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Have Concerns About A Beneficiary Mismanaging an Inheritance? A Spendthrift Trust May Be the Answer
An important decision you must make when creating your estate plan is who’ll inherit your assets. While many of your beneficiaries are likely capable of managing an inheritance responsibly, others may be vulnerable to financial pressures, creditor claims, poor spending habits or other challenges that could erode the wealth you’ve worked hard to build.
One estate planning tool that can help safeguard an inheritance is a spendthrift trust. By placing assets in this type of trust, you can provide financial support for beneficiaries while adding a layer of asset protection.
You set the distribution parameters
A spendthrift trust prohibits a beneficiary from directly tapping its funds or transferring rights to someone else. The trust also generally can deny access to creditors or a beneficiary’s ex-spouse.
Under a spendthrift clause, the trust beneficiary relies on a trustee to provide payments based on the trust’s terms. These could be in the form of regular periodic payouts or on an “as needed” basis. The trust document spells out the nature and, if applicable, frequency of the payments.
One of the primary advantages of a spendthrift trust is creditor protection. If a beneficiary experiences financial difficulties, such as a lawsuit, bankruptcy or significant debt, creditors generally can’t force the trust to distribute assets to satisfy those obligations. Because the beneficiary doesn’t own the trust’s assets outright, those assets usually can remain protected until distributions are made.
Trustee acts as a gatekeeper
The role of the trustee is a critical one. Depending on the trust’s terms, he or she may be responsible for making scheduled payments or have wide discretion as to whether funds should be paid, how much and when. For instance, the trustee may be authorized to withhold payments upon the occurrence of specific events (such as if the beneficiary exceeding a debt threshold or declaring bankruptcy).
Designating the trustee is an important consideration, especially in situations where he or she will have broad control. A good choice can be an attorney, financial or investment advisor, or someone else with the requisite experience and financial acumen. You should also name a successor trustee in the event the designated trustee dies before the end of the term or otherwise becomes incapable of handling these duties.
Other considerations
Keep in mind that the protection offered by a spendthrift trust isn’t absolute. Depending on applicable law, government agencies may be able to access the trust’s assets — for example, to satisfy a tax obligation.
It’s also essential to establish how and when the trust should terminate. It could be set up for a term of years or for termination to occur upon a stated event, such as your child or grandchild reaching a certain age.
A valuable planning tool
A spendthrift trust isn’t necessary for every estate, but it can be an effective solution when protecting assets and preserving wealth are priorities. Whether you’re concerned about creditors, divorce or financial inexperience, or you simply want greater oversight of how an inheritance is used, a spendthrift trust may help strengthen your estate plan. Contact FMD with questions. We can help you determine if a spendthrift trust is right for your family’s circumstances.
TRUMP ACCOUNTS: WHAT YOU NEED TO KNOW!
Trump Accounts were created under the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025. The website went live on July 6th at https://trumpaccounts.gov/.
For those taxpayer’s who have been looking for ways to begin funding a retirement program via an IRA (or Roth IRA) for their children or grandchildren, the new Trump Accounts provide a pathway that was not available in the past. Trump Accounts can be established for any U.S. citizen child under the age of 18. Specific rules under IRC Section 530A govern these accounts.
Annual contributions are limited to $5,000 per year (adjusted for inflation beginning in 2028) until the year the beneficiary turns 18. All contributions must be made in cash. Contributions are treated as completed gifts to the beneficiary in the year they are made, and do not require the filing of a gift tax return.
Employers may also include Trump Account contributions as an option, within their Section 125 Cafeteria Plans. Employers may make tax-free annual contributions of up to $2,500 to the Trump Account of an employee’s eligible dependent.
In addition to the annual contribution, IRC 6434 establishes a Pilot Program that provides a $1,000 tax free government contribution for each U.S. citizen child born during calendar years 2025 through 2028.
In addition, Michael Dell has pledged $6.25 billion to provide an additional $250 contribution for the first 25 million children born between 2016 and 2024 who open Trump Accounts, and reside in a ZIP code with a median household income of $150,000 or less.
There are restrictions on how Trump Account assets may be invested. Funds must be invested in eligible low-cost U.S. equity index funds or ETFs with expense ratios capped at 0.10%. Individual stocks and active management strategies are not permitted while the child is a minor. These requirements are intended to keep investment costs low while encouraging longterm investing. The overall goal is to give every child in the United States “skin in the game” and an opportunity to benefit from long-term tax deferred stock market growth.
