documentation may be important if legal action, write-offs or insurance claims are later required.

Strengthen your receivables strategy

Receivables management plays an important role in maintaining operational flexibility and financial stability. Businesses that actively monitor customer payment trends and refine their collection practices are often better positioned to manage uncertainty and support long-term growth. FMD can help you assess your current receivables procedures, strengthen internal controls and identify practical ways to improve cash flow management. Contact us for guidance.

What You Need to Know about Business Insurance

Given the many potential threats to your business’s assets, cash flow and human resources, which types of insurance products and how much coverage do you need? Some organizations pay for policies that don’t make sense based on their industry or operations. Others have inadequate coverage where risk may be significant. What about your business? It helps to first understand what’s available.

The basics

The most basic kind of business insurance is general liability. Essentially, it covers claims for bodily injury to third parties and property damage arising from business operations. For example, general liability typically protects your business if a customer slips and falls in your facility because someone failed to clean up a slippery floor. Or, in a more extreme example, it might cover the fallout if a piece of equipment explodes, injuring customers and employees and damaging the property you rent.

Other coverage related to and often included in general liability policies includes:

Product liability. This type of policy protects businesses against harm or injury caused by product defects. This coverage is especially important if you sell products that could potentially harm people, such as chemicals, electronics and automobiles.

Professional liability or errors and omissions (E&O). Sometimes general liability and E&O can be rolled into a single policy, but you might not need E&O. It generally applies to negligence when providing a professional service, including legal, engineering, consulting, accounting and architectural services.

Property. This is the business equivalent of homeowner’s insurance. It protects your organization against the cost of losses from factors beyond your control, such as fires and natural disasters. You might also need auto insurance if your business owns and operates vehicles.

Business interrupted

Even if you have general liability and property coverage, you may also need business interruption insurance. This coverage comes into play when a business must halt operations due to a manmade or natural disaster. So if, for instance, a fire forces you to suspend operations for weeks or months while making repairs to your facility, a business interruption policy could help you pay bills in the meantime.

Your operations might also be disrupted by a cyberattack or data breach. Cyberinsurance can help your business respond to losses related to hacking, ransomware attacks and compromised customer or employee data. Depending on the policy, coverage may include costs associated with business interruptions, data recovery, legal claims and regulatory response.

Key person insurance protects against another type of disaster: The sudden loss of a business partner or executive. If an owner dies unexpectedly, the policy can provide living owners with the cash to buy the deceased owner’s shares. Or it could help cover lost profits associated with a key person’s death or pay for the costs of replacing the key person.

Employee risks

Employment practices liability insurance (EPLI) is valuable to any business with employees, regardless of industry. Typically, it protects against violations of Civil Rights Act. EPLI coverage areas include employment discrimination, wrongful termination, sexual harassment and emotional distress. If such violations occur in your organization and you fail to take necessary remedial action, an EPLI policy can cover your defense fees and settlement costs.

EPLI may also cover wage and hour violations. These generally relate to a business’s failure to comply with the Fair Labor Standards Act, including on minimum wage and overtime rules.

Make informed choices

To make smarter insurance decisions for your business, you’ll need to determine which types of coverage fit your risks and how much protection is appropriate for your operations. An independent insurance broker who isn’t employed by a specific insurance provider can help you evaluate the options. Make sure your broker is familiar with any insurance requirements in your industry. Also talk to FMD. We can help you evaluate potential coverage gaps and manage business risk cost-effectively.

Rethinking Payment Options for Your Business

Cash hasn’t disappeared — but it’s no longer the preferred payment method for many customers. As electronic and digital options continue to expand, more businesses are evaluating how much they rely on physical currency. Rather than eliminating cash entirely, many are exploring a “cash-light” approach. Here’s a look at current payment trends and the practical considerations for business owners.

Payment trends continue to shift

Consumer payment behavior has shifted in recent years, with noncash options steadily gaining ground. Card payments, including credit and debit, now dominate, alongside growing use of mobile wallets and peer-to-peer apps.

At the same time, cash hasn’t vanished. Many consumers keep cash on hand for budgeting, emergencies or small purchases. This dual reality — declining usage but persistent demand — is one reason many businesses are opting for a cash-light model instead of going fully cashless.

Customer preferences aren’t one-size-fits-all

Payment preferences often vary by age, income level and access to financial services. Younger consumers, including Millennials and Generation Z, tend to favor cards and mobile payment platforms such as Apple Pay, Google Pay and Venmo. These methods are fast, convenient and increasingly integrated into everyday transactions.

However, other groups still rely heavily on cash. Some older consumers prefer it for its simplicity and familiarity. In addition, unbanked and underbanked individuals, who may lack access to traditional financial services or smartphones, often depend on cash as their primary payment method.

For businesses, this creates a balancing act. Limiting cash too aggressively could alienate certain customers, while continuing to rely heavily on it may create operational inefficiencies. Evaluating your customer mix, average transaction size and industry norms can help determine how far you can shift away from cash without adversely affecting revenue or customer satisfaction.

The real cost of handling cash

While cash offers immediacy (funds are received instantly without processing delays), it also comes with hidden costs. Managing cash requires time, labor and internal controls, including:

• Maintaining sufficient bills and coins to make change,

• Counting and reconciling registers daily,

• Transporting and depositing funds at the bank, and

• Implementing safeguards such as cameras, safes and segregation of duties.

