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Building Bench Strength for Effective Succession Planning
Every business will eventually face leadership transitions. Whether key people retire, pursue new opportunities or become unable to do their job, your business must maintain continuity. Often, smooth transitions depend on “bench strength.” This refers to the depth of employees prepared to step into critical roles. Developing this internal talent pool is one of the most effective ways to support your succession plan and protect your organization’s stability and well-being.
Why it matters
Succession plans are only as strong as the individuals available to carry them out. Many organizations identify successors for specific positions. But what if a designated successor leaves your business or is unable to assume the role when needed? Bench strength enhances flexibility by preparing multiple employees to step into critical roles as circumstances change.
Cultivating your bench can reduce the risk of operational disruptions and help preserve institutional knowledge. Instead of launching a time-consuming external search if a vacancy arises, your business can promote qualified employees who already understand your culture, customers and strategic priorities. Internal promotions often accelerate leadership transitions while reassuring employees that advancement opportunities exist within your organization.
Deeper talent pool
To build bench strength, start by identifying promising employees and assessing potential leadership gaps. Regular performance reviews can help you evaluate employees’ skills, career aspirations and readiness for future roles. At the same time, examine upcoming organizational needs and determine which positions are essential for your business’s long-term success.
Leadership training, mentoring programs, cross-functional projects and job rotations can help employees gain experience beyond their current responsibilities. For example, a high-performing sales manager might be asked to lead a companywide initiative. A finance leader might participate in strategic planning discussions. These experiences broaden skills and prepare staffers for leadership responsibilities.
Connecting the two
Bench strength and succession planning are closely related, but they generally serve different purposes. Succession planning focuses on identifying and preparing specific individuals for key leadership positions. Bench strength, by contrast, emphasizes maintaining a broader pool of employees who can fill roles as business needs evolve.
The most resilient organizations integrate both activities. Your succession plan should ensure your business has qualified successors for critical leadership positions. Strong bench strength, meanwhile, provides the flexibility to respond to unexpected departures, organizational growth and changing market conditions. Together, these strategies help reduce talent gaps and support long-term business continuity.
Move forward confidently
Leadership transitions are inevitable, but disruption doesn’t have to be. Organizations that consistently develop internal talent are better positioned to manage change and maintain stability. When leadership transitions become necessary, a strong bench allows your business to move forward confidently, knowing capable successors are ready to step in and lead. For help building your bench and planning for succession, contact FMD.
Accounting for Business Combinations
Mergers and acquisitions (M&A) provide growth opportunities. But these transactions also introduce accounting complexities. Here’s a closer look at the rules for reporting business combinations under U.S. Generally Accepted Accounting Principles (GAAP). Getting it right is essential to managing stakeholder expectations and providing a solid foundation for future financial reporting.
Breaking down the purchase price
Accounting Standards Codification Topic 805, Business Combinations, requires a buyer to allocate the purchase price to all acquired assets and liabilities based on their fair values. This process begins by estimating a cash-equivalent purchase price.
If a buyer pays 100% cash up front, the purchase price is already at a cash-equivalent value. But it’s less clear if a seller accepts noncash terms, such as an earnout contingent on the acquired entity’s future performance or stock in the newly formed entity.
The next step is to identify all tangible and intangible assets and liabilities acquired in the business combination. The seller’s presale balance sheet will usually report most tangible assets and liabilities, including inventory, equipment and payables. However, intangibles are reported only if the seller previously purchased them. Most intangibles are generated in-house, so they’re rarely included on the seller’s balance sheet.
Allocating value to acquired assets and liabilities
Acquired assets and liabilities are then added to the buyer’s balance sheet, based on their fair values on the acquisition date. Determining fair value can require significant judgment, particularly when valuing intangible assets. In some cases, buyers engage valuation specialists to assist with the process. The difference between the sum of these fair values and the purchase price is reported as goodwill.