Distributions are not permitted during the “Growth Period” which ends on January 1 of the calendar year in which the beneficiary turns 18. After age 18, distributions are generally taxable under IRC Section 72, similar to a nondeductible IRA, with basis established by:
Qualified general contribution
Government contributions received under the IRC Section 6434 Pilot Program
Employer contributions made through a Section 125 Cafeteria Plan
No distributions are permitted before age 18 unless the beneficiary dies.
If you have questions about how these new provisions may affect your tax planning strategies, contact your FMD Advisor. We can help you determine whether a Trump Account fits your family’s goals and develop a plan to invest in your children’s, and grandchildren’s future.
The Right Financial Guidance Can Help Maximize Your Business’s Potential
Financial information is the foundation for every important business decision. Whether your goal is to improve cash flow, launch a new offering, hire additional workers or expand into a new market, accurate data enables you to make decisions confidently. An experienced advisor can help prepare this data and ensure your business is poised to capitalize on growth opportunities.
Organized records
Many business owners don’t realize they need bookkeeping support until problems surface. Are you frequently behind on invoicing, scrambling to prepare tax returns or struggling to reconcile bank accounts? If so, it may be time to seek help.
Professional bookkeeping keeps your records organized. It also provides reliable information that allows you to make informed decisions throughout the year and avoid costly mistakes. Accurate books improve tax compliance, too, and make it easier to apply for financing when you need additional capital.
Key reports
Once your bookkeeping’s in order, review key financial reports regularly. At a minimum, you should always be familiar with your business’s most recent:
Profit and loss statement,
Balance sheet,
Cash flow statement, and
Accounts receivable and payable reports.
When prepared carefully, these reports can provide early warning signs if they show, for example, that revenue or cash flow is slowing. Rather than reacting to financial surprises, you can address issues before they become major problems.
Sustainable growth
Growth creates exciting opportunities, but it also introduces challenges. Before investing in expansion, get a clear picture of your business’s current financial position. Decisions made without accurate information can strain cash flow or increase debt beyond what you can comfortably support.
On the other hand, reliable records allow you to confidently evaluate and pursue your next objective, such as acquiring another business, launching a new marketing campaign or expanding your facilities. Each option may carry financial and tax consequences that deserve careful analysis.
Better cash flow
Even profitable businesses can struggle if cash isn’t managed effectively. Late-paying customers, for instance, are a serious problem when your business needs to pay its own employees, office rent and suppliers on time. Without careful planning, temporary cash shortages can interrupt critical operations.
In addition to suggesting best practices for billing and collections, your financial advisor can help you identify any seasonal trends and develop realistic cash flow forecasts and cash reserve targets. Financial professionals can also recommend ways to control expenses and how to determine when outside financing makes sense (and where to find it).
Informed decisions
Successful businesses don’t grow through guesswork. They flourish because owners thoroughly understand their financial position and use that knowledge to make informed decisions. By working with FMD, you can reduce risk and prepare your business for long-term success.
IRS Issues Guidance on QOZ Program Changes
The Qualified Opportunity Zone (QOZ) program provides tax incentives to invest in designated low-income communities across the United States. Tax law changes enacted last year made the program permanent and altered it, with implications for investors under both the original and renewed programs. With proposed, and eventually final, regulations on the way, the IRS has released some transitional guidance for investors, Qualified Opportunity Funds (QOFs) and Qualified Opportunity Zone businesses (QOZBs).
QOZ basics
The QOZ program was created by the Tax Cuts and Jobs Act (TCJA). It generally allows taxpayers to defer — and possibly reduce or eliminate — short- or long-term capital gains from the sale of their investments by reinvesting the gains in a QOF within 180 days.
QOFs must maintain at least 90% of their assets in QOZ property. Qualifying investments include those in QOZBs and in new or substantially improved commercial buildings in QOZs.
Under the TCJA, the tax benefits from investing in a QOF are generous. Taxes on the “rolled over” capital gains are deferred until the earlier of 1) the sale or exchange of the taxpayer’s investment (an “inclusion event”), or 2) December 31, 2026. Investors receive a 10% step-up in basis for the investment after five years, so only 90% of the rollover gain is taxable. After seven years, the step-up increases to 15%. Gains on investments left in a QOF for at least 10 years are fully tax-exempt.