Cash also carries risk. Theft, employee fraud and counterfeit bills remain ongoing concerns. These risks can increase insurance costs and require additional oversight.

On the other hand, noncash payments may involve transaction fees. Credit card processors and payment platforms charge a percentage of each sale, which adds up over time. These costs can reduce margins and influence pricing strategies, so they should be weighed against the operational savings and reduced risk associated with handling less cash.

Legal and regulatory considerations

Before reducing or eliminating cash acceptance, it’s important to understand the legal landscape. While U.S. currency is considered legal tender for debts, no federal law requires private businesses to accept cash for everyday transactions.

However, to protect consumers who rely on it, several states and municipalities have enacted laws requiring businesses to accept cash. These requirements vary by jurisdiction and may include exceptions. For example, certain types of transactions — such as app-based services — may still be cashless. For businesses operating in multiple locations, these variations can create compliance complexity and heighten the risk of unintended violations.

Legislation in this area continues to develop. In recent years, policymakers have debated measures that would require businesses nationwide to accept cash and prohibit differential pricing based on payment method. Business owners should stay informed about applicable state and local rules before changing their policies.

Finding the right balance

As payment technology continues to evolve, businesses have more flexibility than ever in how they accept and manage transactions. Before making changes, however, it’s important to consult with your accounting and legal advisors to evaluate the financial and compliance implications for your specific situation. The right payment mix depends on your customer base, cost structure and risk profile. Contact FMD to discuss whether a cash-light approach makes sense for your business and how to implement it effectively.

Estate Planning for Foreign Assets Requires Extra Attention

Do you hold assets such as overseas real estate, foreign bank accounts or investments in international markets? Properly addressing foreign assets in your estate plan is essential to avoid unexpected tax consequences, legal complications and asset transfer delays for heirs.

Double taxation

If you’re a U.S. citizen, all your worldwide assets, regardless of where you live or where the assets are located, are potentially subject to federal gift and estate taxes to the extent they exceed your lifetime gift and estate tax exemption. So, if you own assets that are subject to estate, inheritance or other death taxes in those countries, there’s a risk of double taxation.

You may be entitled to a foreign death tax credit against your U.S. gift or estate tax liability — particularly in countries that have tax treaties with the United States. But in some cases, those credits aren’t available.

Even if you’re not a U.S. citizen, you may be subject to U.S. gift and estate taxes on your worldwide assets if you’re domiciled in the United States. Domicile is a somewhat subjective concept — essentially, it means you reside in a place with the intent to stay indefinitely and return to whenever you’re away. Once the United States becomes your domicile, its gift and estate taxes apply to your foreign assets, even if you leave the country, unless you take steps to change your domicile.

You might not feel concerned about federal gift and estate taxes if your estate is well within the 2026 $15 million gift and estate tax exemption (annually indexed for inflation going forward). But keep in mind that lawmakers could reduce the exemption in the future. So, it can still be a good idea to plan for a potential estate tax bill down the road. Further, for married couples, the rules are different — and potentially much more complex — if one spouse is neither a U.S. citizen nor considered domiciled in the United States for gift and estate tax purposes.

Consider drafting two wills

If you own foreign assets, your will must be drafted and executed in a manner that will be accepted in the United States and in the country or countries where those assets are located. Otherwise, your foreign assets may not be distributed according to your wishes.

Often, it’s possible to prepare a single will that meets the requirements of each jurisdiction. But it may be preferable to have separate wills for foreign assets. One advantage is that a separate will, written in the foreign country’s language (if not English), may help streamline the probate process.

If you prepare two or more wills, work with local counsel in each foreign jurisdiction to ensure the will meets that country’s requirements. And it’s critical for your U.S. and foreign advisors to coordinate their efforts so that one will doesn’t nullify the other.

Plan proactively

If you own foreign assets, proactive planning can help preserve your wealth and reduce the burden on heirs. FMD can explain the steps to help ensure all your assets are distributed in accordance with your wishes and in the most tax-efficient manner possible.

2 Retirement Plans for Small Businesses with Lean Budgets

Most business owners would like to offer their employees a 401(k) retirement savings plan with all the bells and whistles. But for small businesses with lean budgets and small staffs, offering such benefits may be out of the question. Fortunately, SEP IRAs and SIMPLE IRAs are less expensive and easier to administer. Might one of these tax-advantaged options work for your workforce?

SEP: Flexible and zero setup fees

Simplified Employee Pension (SEP) IRAs are individual retirement accounts you establish on behalf of each participant. (Self-employed individuals can also establish SEP IRAs.) Participants own their accounts, so they’re immediately 100% vested. If participants decide to leave your company, their account balances go with them. Most people roll their accounts over into a new employer’s qualified plan or traditional IRA account.

SEP IRAs don’t require annual employer contributions. That means you can choose to contribute only when cash flow allows. In addition, there are typically no setup fees for SEP IRAs. But participants generally must pay trading commissions and fund expense ratios (a fee typically set as a percentage of the fund’s average net assets).