Acquired identifiable intangible assets — such as customer lists, noncompete agreements and certain technology assets — are amortized over their estimated useful lives. As a result, purchase price allocation decisions can affect future earnings and other key financial metrics.
Goodwill and other indefinite-lived intangibles — such as brand names and in-process research and development — usually aren’t amortized under GAAP. Instead, companies generally must test goodwill for impairment annually. Impairment testing may also be necessary when certain triggering events occur. Examples of triggering events include the loss of a major customer or the enactment of unfavorable government regulations. If a business reports an impairment loss, it may indicate that the acquisition hasn’t delivered the expected economic benefits or that business conditions have changed since the transaction closed.
Rather than test for impairment, private companies may elect to amortize goodwill on a straight-line basis, generally over 10 years. However, companies that elect this alternative method must still test for impairment when certain triggering events occur.
In rare instances, a buyer negotiates a bargain purchase. Here, the fair value of the net assets exceeds the fair value of the consideration transferred (the purchase price). Rather than recognizing negative goodwill, the buyer reports a gain on the income statement.
Why post-deal accounting matters
The rules for reporting M&A transactions are complex and can sometimes have unexpected effects on a buyer’s financial statements. Accurate purchase price allocations are essential for reliable post-deal financial reporting and reducing future adjustments and restatements. Contact FMD for guidance on accounting for business combinations and subsequent testing for goodwill impairment.
Qualified Disclaimers Help Your Estate Plan Change with the Times
Estate planning is intended to help ensure that your assets are distributed according to your wishes. But circumstances can change in ways that are difficult to predict. A qualified disclaimer allows disclaimed assets to pass from a primary beneficiary to a contingent beneficiary without negative tax consequences. This flexibility can be beneficial in a variety of situations.
Planning for disclaimers
A disclaimer is an irrevocable, unqualified refusal by a beneficiary to accept a bequest, allowing the property to pass to another beneficiary. Normally, using a disclaimer to direct property to someone else would be considered a taxable gift. But there’s an exception for “qualified” disclaimers.
To qualify, a disclaimer must:
Be in writing,
Be delivered to the estate’s representative within nine months after the transfer is made (or, if the disclaimant is a minor, within nine months after the disclaimant turns 21),
Be delivered before the disclaimant accepts the property or any of its benefits, and
Cause the property to pass to the deceased’s surviving spouse or to someone other than the disclaimant, without any direction from the disclaimant.
This last point is critical and requires some planning on your part. To ensure that the disclaimant doesn’t direct the property’s disposition, the property must pass automatically to a contingent beneficiary according to the terms of your will or trust.
Disclaimers in action
Here are a couple of examples of situations when qualified disclaimers can provide estate planning flexibility:
Scenario 1. Suppose your will leaves a significant inheritance to your daughter, naming a trust for her children’s (your grandchildren’s) benefit as the contingent beneficiary. By the time you die, your daughter has built a substantial estate of her own. If she accepts the inheritance, it will ultimately be taxed as part of her estate.
Your daughter can disclaim the inheritance and allow it to pass directly to the trust for her children’s benefit, avoiding double taxation. Before making a disclaimer, however, she should check that it won’t trigger the generation-skipping transfer tax.
Scenario 2. Suppose your son is the primary beneficiary of your traditional IRA and your favorite charity is the contingent beneficiary. Your son will have to pay income tax on the distributions, and the account will have to be depleted within 10 years. The distributions could even push him into a higher income tax bracket. And, if your estate’s value exceeds the exemption amount, some or all of the IRA also may be subject to estate tax.
If your son is financially secure at the time of your death, he might want to disclaim the IRA and allow it to pass directly to the charity. By doing so, he eliminates his income tax liability while creating a charitable deduction that reduces the size of your taxable estate.
Turn to us for help
Qualified disclaimers can provide estate planning flexibility after death, helping families adapt to changing tax laws, financial needs and other personal circumstances. But disclaimers generally will be effective only if you’ve named appropriate contingent beneficiaries.