The One Big Beautiful Bill Act (OBBBA) established a permanent QOZ program with rolling 10-year QOZs. The first round of newly designated zones eligible for investment will begin January 1, 2027. It’s expected that about 6,500 new zones will be designated. The original QOZ designations generally expire on December 31, 2028.
Under the permanent program, rollover gains can still be deferred, with a 10% step-up at year five. At that point, though, the rollover gains must be recognized. And the additional step-up at seven years has been eliminated. But the permanent exclusion of gains on the QOF investment itself after 10 years remains intact, for up to 30 years after investment. The OBBBA also created a new kind of QOZ for rural areas, with a 30% step-up on the rollover gain after five years.
What’s in the guidance?
The guidance in IRS Notice 2026-40 addresses several issues of concern, including:
Treatment of existing QOF investments. Investors who hold a qualifying investment through December 31, 2026, must include the amount of remaining rollover gain from the investment in their income for the tax year that includes that date. Notably, they can’t defer that gain by rolling it into a new QOF.
Existing QOF investors can opt to continue to hold those investments. If investors reach the 10-year holding period and satisfy certain requirements, they can elect to adjust the basis at sale or disposition to the investment’s fair market value at that time, thus eliminating taxable gains after the date of the original investment.
The treatment of gains on an inclusion event that occurs before December 31, 2026, differs from that of gains where the investment is still held on December 31, 2026. In the former situation, the recognized gains may be eligible for deferral by making a new qualifying investment within 180 days. But the clock on the 10-year step-up in basis will start over and run from the date of the new investment.
Tangible property acquired after 2026. Under the OBBBA, property acquired by a QOF or QOZB after December 31, 2026, generally can’t be treated as QOZB property unless it’s acquired for use in a QOZ designated after July 4, 2025. That means tangible property acquired after 2026 generally can’t qualify as QOZB property if it’s in one of the originally designated QOZs.
However, the guidance outlines two exceptions that allow tangible property acquired by QOZBs after 2026 in an original QOZ to qualify:
Working capital safe harbor. The safe harbor applies if an entity acquires the property under a written working capital plan that was adopted before December 31, 2026. The QOZB also must have received at least 10% of the estimated working capital assets designated by the plan before December 31, 2026, and expended at least 5% by that date.
Ordinary course of business exception. This exception applies when a QOF or QOZB acquires tangible property in an existing QOZ, in the ordinary course of its business, to replace existing tangible business property (if other requirements are met). Covered replacements include the replacement or modernization of property necessary for the business. Property acquired to expand a business or transition to a new business doesn’t qualify.
QOZBs and QOFs that are active in existing QOZs should ensure they can satisfy one of these requirements before the end of 2026.
Seize the opportunities
In addition to the above, the IRS guidance provides transitional rules, including safe harbors for how QOFs and QOZBs can continue to treat a location as if it were in a QOZ after an existing designation expires. Questions? FMD can provide further details on the new QOZ guidance and explain how it can benefit your tax situation.
Turn Raw Data into Actionable Insights with Dashboard Reporting
Business owners have access to more financial and operational data than ever before. The challenge is identifying the most useful information and presenting it in such a way that enables better decision-making. Dashboard reports consolidate your key metrics into an easy-to-read format, helping management monitor performance, identify trends and respond more quickly to changing business conditions.
Focus on what matters most
Everything in a dashboard report can typically be found elsewhere in your financial reporting systems, albeit in a less user-friendly format. Rather than providing new information, a dashboard report captures the most critical data — based on the nature of your operations — and presents it clearly and succinctly.
A dashboard report may compare your results with budgets, prior periods or industry benchmarks so you can see whether you’re falling short or exceeding expectations. It can also provide an early warning system for potential problems, allowing you to pivot as needed to minimize losses and capitalize on emerging opportunities before they pass.
To maximize the effectiveness of dashboard reports, make them accessible to appropriate managers across your organization via your internal website or weekly email blasts. Widespread availability allows your management team to quickly identify trends that require immediate attention. Additionally, businesses that are struggling during a reorganization or debt restructuring sometimes share selected dashboard reports with their lenders or investors to demonstrate performance and confirm compliance with financial expectations.