In 2026, the SEP IRA annual contribution limit is 25% of a participant’s compensation, up to $72,000. That amount is higher than the standard 401(k) account contribution limit of $24,500 (in 2026). What’s more, employer contributions are tax-deductible. Meanwhile, participants won’t pay taxes on their SEP IRA funds until they’re withdrawn.

However, there are a few downsides to consider. Although participants own their accounts, only employers can make SEP IRA contributions. And if you contribute sparsely or sporadically, participants may see little value in the accounts. Also, unlike many other qualified plans, SEP IRAs don’t permit participants age 50 or over to make additional “catch-up” contributions.

SIMPLE: Easy and participant-friendly

Another possibility is to offer a Savings Incentive Match Plan for Employees (SIMPLE) IRA. As with a SEP IRA, your business creates a SIMPLE IRA for each participant, who’s immediately 100% vested in the account. Unlike SEP IRAs, SIMPLE IRAs allow participants to contribute to their accounts if they choose.

Other advantages of SIMPLE IRAs include:

• They’re relatively easy for employers to set up and administer.

• They don’t require your business to file IRS Form 5500, “Annual Return/Report of Employee Benefit Plan.”

• You don’t need to submit the plan to nondiscrimination testing.

• Participants pay no setup fees and enjoy tax-deferred growth on their account funds.

• Participants can contribute up to $17,000 annually in 2026.

• Participants age 50 or over can make catch-up contributions of up to $4,000 in 2026 ($5,250 for those ages 60 to 63).

Participants can contribute more to a SIMPLE IRA than to a self-owned traditional or Roth IRA. But SIMPLE IRA contribution limits are lower than limits for 401(k)s. Also, because contributions are made with pretax dollars, participants can’t deduct them. They also can’t take out plan loans. Then again, making pretax contributions does lower their taxable income. Perhaps most important is that employer contributions to SIMPLE IRAs are mandatory, regardless of your cash-flow situation. However, in general, you can deduct contributions as a business expense.

SIMPLE Roth IRAs are available, too. Ask your financial and employee benefits advisors whether this might be a better option for your business.

Lower-cost options

If you’ve thought you can’t afford to offer workers a retirement plan, think again. In addition to SEP and SIMPLE IRAs, there are now some lower-cost 401(k) options available as well. FMD can review your budget, tax situation and benefit needs and suggest how best to proceed. Contact us.

Create a more Agile F&A Team with Cross-Training

The accounting profession continues to face a talent shortage. This trend — driven by retirements among experienced accountants and bookkeepers and a limited pipeline of new graduates with accounting degrees — is forcing many organizations to rethink how their finance and accounting (F&A) team operates. As businesses prioritize flexibility and continuity, cross-training is a practical, cost-effective way to strengthen your team.

Ample advantages

The most immediate benefit of cross-training is improved coverage. When an employee is out — whether due to illness, resignation, vacation or family leave — others can step in and keep essential processes running smoothly.

Cross-training also strengthens collaboration. When team members understand each other’s responsibilities, they gain a clearer view of how the department functions as a whole. This broader perspective often leads to better communication, fewer bottlenecks and errors, and improved overall efficiency. It can also support internal mobility, as employees are better prepared to step into new roles when opportunities arise.

Another important advantage is risk reduction. The accounting function remains particularly vulnerable to fraud schemes, such as payment tampering and billing irregularities. When multiple employees are familiar with key processes, it creates natural oversight and can facilitate the separation of duties. Combined with practices like mandatory vacations and management review procedures, cross-training can help strengthen internal controls.

Simple steps

Cross-training doesn’t have to be complicated. A basic starting point is to rotate responsibilities among team members on a temporary basis. The goal isn’t to create deep specialists in every function, but to ensure employees understand the core day-to-day tasks their colleagues perform.

Even short-term rotations — lasting a day, a week or during slower periods — can build valuable familiarity. Over time, this shared knowledge base can make a big difference when unexpected gaps arise.

It’s also wise to include leadership in the process. Encouraging CFOs, controllers and other senior staff to “reverse train” on routine functions helps ensure they can step in if needed and effectively guide others. This approach builds resilience at every level of the F&A department.

Turn cross-training into a strategic advantage

As talent challenges persist, cross-training can help your F&A department maintain continuity while building a more engaged and versatile team. By investing in your current staff, you not only prepare for unexpected disruptions but also support long-term growth and development. FMD can help you identify cross-training priorities and align your approach with strong internal controls and reporting needs — so your team gains flexibility without increasing risk. Contact us for guidance on developing a cross-training strategy tailored to your organization.

What’s the Meaning of that Estate Planning Term?

Estate planning can be overwhelming. One reason is that it has a language all its own. While you may be familiar with common terms such as “will” or “executor,” you may not be as certain about others. This uncertainty can make it difficult to make informed decisions about protecting your assets, providing for your family and ensuring your wishes are carried out.

For quick reference, here’s a glossary of key terms you may come across when planning your estate:

Administrator. An individual or fiduciary appointed by a court to manage an estate if no executor or personal representative has been appointed or the appointee is unable or unwilling to serve.

Ascertainable standard. The legal standard, typically relating to an individual’s health, education, maintenance and support, which is used to determine what distributions are permitted from a trust.