If you’re reviewing your estate plan or considering ways to provide greater flexibility for your heirs, contact FMD. We can help you determine whether qualified disclaimers should be factored into your overall estate planning strategy.
Behind on Bookkeeping? Here’s How to Get Back on Track
Running a business requires juggling countless responsibilities. Not surprisingly, bookkeeping tasks often end up on the bottom of to-do lists. The good news is that falling behind doesn’t necessarily mean your financial records are beyond repair. With a disciplined approach and the right support, you can regain control.
Recognize the issue
Many business owners don’t realize how far behind they’ve fallen until they need, for example, to file a tax return or complete a loan application. Take notice if you:
Haven’t reconciled bank and credit card accounts in months,
Have unfiled tax returns or unanswered tax notices,
Are missing receipts or have incomplete expense records,
Are uncertain about cash flow or profitability,
Can’t generate accurate, timely financial reports, or
Spend significant time searching for basic financial information.
If these issues sound familiar, you’re not alone. Growing businesses often outpace the systems and processes that once worked well. Acknowledging the problem is the first step toward solving it.
Start with the basics
When recordkeeping lags and you try to catch up, it’s tempting to focus on everything at once. A more effective approach is to prioritize the essentials, starting with key financial documents. First, gather bank and credit card statements, invoices, payroll records, and tax filings. Organizing these records by month can make the cleanup process more manageable.
Next, identify which bookkeeping tasks are incomplete. For instance, you may need to reconcile accounts, categorize transactions, record outstanding invoices or update payroll information. Creating a checklist can help you tackle the work systematically and avoid overlooking important items. Technology may also help streamline the process. QuickBooks® and other accounting platforms can automate routine tasks and simplify account reconciliations.
Address tax issues promptly
If your tax filings or payments aren’t up-to-date, address the situation as soon as possible. Delays can increase IRS penalties and interest, as well as complicate administration.
Begin by determining which returns have been filed and which obligations remain outstanding. If you’ve received notices from the IRS or other taxing authorities, review them carefully and respond within the required time frame. This can help limit penalties and prevent small problems from becoming major ones. Accurate bookkeeping plays an important role here. If your records are current, it will be easier to prepare returns, substantiate deductions and respond to questions.
View cleanup as an opportunity
Updating records does more than fix past issues. The process can also provide valuable insight into your business’s current financial position and future growth opportunities.
Once your books are current, you’ll be better equipped to evaluate cash flow, monitor profitability and make informed business decisions. Clean books provide the foundation for reliable budgeting and planning. Updating records may also reveal opportunities to improve efficiency and focus your business strategy on the most profitable activities.
Ask for help
You might be able to address minor bookkeeping issues yourself, but more complex situations call for professional assistance. Don’t wait until the next tax deadline or business opportunity exposes the problem. Contact FMD. We can help you update your financial records and provide the timely, reliable information you need to monitor profitability, manage cash flow and grow your business.
Rethink Inventory Management
For many businesses, inventory is one of the largest and most expensive assets to maintain. Beyond the cost of purchasing goods, businesses incur ongoing expenses related to storage, labor, insurance, transportation, obsolescence, depreciation and shrinkage. Excess inventory can also tie up cash that you could otherwise use to fund growth initiatives or other operational priorities. Here are two supply chain approaches that may help reduce inventory carrying costs, improve cash flow and enable a more efficient response to changes in customer demand.
1. JIT inventory management
Under the just-in-time (JIT) approach, a business plans shipments of raw materials to arrive just before they’re required for production or fulfillment. This reduces the amount of inventory on hand — and the associated carrying costs. It also increases production responsiveness and flexibility. Elements of this approach include:
Small lot sizes. This allows the business to be more flexible and adapt more quickly to changes in market demand. It can also decrease inventory cycle time, lead times and pipeline inventory. Because lot sizes are smaller, businesses that use this approach can achieve more consistent workflows.