Choose relevant metrics
When deciding which information to target, look at your business’s loan covenants — lenders usually have a good sense of which metrics are worth monitoring. Then conduct your own risk assessment. What’s relevant varies depending on your industry, general economic conditions and the nature of your business operations.
In addition to tracking cash balances and receipts, useful financial measures may include the following ratios:
Gross margin [(revenue – cost of sales) /revenue],
Current ratio (current assets / current liabilities), and
Interest coverage ratio (earnings before interest and taxes / interest expense).
From here, consider adding a handful of business- or industry-specific metrics. For example, a warehouse might report daily shipments and inventory turnover. A hotel might track net operating income, average room rates and occupancy rates compared to the previous week or month. A law firm might report each partner’s realization rate. Retailers may focus on sales per square foot and average transaction value, while service businesses might track utilization rates and revenue per employee.
Avoid information overload, however. A limited number of well-defined metrics is generally more useful than a cluttered report that recreates the underlying financial statements. Review your dashboard metrics periodically as your business’s goals, risks and operating conditions change.
Complement rather than replace
While financial statements provide a comprehensive view of your business’s financial position and results, dashboard reports deliver timely insights that help management monitor day-to-day performance and respond quickly when conditions change. Contact FMD for help identifying key financial metrics and developing a dashboard report that’s tailored to your business.
How to Build a Stronger Workforce with a Strategic Onboarding Process
U.S. Bureau of Labor Statistics data shows that hiring has slowed in recent months. Even so, thousands of people continue to start new jobs, and every new hire represents a significant investment of time and money for organizations. With labor costs remaining a concern for many businesses, it’s more important than ever to help employees become productive members of your workforce as quickly as possible. An effective onboarding process can help you do this.
Start before day one
Successful onboarding begins before a new hire’s first day on the job. Once a candidate accepts your job offer, explain what to expect before, during and after the first day. A welcome email can provide practical details, such as where to park (for on-site employees), when to arrive and to whom to report. Whenever possible, give new hires digital access to employment forms, benefit information and introductory training materials so they can complete administrative tasks in advance and arrive better prepared.
The first day should combine orientation with a personal welcome. Designate a specific person — ideally the employee’s direct supervisor — to guide the new hire through a structured agenda. For on-site positions, ensure the workspace is fully set up with the necessary equipment before arrival. For remote employees, verify that technology and systems access are working properly. In either setting, introduce new employees to teammates and other key colleagues to help them begin building relationships immediately.
Investing in career development
Supervisors play a central role in helping new employees succeed, but experienced peer mentors can make the transition smoother. A mentor can answer day-to-day questions, explain workplace norms and help new hires navigate your organization’s culture. These informal connections often build confidence and accelerate integration into the team.
Training should begin immediately after orientation and continue beyond the first week. Avoid taking a one-size-fits-all approach or assuming employees will simply learn as they go. Instead, develop structured training programs tailored to each role, with clear learning objectives and opportunities for ongoing professional development. Employees who receive meaningful training are generally more confident and productive.
Continuous improvement
Many organizations assume their onboarding programs are effective until negative feedback reveals otherwise. Like any critical business process, onboarding should be regularly evaluated and refined.
Encourage supervisors to check in with new hires throughout the onboarding period, which typically lasts one to two weeks. These discussions should emphasize active listening and honest feedback. If your organization uses peer mentors, ask them to share observations as well. The insights you gather can help you identify weaknesses and improve your onboarding program.
Welcome, prepare and support
Employees who feel welcomed, prepared and supported from their first day on the job are more likely to become enthusiastic contributors and deliver stronger long-term performance. Contact FMD for help evaluating your onboarding process, measuring its return on investment and aligning it with your business objectives.
Where to Look When You Need to Improve Profit Margins
Increasing revenue isn’t the only way to strengthen your business’s financial performance. Another option is to take a closer look at operating expenses and determine whether every dollar you spend delivers value. A systematic review of major expense categories can uncover opportunities to reduce waste and protect your bottom line without sacrificing long-term growth. Here are some tips to help you use financial data to cut selectively.
Review compensation and benefit costs
Evaluate your total employment costs. These include salaries, wages and employee benefits, such as health insurance and retirement plan contributions. Benefits account for more than 30% of total employee compensation, according to the U.S. Bureau of Labor Statistics.