Attorney-in-fact. The individual named under a power of attorney (POA) as the agent to handle the financial and/or health affairs of another person.

Codicil. A legally binding document that makes minor modifications to an existing will without requiring a complete rewrite of the will.

Community property. A form of ownership in certain states in which property acquired during a marriage is presumed to be jointly owned regardless of who earned it or paid for it. (There are exceptions, such as inherited property, as long as it’s not commingled with community property.)

Credit shelter trust. A trust established to bypass the surviving spouse’s estate to take full advantage of each spouse’s federal estate tax exemption. It’s also known as a bypass trust or A-B trust.

Fiduciary. An individual or entity, such as an executor or trustee, designated to manage assets or funds for beneficiaries and legally required to exercise an established standard of care.

Grantor trust. A trust in which the grantor retains certain control so that it’s disregarded for income tax purposes and the trust’s assets are included in the grantor’s taxable estate.

Inter vivos. The legal phrase used to describe various actions (such as transfers to a trust) made by an individual during his or her lifetime.

Intestacy. This occurs when a person dies without a legally valid will and the deceased’s estate is distributed through a court-supervised probate process in accordance with the applicable state’s intestacy laws.

Joint tenancy. An ownership right in which two or more individuals (such as a married couple) own assets equally, often with rights of survivorship.

Living trust. A trust that’s established during an individual’s lifetime to hold and manage assets for the benefit of that individual and, ultimately, for his or her beneficiaries. Also commonly referred to as a “revocable trust” or “inter vivos” trust. The individual creating the trust often serves as the trustee, retaining control over the assets while alive. One of the primary advantages of a living trust is that it allows assets to pass to beneficiaries without going through probate, helping to save time, reduce costs and maintain privacy.

No-contest clause. A provision in a will or trust stating that an individual who pursues a legal challenge to assets will forfeit his or her inheritance or interest.

Pour-over will. A will used upon death to pass to a living trust the ownership of assets that weren’t transferred to the trust during life.

Power of appointment. The power granted to an individual under a trust that authorizes him or her to distribute assets on the termination of his or her interest in the trust or in certain other circumstances. 

Power of attorney. A legal document authorizing someone to act as attorney-in-fact for another person, relating to financial and/or health matters. A “durable” POA continues if the person is incapacitated.

Probate. The legal process of settling an estate in which the validity of the will is proven, the deceased’s assets and debts are identified, all debts and taxes are paid, and the remaining assets are distributed.

Qualified disclaimer. The formal refusal by a beneficiary to accept an inheritance or gift, which allows the inheritance or gift to pass to the successor beneficiary.

Spendthrift clause. A clause in a will or trust restricting the ability of a beneficiary (such as a child under a specified age) to transfer or distribute assets.

Tenancy by the entirety. An ownership right between two spouses in which property automatically passes to the surviving spouse on the death of the first spouse.

Tenancy in common. An ownership right in which each person possesses rights and ownership of an undivided interest in the property.

If you have questions about the meanings of these terms, contact FMD. We’d be pleased to provide context for any estate planning term you’re unfamiliar with.

If You’re Charitably Inclined, Your Estate Plan Can Benefit from a Donor-Advised Fund

Donor-advised funds (DAFs) have become increasingly popular among individuals and families who want to simplify their charitable giving while maximizing tax efficiency. According to the 2025 Annual DAF Report produced by the Donor Advised Fund Research Collaborative, in 2024, the total number of DAF accounts reached a record high of 3.56 million. Total assets in DAFs increased 27.5%, with total invested funds reaching $326.5 billion. Here’s how a DAF might fit into your charitable giving strategy and estate plan.

DAFs in action

A DAF is a charitable investment account that generally requires an initial contribution of at least $5,000. It’s typically managed by a financial institution or an independent sponsoring organization, which charges an administrative fee based on a percentage of the deposit.

From a tax perspective, DAFs offer significant benefits. Contributions are generally deductible in the year they’re made (assuming you itemize deductions), even if the funds are distributed to charities in future years. This is particularly valuable in high-income years when you may want to offset income with a sizable charitable deduction but don’t know exactly which charities you’d like to benefit.

Additionally, donating appreciated assets, such as publicly traded stock, allows you to avoid the capital gains tax liability you’d incur if you sold the assets. Yet you can still deduct their fair market value. (Be aware that some DAFs only allow contributions of cash or cash equivalents.)

Another DAF advantage is administrative simplicity. Unlike private foundations, DAFs don’t require the donor to manage compliance, file separate tax returns or oversee grant administration. The sponsoring organization handles recordkeeping, due diligence and distribution logistics, allowing you to focus on your charitable intent rather than administrative burdens.

DAFs can also enhance strategic giving. Funds within a DAF can be invested and potentially grow tax-free, increasing the amount ultimately available for charitable purposes. You can take time to thoughtfully select the charities, involve family members in philanthropic decisions and create a more intentional giving strategy rather than making rushed year-end donations.

Estate planning benefits

Integrating a DAF into an overall estate plan can amplify its benefits. It can serve as a centralized vehicle for a family’s charitable legacy, helping to align philanthropic goals across generations. You can name successor advisors — such as children or other heirs — who can recommend grants from your DAF after your lifetime, fostering continued family engagement in charitable giving.