Tight set-up times. By reducing equipment set-up times and the associated costs, a business can afford to produce smaller lot sizes. In addition, the business can avoid lengthy or inefficient set-up processes, which may discourage frequent product changeovers and reduce operational agility.
Workforce flexibility. A flexible workforce can quickly shift responsibilities and resources during bottlenecks or unplanned spikes in demand.
Strong supplier relationships. Suppliers must provide frequent, on-time deliveries of high-quality materials. So, close ties with them are vital to this approach. Long-term relationships with suppliers promote loyalty and improved overall quality.
Regular maintenance schedules. For operations with a high degree of automation, preventive maintenance is critical. Unplanned downtime can be disruptive and costly.
Quality control. JIT systems are designed to control quality at the source, rather than later in the process. For that reason, production workers are responsible for their own work, and if a defective unit is discovered, it’s returned to the area where the defect occurred. This makes employees accountable and empowers them to produce higher-quality products.
JIT can reduce carrying costs and improve efficiency. However, it hinges on having a reliable supply chain. Delays, shortages and other disruptions can adversely affect sales and customer satisfaction when inventory levels are kept low.
2. Accurate response inventory management
While JIT focuses on minimizing inventory levels, the accurate response approach tries to match inventory levels to customer demand. This approach can be particularly useful for seasonal products and items with unpredictable demand because it helps reduce excess inventory and minimize stockouts. However, it requires timely sales and inventory data, demand forecasting capabilities, flexible production processes and shorter replenishment cycles.
The accurate response approach begins with an initial forecast of customer demand, which helps management determine how much inventory to produce or purchase. Then management monitors actual sales and uses that information to adjust inventory levels. That way, the business carries more high-demand products and limits its investment in slower-moving items.
Find the right fit
There’s no one-size-fits-all approach to inventory management. The most effective system depends on your business’s products, supply chain, customer expectations and operating model. Contact FMD to help assess your current inventory management processes and identify opportunities to improve cash flow and operational efficiency.
A Trust Protector can help Ensure that Your Trust will Fulfill Your Goals
Your estate plan should be flexible enough to adapt to changing laws, family circumstances and financial situations. If it includes an irrevocable trust, there’s a risk that the trustee will be unwilling (or unable) to make appropriate moves in response to changes. A trust protector can provide the needed flexibility and mitigate other risks that could derail your wishes.
What powers can you bestow?
A trust protector is to a trustee what a corporate board of directors is to a CEO. A trustee manages the trust on a day-to-day basis. The protector oversees the trustee and weighs in on critical decisions, such as the sale of closely held business interests or investment transactions involving large dollar amounts.
There’s virtually no limit to the powers you can confer on a trust protector. For example, you can enable a trust protector to:
Replace a trustee,
Appoint a successor trustee or successor trust protector,
Approve or veto investment or beneficiary distribution decisions, and
Resolve disputes between trustees and beneficiaries.
More specifically, a protector with the power to remove and replace the trustee can do so if the trustee develops a conflict of interest or fails to manage the trust assets in the beneficiaries’ best interests. A protector with the power to modify the trust’s terms can correct mistakes in the trust document or clarify ambiguous language. Or a protector with the power to change how trust assets are distributed, if necessary to achieve your original objectives, can help ensure your loved ones are provided for as you would have desired.
A word of warning: Although it may be tempting to provide a protector with a broad range of powers, this can hamper the trustee’s ability to manage the trust efficiently. Keep in mind that the idea is to protect the integrity of the trust, not to appoint a co-trustee.
What are the qualifications?
Choosing the right trust protector is critical. Given the power he or she has over your family’s wealth, you’ll want to choose someone whom you trust and who’s qualified to make investment and other financial decisions. Many people appoint a trusted advisor — such as an accountant, attorney or investment advisor — who may not be able or willing to serve as trustee, but who can provide an extra layer of protection by monitoring the trustee’s performance.