As you seek to offer competitive pay and benefits, compare your total compensation for each position with what others in your industry pay for similar roles. Consider adjustments if your compensation differs significantly from these benchmarks. Sometimes you can offset salary reductions by adding cost-effective benefits and perks that your workers might value — such as flexible work arrangements and professional development opportunities — to help maintain morale and minimize turnover.
Evaluate vendor and subscription spending
Gather all your vendor contracts so your management team can review them together. These may include contracts with suppliers, insurers, professional services providers, cleaners, landscapers, technology firms and software subscription providers. Determine if you’re paying for overlapping services from multiple providers. If so, eliminate unnecessary vendors. Next, evaluate the services you’re purchasing from each provider and whether they’re necessary. For instance, you might be paying a vendor to perform a service that your staff could accomplish with technology you already have in place.
Finally, designate a preferred provider in each expense category and negotiate the best price with this vendor. Require employees to use preferred vendors unless there are extenuating circumstances that are approved by a manager. Also consider leases for equipment and property that could be renegotiated on more favorable terms. Before changing vendors or renegotiating contracts, it’s important to review cancellation penalties and renewal deadlines.
Measure marketing ROI
Work closely with your marketing team or agency to measure the effectiveness of your current campaigns. Some businesses spend thousands of dollars a month on advertising, digital marketing and other promotional efforts that deliver few, if any, results. Ask your marketing team to estimate the return on investment (ROI) of campaigns across channels, including search, social media, email and traditional advertising. Based on this analysis, reduce or eliminate spending on ineffective campaigns and consider diverting these funds to campaigns with stronger ROIs.
Also, consider putting your advertising account out to bid if you haven’t done so in the past year or two. Many agencies automatically increase their rates annually. Tell your current agency that you’re shopping around and ask them for their best price. If you decide to switch to a new agency, you might benefit from fresh ideas and new perspectives on increasing revenue.
Keep borrowing costs under control
If your business borrows money for equipment, real property or working capital needs, interest expense is probably a significant item on your income statement. Although commercial interest rates have eased from their recent highs, borrowing costs remain elevated for many businesses. If you have variable-rate loans, financing costs may still be adversely affecting your profitability.
Your business operations should generate returns that exceed the cost of your debt. If not, high interest costs could lead to financial distress. To avoid this pitfall, brainstorm ways to lower borrowing costs and improve cash flow.
For instance, you might be able to lower your interest rate by shopping around for fixed-rate loans or refinancing existing debt if more favorable terms are available. Shorter terms may reduce total interest costs but increase monthly payments. Alternatively, you may need to draw less from your line of credit by managing inventory and receivables more efficiently. Also consider setting aside some operating cash to pay down your outstanding loans, rather than taking dividends or paying bonuses.
Take a targeted approach
Reducing expenses doesn’t mean cutting costs across the board. The goal is to eliminate spending that isn’t contributing to your success while continuing to invest in the people, technology and resources your business needs to grow. Contact FMD for guidance on performing a comprehensive expense review. We can help you analyze margins and identify strategies to improve profitability without undermining your long-term business goals.
IRS Provides Gift Tax Reporting Relief for Sec. 530A Account Contributions
Section 530A accounts, also known as “Trump accounts,” are available for contributions as of July 4, 2026. Created by last year’s One Big Beautiful Bill Act, they’re custodial, tax-advantaged accounts opened by a parent or guardian for an eligible child under age 18. In late June, the IRS issued Revenue Procedure 2026-25, which, among other things, allows qualifying 530A account contributions to be treated as completed gifts rather than gifts of a future interest. The upside is that your contributions can qualify for the gift tax annual exclusion and you may not have to file a gift tax return (Form 709) — but only if certain requirements are met.
How do 530A accounts work?
A 530A account can be set up for anyone who’ll be under age 18 at the end of the tax year and who has a Social Security number. Annual contributions of up to $5,000 can be made until the year the beneficiary turns age 18. In addition, U.S. citizen children born from Jan. 1, 2025, through Dec. 31, 2028, can potentially qualify for an initial $1,000 government-funded deposit.
530A account contributions aren’t deductible, but earnings grow tax-deferred as long as they’re in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Withdrawals generally can’t be taken until the child turns age 18, when the account becomes a traditional IRA, subject to traditional IRA rules. Distributions will generally be at least partially taxable, and IRA early withdrawal penalties could also apply.
What’s in the IRS guidance?