From an estate tax standpoint, DAFs are also beneficial. Assets contributed to a DAF — whether during your life or at death — are removed from your taxable estate. This can be particularly advantageous for high-net-worth individuals seeking to reduce estate tax exposure while supporting causes they care about.

Additionally, you can designate a DAF as a beneficiary of retirement accounts, such as IRAs. Because these accounts are typically subject to income tax when an individual beneficiary takes distributions, leaving them to a charitable vehicle, such as a DAF, can be tax-efficient. (But think twice before naming a DAF as the beneficiary of a Roth account, because distributions would generally be tax-free to an individual beneficiary.)

Coordination is key

It’s important to coordinate a DAF with your other estate planning strategies. For example, ensure that your charitable intentions are clearly documented and aligned with your overall distribution strategy. FMD can help structure your DAF contributions and beneficiary designations to maximize both tax savings and philanthropic impact.

Strategic Alliances: Collaborate Now, Possibly Combine Later

Even if you aren’t currently preparing to sell your business, you might want to think strategically about your eventual buyer. Sophisticated buyers won’t only look at your financials, they’ll also evaluate how your company fits into their long-term business plan. One way to strengthen current profitability and future exit options is with a strategic alliance.

Current and long-term objectives

Strategic alliances are structured in several ways, including joint ventures, revenue-sharing arrangements and co-development agreements. In some relationships, the two companies simply agree to work together on a particular project. Others involve long-term agreements, with the end game being a merger. Alliances can have set expiration dates or be renewed at intervals after they pass performance reviews. Among the many reasons companies pursue alliances are to leverage core assets, expand sales capacities and reduce operating costs.

Your company doesn’t have to enter into a strategic alliance to make it easier to sell one day. It may, after all, be performing well on its own. Instead, look at a potential strategic alliance as a near-term growth and expense-cutting mechanism with long-term benefits.

If you agree to an alliance, focus on financial and operational objectives, including achieving economies of scale. For example, by combining orders for everything from raw materials to office supplies, both partners may qualify for supplier discounts and reduce overhead costs. What about jointly purchasing capital equipment or upgrading both companies’ IT networks? Or you may want to find a partner to improve transportation logistics by consolidating warehouses. Another idea: Sharing intellectual property, such as customized software.

Keys to success

Your strategic alliance may require time and effort to get up and running. But if you’ve thoroughly vetted your partner and have a well-structured agreement in place, you’re likely to realize benefits. If you don’t, and the relationship becomes a drain on resources, take immediate action.

Some problems can be fixed. For example, it’s easy for alliances to drift from their original purpose. A partnership forged mainly to upgrade an IT system could wind up focusing on improving employee productivity instead — with mixed results. In this case, the partners could refocus and reinforce their alliance objectives. But if problems seem intractable, it’s usually better to terminate the alliance.

Profitable arrangements

Not only can strategic alliances be mutually profitable, but they can help both partners envision a permanently combined company. Alliances often begin informally or as short-term agreements that eventually lead to mergers when the companies realize their synergistic potential.

A successful prior relationship can smooth the merger process. Before joining a strategic alliance, companies typically conduct due diligence on one another. Financial and other conditions can certainly change between the initiation of a strategic alliance and the beginning of merger negotiations. But a well-structured alliance allows partners to keep tabs on each other. If one of the companies experiences leadership challenges or has trouble getting financing, the other is likely to know about it. Such knowledge can speed up the merger transaction process and simplify integration.

Exercise in discipline

Regardless of whether your business eventually merges with a strategic partner, the discipline of building and managing your relationship can strengthen operations and expand your market reach. It can also enhance financial transparency and position your business more favorably to potential buyers. Contact FMD for help honing your financial objectives, vetting possible alliance partners and selling your business.

More Than Just 0s and 1s: Accounting for Digital Assets in Your Estate Plan

In today’s digital world, estate planning goes beyond physical property and financial accounts — it must also address your digital assets. From online banking and investment accounts to social media profiles, cloud storage and even cryptocurrency, these assets can hold both financial and sentimental value.

Without proper planning, your loved ones may face significant legal and logistical challenges in accessing or managing them. By taking steps now to inventory your digital assets and incorporate them into your estate plan, you can help ensure a smoother transition and protect your legacy in the digital age.

What digital assets do you possess?

The first step in planning for digital assets is to identify all online accounts and digital property you own. Financial accounts, such as online bank and brokerage accounts, should be listed alongside nonfinancial assets like email accounts, social media profiles, subscription services and cloud storage. Don’t forget emerging asset classes such as cryptocurrencies or monetized digital content.

For each asset, detail how to access it, including usernames, passwords and any multi-factor authentication methods. This sensitive information should be stored in a secure location, such as a password manager or encrypted document, rather than directly in your will.

How do you want the assets to be handled?

You may want certain accounts memorialized, deactivated or deleted altogether. Many platforms, including Facebook and Google, allow users to designate legacy contacts or set instructions for account management after death. Taking advantage of these tools can simplify the process for your loved ones.

Also consider designating a family member or friend to manage your digital assets. You can give this person, sometimes referred to as a “digital executor,” the authority through your will or a separate legal document, depending on your state’s laws. His or her role is to carry out your instructions, access accounts and ensure that digital property is handled appropriately. Be sure to discuss your wishes with this individual in advance so he or she understands the responsibilities.