Appointing a family member as protector is also possible, but it can be risky. If the protector is a beneficiary or has the power to direct the trust assets to him- or herself (or for his or her benefit), this power could be treated as a general power of appointment, potentially triggering negative tax consequences.
The right decision for your family
Bear in mind that a trust protector isn’t essential. In most circumstances, well-established irrevocable trusts function according to their original owners’ intentions without a protector’s intervention. But if you decide to mitigate any lingering risk by naming a protector, work with experienced legal and estate planning advisors to draw up the paperwork that specifies your protector’s powers. Contact FMD for additional details.
Midyear is a Good Time to Update Your Business’s Strategic Plan
Strategic planning isn’t meant to be a one-time exercise. Your plan should evolve with your business — and the environment in which it operates. Regular reviews help ensure your business remains focused on the right priorities and positioned to take advantage of new opportunities.
Even if you can’t find time for extensive “big picture” thinking, try to conduct some form of active strategic planning at least once a year. Doing so will help you identify emerging challenges and evaluate progress toward short- and long-term goals. A fresh strategic plan also provides stakeholders with an up-to-date map they can use to orient decisions and measure outcomes.
Get going
Sometimes businesses procrastinate on new strategic planning because they’re busy pursuing current goals and are profitable enough not to mess with “the formula.” But more often, businesses delay it because a new strategic plan requires research they may not have time to conduct and fresh ideas that can be hard to generate. If you can’t commit to an annual review, don’t let more than three years pass without productively engaging in strategic planning.
If it makes the undertaking easier, you might want to seek professional assistance — for instance, to perform research, lead strategy sessions, model financial outcomes, identify potential risks and assemble strategic ideas into a workable plan. In addition to freeing up your time, professionals offer experience and objectivity. Facilitators can put attendees at ease, foster creative thinking and adhere to productive agendas.
Brainstorm without distraction
Retreats often facilitate strategic planning sessions. So consider whether an off-site location makes sense given your attendees and project ambitions. There’s potential for excessive spending and counterproductive distractions. But if you plan carefully, you can arrange a distraction-free experience that allows participants to freely brainstorm.
Your first session should review your business’s:
Mission (what it does),
Vision (where it’s going),
Current financial results,
Recent successes and setbacks, and
Future performance based on internal and external trends.
Next, come up with 1) several goals, 2) strategies for pursuing them and 3) metrics for measuring your progress. Some of these may be similar to existing objectives, action plans and measurements and may not require a lot of extra work. New ideas, however, should be thoroughly discussed and outlined.
To ease the pressure of strategic planning, avoid trying to do everything at once. If you can accomplish the three points mentioned earlier in one session, schedule a follow-up meeting to develop a timeline and assign responsibilities. That plan should be formally approved by your business’s owners before it’s put into action.
Helpful voices
Your employees can play an important role in helping your new strategic plan succeed. To the extent practical, involve ordinary workers in the strategic goal-setting process. This will help build engagement and instill a sense of personal responsibility for your plan’s success. When you communicate the final plan, be sure it includes realistic ways for workers and others to be involved.
FMD can help ensure your new plan is supported by sound financial analysis. For guidance on evaluating your business’s performance, identifying growth opportunities and facilitating planning sessions, contact us.
Use Non-GAAP Measures without Losing Transparency
U.S. Generally Accepted Accounting Principles (GAAP) is widely perceived as the “gold standard” in financial reporting. Public companies are required to issue GAAP financial statements. A recent survey found that most private businesses also follow GAAP, though some use carve-outs for certain complex rules, such as the lease guidance.
However, you might want to supplement your GAAP financials with non-GAAP metrics. Doing so can help stakeholders better understand your operations, profitability and cash flow. Here’s how to ensure consistency and transparency when using these supplemental metrics.