Under safe harbor rules included in the June IRS guidance, 530A account contributions will be eligible for the gift tax annual exclusion and you won’t be required to file a gift tax return if all these requirements are met:
Your cash contributions to a 530A account for a beneficiary under age 18 are your only taxable gifts for the calendar year,
The total amount of each beneficiary’s gift (including contributions to the 530A account) doesn’t exceed the gift tax annual exclusion amount ($19,000 per recipient for 2026) or your available lifetime gift and estate tax exemption ($15 million for 2026, less any exemption you’ve already used during your life), and
A gift tax return for the year isn’t otherwise required to be filed by you.
When these conditions are met, the IRS will generally treat the contributions as completed gifts rather than future interests in property. But if just one of the conditions isn’t met, your contributions will be treated as gifts of a future interest, which means they won’t be eligible for the annual exclusion and you must file a gift tax return for every account beneficiary who receives a contribution. The gifts can still be tax-free, but you’ll have to apply your lifetime gift tax exemption — and your generation-skipping transfer (GST) tax exemption if the GST tax also applies (generally when a gift is made to a grandchild or someone else two generations or more below you).
Should you file a gift tax return?
If you’re planning to contribute to your children’s or grandchildren’s 530A accounts, the new IRS rules can potentially ease the tax-filing burden next year. However, there are situations where it’s advantageous to file a gift tax return even if one isn’t required. And if your 530A account contributions are only part of your overall gifting program, you’ll likely still be required to file a gift tax return — and you’ll need to factor the tax consequences of the contributions into your planning. If you’re unsure whether you must (or should) file a gift tax return, or you need clarification on the recent IRS guidance on 530A accounts, contact us.
Stress Testing: A Smart Way to Manage Today’s Business Risks
Business owners today face no shortage of uncertainty. Persistent inflation, evolving trade policies, cybersecurity threats and ongoing geopolitical tensions have made planning challenging. Although it’s impossible to predict every disruption, you can better prepare by evaluating how your business would respond under adverse conditions. One proven approach is stress testing, which helps organizations identify vulnerabilities before they become costly problems.
Some background
Stress testing gained widespread attention in the banking industry following the 2008 financial crisis. Regulators continue to require large financial institutions to evaluate how they’d perform under severe economic scenarios.
However, for most businesses, stress testing doesn’t need to be as complex as a bank regulatory model. Approach it as a practical planning exercise that uses realistic financial assumptions to answer questions such as: What would happen to operating cash flow if a major customer left, borrowing costs rose or a key supplier increased prices? By modeling the financial impact of potential disruptions, you can make more informed decisions and improve long-term planning.
Identify major risks
To launch your own stress-testing initiative, identify your business’s primary risk factors in the following categories:
Operational. These affect the day-to-day functioning of your business and may include supply chain disruptions, technology failures, cyberattacks, natural disasters, employee shortages and human error.
Financial. Risks related to cash flow, access to capital, interest rate fluctuations, fraud, customer credit issues and changes in borrowing costs all deserve attention.
Compliance. Such risks stem from evolving tax laws, industry regulations, data privacy requirements, labor laws and other government mandates.
Strategic. These relate to competitive pressures, changing customer preferences, market disruptions, technological innovation and broad economic shifts.
As you evaluate each risk category, be specific. The more realistic your assumptions, the more valuable the exercise will likely be.
Meet with your team
Once you’ve identified the most significant risks, meet with your leadership team and trusted professional advisors to discuss each scenario. Consider not only the likelihood of each event but also its potential financial impact and your business’s ability to respond.
The goal is to develop practical strategies to reduce exposure and improve resilience. For example, if your business operates in an area susceptible to natural disasters, a comprehensive disaster recovery and business continuity plan is essential. Other vulnerabilities may be less obvious. If your business depends heavily on a single executive with specialized knowledge, stress testing can highlight the importance of succession planning.
Value of continuous improvement
Risk management isn’t a one-time exercise. Economic conditions, customer behavior, technology development and regulatory requirements continue to evolve, creating new challenges and opportunities. So review your stress-testing program at least annually and update it whenever significant changes occur within your business, industry or in the broader marketplace.
Although stress tests won’t eliminate uncertainty, they can help your business respond more confidently when unexpected events arise. FMD can help you analyze potential scenarios and develop reliable financial projections. Contact us to discuss how stress testing can strengthen your risk management strategy.