Any legal considerations?

Laws governing access to digital assets vary by state, and service providers often have their own policies that limit what can be shared. Fortunately, there are laws that govern access to digital assets in the event of your death or incapacity. Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which provides a three-tier framework for accessing and managing your digital assets:

1. The act gives priority to providers’ online tools for managing the accounts of customers who die or become incapacitated. For example, Google offers an “inactive account manager,” which allows you to designate someone to access and manage your account. Similarly, Facebook allows users to determine whether their accounts will be deleted or memorialized when they die and to designate a “legacy contact” to maintain their memorial pages.

2. If the online provider doesn’t offer such tools, or if you don’t use them, access to digital assets is governed by provisions in your will, trust, power of attorney or other estate planning document.

3. If you don’t grant authority to your representatives in your estate plan, then access to digital assets is governed by the provider’s Terms of Service Agreement.

To ensure that your loved ones have access to your digital assets, use providers’ online tools or include explicit authority in your estate plan.

More questions?

By taking a proactive approach to digital asset planning, you can reduce uncertainty, avoid unnecessary complications and provide clear guidance for your loved ones. A well-structured plan can protect the financial value of your digital property and help ensure that your personal legacy is handled according to your wishes.

We can answer your questions on properly addressing digital assets in your estate plan. Contact FMD today to learn more.

IRS Issues Final Regulations on Tips Tax Break

Last year, a new income tax deduction for qualified cash tips went into effect under the One Big Beautiful Bill Act (OBBBA). The break is scheduled to expire after 2028. In September 2025, the IRS released proposed regulations to provide guidance for taxpayers. The IRS has now published final regs that largely mirror the proposed regs but also include some important clarifications and additions.

What does the deduction cover?

Under the OBBBA, individual taxpayers can claim a tax deduction, available to both itemizers and nonitemizers, for up to $25,000 in “qualified tips.” The deduction begins to phase out if your modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 if you’re married filing jointly. The deduction is completely phased out if your MAGI reaches $400,000, or $550,000 if you’re a joint filer. (Married taxpayers filing separately can’t claim the tips deduction.)

Important: The $25,000 limit applies per tax return, so joint filers who both receive qualified tips can’t claim two separate deductions. In addition, tips remain subject to federal payroll taxes and, where applicable, state income and payroll taxes.

Qualified tips generally refers to tips paid in cash (or an equivalent medium, such as checks or credit and debit cards) to an individual in an occupation that customarily and regularly received tips on or before December 31, 2024. They must be paid voluntarily, without any consequence for nonpayment, in an amount determined by the payor and without negotiation. Tips received in the course of a specified service trade or business are excluded.

What’s in the final regs?

The final regs address several critical areas, including:

Eligible occupations. The proposed regs identified 68 eligible occupations in eight categories. The final regs expand the list to 71 occupations (adding visual artists, floral designers and gas pump attendants) and tweaked some of the categories, ending up with:

• Beverage and Food Service,

• Entertainment and Events,

• Hospitality and Guest Services,

• Home Services,

• Personal Services,

• Personal Appearance and Wellness,

• Recreation and Instruction, and

• Transportation and Delivery.

The final regs also expanded some of the proposed regs’ categories and clarified others. For example, they added “app/platform-based delivery person” to the illustrative list for the “Goods Delivery People” occupation in the “Transportation and Delivery” category.

The final regs also include two new examples dealing with payments to digital content creators. If customers’ payments give them access to the content, the payments are treated as compensation for services provided. But if customers make voluntary payments after gaining access to the content, the payments are tips.

Digital assets. The final regs state that digital assets aren’t considered cash tips — for now. Thus, they’re currently not eligible for the tips deduction. But the IRS has indicated it will consider the treatment of stablecoins in connection with the implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act and any future legislation that modifies the characterization of digital assets.

Voluntariness. Under the proposed regs, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer’s bill by the vendor or establishment generally weren’t considered voluntary, even if the amounts were subsequently distributed to employees. To be voluntary, the customer must be expressly provided an option to disregard or modify amounts added to a bill.

The final regs retain this approach. However, they modify the language to make clear that a tip is voluntary if the customer has the option to reduce the tip amount to zero. So tips made on POS systems with a tip slider that goes to zero or an option for the customer to select “other” and enter zero are voluntary.

Note: Payments in excess of mandatory amounts are voluntary.

Managers/supervisors. Under the final regs, tips received by a manager or supervisor via a voluntary or mandatory tip-sharing arrangement, such as a tip pool, aren’t considered qualified tips. But tips received directly by supervisors or managers for services they provided in the course of duties performed in an eligible occupation (for example, performing the duties of wait staff while the restaurant is crowded) are qualified tips if all other requirements are satisfied.

Anti-abuse rules. To prevent the reclassification of income as qualified tips, under the proposed regs, a payment wasn’t a qualified tip if the recipient had an ownership interest in or was employed by the payor of the tip. The final regs relax this standard somewhat.