Why non-GAAP measures matter
GAAP is a set of rules and procedures that accountants typically follow to record and summarize business transactions. These guidelines provide the foundation for consistent, fair and accurate financial reporting. Businesses that issue GAAP financial statements use the accrual method of accounting. Under this method, revenue is recognized when earned (regardless of when cash is received), and expenses are recognized when incurred (not necessarily when bills are paid). Lenders and investors often prefer GAAP financials because they make it easier to compare your financial results over time and with those of other businesses.
Over the years, the use of non-GAAP measures has grown. Beyond helping your management team understand your financial results, these supplemental measures can be useful when applying for financing and evaluating mergers and acquisitions. In fact, some investors and executives argue that certain unaudited figures provide a more meaningful proxy of financial performance than customary earnings figures reported under GAAP. Before relying on non-GAAP metrics, it’s important to understand what’s included and excluded to avoid making misinformed business decisions.
A closer look at EBITDA
One popular example of a non-GAAP metric is earnings before interest, taxes, depreciation and amortization (EBITDA). It was developed in the 1970s to help investors project a business’s long-term profitability and cash flow. The figure is considered one of the most valuable yardsticks investors use when a business is being bought or sold.
Because non-GAAP measures aren’t governed by a single set of accounting standards, some businesses may calculate EBITDA and related metrics differently, or enhance EBITDA figures by excluding certain costs, such as stock- or option-based compensation, that are plainly costs of doing business.
This trend has made it difficult for investors and lenders to make fair comparisons and understand the items left out. As a result, stakeholders should carefully review how these figures are derived, what adjustments have been made, why those adjustments are needed and how management uses non-GAAP metrics for internal purposes. Transparent, detailed disclosures are essential for reliable comparisons across organizations and industries.
Clarity and consistency
Non-GAAP measures can provide valuable insight into your business’s performance when used alongside traditional financial statements. But they should complement — not replace — GAAP reporting. Contact FMD for guidance on presenting EBITDA and other non-GAAP metrics consistently and transparently.
Transfer Assets Tax Efficiently with a GRAT
A properly structured grantor retained annuity trust (GRAT) can be a powerful tool for those with estates large enough that gift and estate taxes are a concern. It allows you to transfer wealth to your loved ones at little or no tax cost while continuing to enjoy an income stream for a period of years. However, there are some drawbacks to a GRAT.
GRAT benefits
A GRAT is an irrevocable trust that allows you, as the grantor, to transfer appreciating assets to beneficiaries while retaining the right to receive fixed annuity payments for a specified term. At the end of the term, any remaining assets pass to the beneficiaries you’ve named, such as your children.
The projected value of what will remain in the trust for the beneficiaries after the annuity is paid is generally a taxable gift for federal purposes. This is calculated by assuming the GRAT assets will grow at the Section 7520 rate, regardless of the specific assets’ projected or actual growth rate.
For taxpayers with estates that currently exceed the federal gift and estate tax exemption (or that might grow to exceed it in the future), one of the most attractive features of a GRAT is its ability to reduce gift and estate taxes. GRATs are commonly funded with assets that are expected to increase significantly in value, such as closely held business interests, stocks or investment portfolios. Any appreciation of the trust assets above the Sec. 7520 rate, also known as the “hurdle” rate, can pass to beneficiaries free of additional gift or estate tax.
Many GRATs are structured as “zeroed-out” GRATs, meaning the present value of the annuity is nearly equal to the value of the assets contributed to the trust. As a result, the taxable gift is minimal or even close to zero.
GRAT drawbacks
One of the most significant risks of using a GRAT is that the grantor must survive the trust term. If you die before the GRAT expires, some or all of the trust assets may be included in your taxable estate, potentially eliminating the anticipated tax benefits. For this reason, shorter-term GRATs are often preferred, particularly for older individuals or those with health concerns.