How a Financial Statement Audit Strengthens Your Fraud Defenses
Fraud is a major threat facing small and midsize businesses. While audits aren’t designed to uncover fraud, they can help business owners identify anomalies and deter would-be fraudsters. Recent findings from the Association of Certified Fraud Examiners (ACFE) underscore the important role audits play, together with other controls, in a broader fraud prevention strategy.
Recent ACFE study
External audits can be effective antifraud controls. The ACFE’s Occupational Fraud 2026: A Report to the Nations analyzed 2,402 occupational fraud cases across 143 countries. Consistent with previous studies, the latest version of the ACFE’s report estimates that organizations lose approximately 5% of their annual revenue to occupational fraud. The study also found that a typical fraud scheme lasts 12 months before it’s detected.
More than half of the cases in the 2026 study involved either a lack of internal controls or management overriding existing controls. However, respondents with strong antifraud controls — such as external financial statement audits, management review, proactive data monitoring and surprise audits — generally experienced lower fraud losses and detected fraud more quickly than organizations without those safeguards.
Limits on audit assurance
The purpose of an audit isn’t to detect fraud. Instead, it provides an express opinion about whether the financial statements are fairly presented, in all material respects, in conformity with U.S. Generally Accepted Accounting Principles (GAAP) or another comprehensive basis of accounting.
An audit provides a reasonable level of assurance that the business’s financial statements are free from material misstatement and conform with GAAP. However, external audits don’t provide guarantees against intentional financial statement fraud or inadvertent errors.
The role audits play in fraud detection
Auditors play a crucial role in supporting the integrity of financial reporting. Here’s how certain audit procedures may help reveal suspicious activity and identify weaknesses in your business’s controls.
Risk assessments. These assessments identify high-risk areas for misstatement or errors. They help direct the auditors’ attention to the accounts and transactions that warrant more rigorous audit procedures. Auditors analyze the business’s operations, financial reporting processes, internal controls and industry environment to pinpoint potential risks. Then they develop audit plans focusing on these areas.
Audit fieldwork. Auditors perform various procedures during fieldwork to help them detect discrepancies that may indicate fraudulent activity. For example, they may test certain financial transactions and account balances to verify their accuracy and completeness. They may also examine supporting documentation, such as invoices, contracts and bank statements, to ensure that transactions are legitimate and properly recorded. And they might confirm accounts receivable, review pending litigation and physically observe year-end inventory counts. Auditors customize their procedures to fit each business’s risk assessment.
Auditors are trained to recognize the warning signs of fraud, including unusual transactions, inconsistencies in financial records and deviations from standard procedures. When auditors identify red flags, they may ask questions and conduct additional audit procedures to help ensure the financial statements are fairly presented and conform to GAAP.
Financial reporting compliance. Businesses must comply with a wide range of laws and regulations, including those related to financial reporting, taxes and corporate governance. Auditors consider laws and regulations that could have a material effect on the financial statements and may identify issues that warrant management’s attention or further review.
A stronger defense
No organization is immune to fraud. But an external audit can help reduce your business’s risk by examining financial reporting procedures, evaluating internal controls and identifying potential warning signs before they become larger problems. If you have questions about your business’s fraud risks or you’d like to discuss our audit and forensic accounting services, contact FMD. We can help you build a stronger fraud prevention strategy and investigate any suspicious activity.
Is a Joint Trust Better Than Separate Trusts? Not Necessarily
A single joint living trust with your spouse can simplify the management of shared assets, but separate trusts may offer enhanced asset protection and tax planning opportunities. Which option is right for your estate plan depends on a variety of factors, including your and your spouse’s combined assets, financial goals, family circumstances and applicable state law.
Living trust benefits
There are many benefits of including a living trust (also known as a “revocable” trust) in your estate plan. This trust type allows you to minimize probate expenses, keep your financial affairs private and provide for the management of your assets in the event you become incapacitated.
Importantly, a living trust also offers flexibility: You’re free to amend the terms of the trust or even revoke it altogether at any time.
A single joint trust
If you’re comfortable with your spouse inheriting your combined assets (and vice versa), a joint trust can be a good choice because of its simplicity. It avoids the need to divide assets between two separate trusts, and funding the trust is a simple matter of transferring your combined assets into it.