Under the final regs, an amount isn’t a qualified tip if, based on all relevant facts and circumstances, the amount is a recharacterization of wages or payment for goods or services for the purpose of claiming the deduction. Facts and circumstances that might indicate that wages, payment for services or other income have been recharacterized as tips in order to claim the deduction include when:

• The invoiced charge for services is less than the payment from the payor shown on a related receipt, and the amount of the cash tip reported on the receipt approximates the difference between the invoiced charge and the payment amount on the receipt, and

• A significant shift in historical tipping or payment practices between the payor and the tip recipient occurs.

Moreover, the final regs establish an irrebuttable presumption that a “tip” reflects a recharacterization of wages, payment for services or other income when the employer is the payor of a cash tip received by the employee. The presumption also is triggered if the tip recipient has a direct ownership interest in the tip payor.

Questions?

If you receive tips for work you perform, check the list of occupations eligible for the deduction and plan accordingly. If you have any questions about this tax break, contact FMD. We can help you determine if the tips you receive qualify for the deduction.

What Sets Internal and External Audits Apart — and Why It Matters

Both internal and external audits play vital roles in safeguarding your organization’s financial integrity. They share the common goals of promoting reporting transparency and helping prevent errors and fraud, but they serve different functions and audiences. Here’s a closer look at some key distinctions to help your business develop a strategic audit approach.

Why they’re conducted

The purpose of an internal audit is to assess and improve a company’s internal controls, risk management and governance processes. Some companies have an internal audit department, but others outsource this function to external audit firms. Internal auditors — whether in-house or outsourced — work as an extension of the company’s management to ensure that internal processes align with organizational objectives and mitigate risk.

External audits must always be performed by an independent CPA firm. Under the auditing standards, an external audit aims to provide reasonable assurance about whether the company’s financial statements are free from material misstatement and to express an opinion on whether they’re presented fairly in accordance with U.S. Generally Accepted Accounting Principles (GAAP) or another relevant framework.

How far they reach

Internal audits can cover a broad range of topics. For example, auditors may evaluate operations, internal controls, company or industry-specific risks, and compliance with laws and regulations. You can tailor an internal audit’s scope to your company’s needs and modify it as new risks or business opportunities emerge. Outsourcing this function can be cost-effective for smaller organizations that don’t require a full-time internal audit department.

External audits are standardized, focusing solely on the financial statements and related disclosures. External auditors perform testing on account balances and transactions, evaluate financial reporting controls, and assess compliance with GAAP or other relevant frameworks. They also follow applicable regulatory guidelines, such as the U.S. Generally Accepted Auditing Standards issued by the American Institute of Certified Public Accountants and the Public Company Accounting Oversight Board standards.

Who stays independent

Internal auditors work under the direction of the company’s audit committee or management. Outsourced internal audit teams are also part of the organization’s internal audit function, so they may not be entirely independent. While internal auditors usually provide recommendations to the company, they can remain objective if they report directly to the audit committee or management.

On the other hand, external auditors must maintain independence, in fact and appearance, from the companies they audit to ensure objectivity and compliance with professional standards. This means they can’t have direct financial interests in the company or perform services that could create actual or perceived conflicts of interest. Independence is crucial for external auditors to provide an unbiased opinion that stakeholders can trust.

How the work gets done

Internal auditors use a risk-based, continuous-improvement approach, targeting specific areas of concern. They may also use internal control models — such as the Committee of Sponsoring Organizations of the Treadway Commission framework — to assess the company’s processes, identify potential risks, evaluate controls and make recommendations for improvement. Their role tends to be more consultative.

External auditors follow standardized methods to gather sufficient evidence to form an opinion on the fairness and compliance of the financial statements. After assessing the company’s risks, external auditors may perform substantive procedures, analytical reviews and sampling techniques to detect material misstatements. They verify the accuracy of accounts by conducting tests, reviewing source documents and confirming account balances with third parties.

What they produce

Internal auditors typically report directly to management or the audit committee. They provide detailed recommendations and action plans based on their findings, areas of risk and control weaknesses. Internal audit reports aren’t usually distributed to outside stakeholders; instead, they’re intended to guide internal improvements and decision-making.

External auditors issue an audit opinion on the organization’s financial statements. The audit opinion is a letter that serves as the front page of the company’s financials. Public companies file reports with the U.S. Securities and Exchange Commission, which are available to the general public. Many private companies share audited financial statements with lenders, franchisors, private equity investors and other stakeholders.

When they happen

Internal audit procedures are conducted throughout the year, typically in accordance with an annual audit plan approved by management or the audit committee. Internal auditors may evaluate different areas on a rotating or as-needed basis as risks evolve or emerge.

External audits are generally performed at year end. However, public companies and larger private organizations may also be required to issue audited financial statements quarterly. For an added measure of assurance, some companies have auditors conduct periodic “surprise” audits or agreed-upon procedures engagements that target high-risk accounts or areas of concern identified during year-end audits.

Choosing the right mix

When used together, internal and external audits provide a more complete picture of your organization’s risks, controls and financial reporting. As your business evolves, so should your audit approach. Periodically reassessing your needs can help ensure you’re getting the right balance of insight, assurance and strategic value. Contact FMD to learn more.