Also, the investment performance of a GRAT’s assets matters. A GRAT succeeds only if the trust assets appreciate at a rate greater than the hurdle rate. If the assets underperform or decline in value, the GRAT may produce little or no wealth-transfer benefit. While you, as the grantor, generally will still receive the annuity payments, the effort and costs associated with establishing the trust may be wasted.
Bear in mind, too, that because a GRAT is irrevocable, you can’t simply change the terms or reclaim the transferred assets once the trust has been established. This lack of flexibility requires careful planning and consideration of future financial needs.
Right for you?
A GRAT can be a powerful estate planning tool for individuals with large estates and a desire to transfer wealth tax efficiently to future generations. However, it isn’t right for everyone. Factors such as life expectancy, asset performance expectations, cash flow needs and overall estate planning objectives should all be carefully evaluated. FMD can help you determine if a GRAT is right for you.
Summer’s for Vacation — Encourage your Workers to Take One
Ahh, summer! You’re probably looking forward to time off from work — anything from a long-anticipated trip abroad to a U.S. road trip to a “staycation,” where you might enjoy reading a good book with an iced drink in your own backyard. But not everyone takes a summer vacation. In fact, several studies say that only about half of Americans take time off in the warmer months.
Despite providing paid time off (PTO) as a fringe benefit, your business may also employ workers who don’t take holiday or sick days. This can be a problem for both workers who lose their valuable benefits and your organization, which may experience lower productivity and higher fraud risk. Let’s look at the problems and some solutions.
Too much time in
The 2025 FlexJobs Work and PTO Pressure Report found that 23% of U.S. workers didn’t take any days off in the previous year. Other surveys have shown that most employees leave at least some PTO unused at the end of the year. Depending on your business’s policies and applicable state laws, employees could lose unused PTO hours when a new calendar year begins.
Unfortunately, your business is also likely to suffer if workers don’t take time off. Overworked employees are generally more stressed, less productive and more prone to making errors. The primary reason workers don’t take time off, according to the FlexJobs survey, is that they feel their workload is too heavy. In addition, some employees fear that taking vacation time makes them look less committed to the job. This can result in poor morale across your organization.
Failure to take time off is a major red flag for occupational fraud, too. Employees engaged in fraud schemes typically decline vacations and time off for illness because they fear exposure if others fill in for them. For this reason, your business should consider requiring workers to take a minimum amount of PTO each year.
Encouraging time off
In addition to establishing an official PTO policy, supervisors should regularly remind their reports to schedule days off. To appease workers who worry about their workload, arrange for other employees or a temporary worker to fill in for them. You might want to tell them that taking accrued time off won’t negatively affect their performance evaluations. After all, the business will likely benefit when workers return from vacation refreshed and newly energized.
For supervisors to play this role, they’ll need access to running PTO totals — possibly through your payroll management system. You may also want to engage a third-party provider to send easily digestible wellness content and vacation reminders to employees.
Other strategies
If some of your workers always end the calendar year with unused PTO, you might want to consider revising your plan to allow them to carry over a certain number of days. Just understand that large amounts of carried-over PTO can add liabilities to your balance sheet. Also, know that some states (including California and Montana) place significant restrictions on PTO forfeiture, which might require you to carry over all or some of your employees’ unused balances.
Another option? Establish a PTO contribution program. These programs allow employees with unused vacation hours to convert them to retirement plan contributions. If you offer a 401(k) plan, it can treat these amounts as pretax contributions similar to employee payroll deferrals. Alternatively, the plan can treat the amounts as employer profit sharing. If your 401(k) plan doesn’t already include a PTO contribution arrangement, you’ll need to amend it. You must continue to follow the plan document’s eligibility, vesting, rollover, distribution and loan terms.
True cost
Contact FMD for details on creating and administering a tax-advantaged PTO contribution arrangement. We can also help you evaluate your PTO policies, determine the hidden costs of unused PTO, and recommend strategies that support both your workforce and your business goals.
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.