How to Ensure Your Business Really Owns Its Intellectual Property

Whether it’s a trademark, copyright, patent, trade secret or other piece of IP, its ultimate value to your business depends on you owning it. Without airtight agreements with employees and independent contractors, these workers may claim that the IP they research and develop belongs to them.

Some companies learn they don’t actually own IP assets only when they’ve engaged a business valuation professional in preparation for a sale, or when employees leave and take IP with them. To prevent unexpected ownership issues and costly disputes that could create risk and diminish your business’s value, take action now.

What the law says

Federal copyright law and the laws of most states mandate that employees and independent contractors who invent products, write materials and develop software may be the owners of the IP rights. In fact, in some states, employers may only have a limited license to inventions created by employees, even if they were invented “on the clock” or using company resources.

Fortunately, you can help prevent ownership disputes, including litigation. All states permit businesses to require workers to sign copyright, IP and invention assignment agreements, subject to applicable legal limitations.

Work with an attorney who specializes in IP to draft a standard agreement based on your state’s laws. It should require the employee or contractor to turn over or legally “assign” IP rights to your business. In addition, it should mandate that the employee or contractor assist your company’s legal counsel in securing and enforcing these rights. It’s also important to apply these agreements consistently and enforce them in practice, because inconsistent use can weaken your position in disputes and merger and acquisition due diligence.

Go a step further

When you hire workers (or when you require them to sign an agreement), make sure you ask them to identify all pre-existing inventions that are to be excluded from the agreement. For example, they may have patented inventions on their own or created trademarks for previous employers. Then request that they give up claims to any new inventions that are related to your business activities, even if the inventions are developed during their nonworking hours.

For example, let’s say your company develops 3D printing software. Your agreement should prohibit your code writers from creating related design tools at home and then selling them to your competitors. If, however, an employee working on her own time and with her own resources develops software that’s unrelated to your business, that IP likely belongs to her. Some states, such as California, prevent employers from claiming such IP or asking employees to sign away their rights to it.

Legal and financial advice

Ultimately, safeguarding IP isn’t a passive exercise but a deliberate business discipline that requires foresight, structure and legal precision. Although an attorney’s guidance is critical for this purpose, financial advisors also play an important role. FMD can help you address IP ownership issues before you sell your business or before workers leave your employment. We can also help identify financial and tax considerations of IP. Contact us for more information.

What if …? How Stress Testing Can Help Your Business Prepare for Economic Uncertainty

Even financially sound businesses can be vulnerable to market volatility and unexpected disruptions. Many companies discover too late that their financial position, internal controls or contingency plans aren’t built to withstand sudden shocks, potentially leading to cash shortfalls, debt covenant violations and reduced profitability. A “stress test” models how your cash flow, liquidity and overall financial structure would perform under adverse scenarios. Here’s how stress testing can help you proactively evaluate your business’s resilience and strengthen its ability to adapt to changing market conditions.

Identify your organization’s exposure points

Start by identifying your business’s exposure points. Risks are often classified in four categories:

1. Operational risks. These risks encompass the company’s internal operations. Examples include cybersecurity incidents, supply chain breakdowns or natural disasters.

2. Financial risks. How well does your company manage its finances? Key financial risks may include liquidity constraints, interest rate exposure and the threat of fraud.

3. Compliance risks. This category includes issues that might attract the attention of government regulators, such as evolving tax, reporting and industry-specific requirements.

4. Strategic risks. This term refers to the company’s market focus and its ability to respond to changes in customer demand, competition and technology.

Build a practical response framework

Once you’ve identified key business risks, meet with your management team to improve your collective understanding of their potential financial impacts and the organization’s capacity to absorb them. Encourage team members to share additional risks and model downside scenarios, such as revenue declines, delayed receivables or increased borrowing costs — along with their impact on cash flow and profitability.

In addition to evaluating downside risk, stress testing can help your team identify opportunities to reallocate resources to higher-performing products or services, adjust pricing strategies in response to shifting demand, or make targeted investments when competitors pull back. This approach allows you to respond proactively rather than defensively to emerging threats.

From there, your management team can develop a plan to mitigate risk. For example, if your company operates in an area prone to natural disasters, you should maintain and periodically test a disaster recovery and business continuity plan. If your company relies heavily on a key individual, consider implementing a succession plan and evaluating key person insurance. For financial risks, your plan may include maintaining adequate liquidity buffers, diversifying your revenue base, revisiting debt covenants and strengthening internal controls to reduce fraud risk.

Reassess and refine regularly

Effective risk management is an ongoing process. New risks emerge as markets, technology and regulations evolve, while previously significant risks may diminish over time. Meet with your management team at least annually — or more frequently in periods of change — to review and update your risk management plan. If your organization has recently faced a disruption, use that experience as a learning opportunity. Evaluate how well your plan performed, identify gaps and missed opportunities, and implement improvements to strengthen your response going forward.

Build resilience now

A well-executed stress test identifies blind spots that can affect financial performance and provides a roadmap for building resilience. In today’s environment, proactive risk assessment is a key component of sound financial management and governance. We can help you quantify potential cash flow gaps, evaluate tax and financial risks across multiple scenarios, and identify practical steps to fortify your financial position and uncover strategic opportunities. Contact FMD to design and perform a stress test tailored to your organization, so you can make timely, data-driven decisions.