In addition, during your lifetimes, you and your spouse have equal control over the trust’s assets. This can make it easier to manage and conduct transactions involving the assets. But it can be a negative for spouses who aren’t comfortable sharing control of their combined assets.
Separate trusts
Not wanting to share control of assets is one reason to set up separate trusts. Another is asset protection. If shielding assets from creditors is a concern, separate trusts can offer greater protection. With a joint trust, if a creditor obtains a judgment against one spouse, all trust assets may be at risk. But a spouse’s separate trust is generally protected from the other spouse’s creditors.
Also, when one spouse dies, his or her separate trust becomes irrevocable, making it more difficult for creditors of either spouse to reach the trust assets. Keep in mind that the degree of asset protection a trust provides depends on the type of debt involved, applicable state law and the existence of a prenuptial agreement.
Don’t forget to consider taxes
For most married couples today, federal gift and estate taxes aren’t a concern. This is because they enjoy a combined gift and estate tax exemption of $30 million in 2026 (adjusted annually for inflation ).
However, if your family’s wealth exceeds the exemption amount, or if you live in a state where an estate or similar “death” tax kicks in at lower asset levels, separate trusts offer greater opportunities to avoid or minimize these taxes. For example, some states have exemption amounts as low as $1 million or $2 million. In these states, separate trusts can be used to maximize each spouse’s exemption amount and minimize exposure to state death taxes.
It’s also important to consider income tax. As previously mentioned, when one spouse dies, his or her separate trust becomes irrevocable. That means filing tax returns for the trust each year and, to the extent trust income is accumulated in the trust, paying tax at significantly higher trust tax rates.
A joint trust remains revocable after the first spouse’s death — it doesn’t become irrevocable until both spouses have died. In this case, income is taxed to the surviving spouse at his or her individual tax rate.
Arriving at a decision
There’s no one-size-fits-all answer when deciding between a joint living trust and separate trusts. What works well for one married couple may not be the best choice for another, especially as family dynamics, wealth and tax laws evolve over time. If you’re unsure whether having one or two trusts better fits your needs, FMD can help. Contact us today.
Open the Door to Investment with a Winning Pitch Deck
Whether you’re launching a start-up, expanding into different markets, developing a new product or pursuing a business acquisition, attracting investors requires more than a good idea. Investors want to see a compelling opportunity supported by solid financials and a realistic growth plan. One of the most effective ways to communicate all of this is with a digital presentation known as a pitch deck. Here’s how to build yours.
Short and sweet
Most investors review dozens of investment opportunities each year. So your pitch deck should capture their attention quickly by explaining what your business does, why it matters and why now is the time to invest.
Early in the presentation, lay out:
Your business’s mission and long-term vision,
The problem your business solves,
Your unique value proposition,
The amount of funding you’re seeking, and
How investment will help achieve specific business objectives.
Keep it brief, with no more than 10 to 12 slides. You can share additional financial schedules and technical documentation later in the process.
Defining the opportunity
An effective pitch deck clearly defines the market opportunity. Be sure to explain the solutions you’re offering by using straightforward language and avoiding unnecessary technical jargon. And describe your target market using credible research and realistic assumptions. Include information about market size, customer demographics, industry trends and expected growth.
Next, discuss revenue generation. Describe your pricing strategy and business model, including whether you’ll pursue sales through subscriptions, direct sales, licensing or other channels. Talk about your marketing plans as well. Investors will want to know how you’ll build brand awareness and acquire and retain customers. Existing customer relationships, strategic partnerships, recurring revenue and a growing social media presence can strengthen your case.
People and financials
Investors often invest in people as much as ideas. Introduce your leadership team and explain why it’s qualified to execute your business plan. Highlight relevant industry experience and previous entrepreneurial success. If your management team has complementary skill sets, emphasize how those strengths work together.
Financial information should reinforce your story rather than overwhelm it. Use charts and graphs to illustrate historical performance, revenue growth, profit margins and future projections. Forecasts should be ambitious but grounded in reasonable assumptions and current market conditions. Investors also appreciate evidence that your business is gaining momentum. If applicable, include key metrics such as customer growth, recurring revenue, retention rates, strategic partnerships, product milestones and other measurable achievements.
Equally important is explaining how you intend to use the capital you’re raising. Break down how the funds will be allocated to, for example, hiring, expanding operations, developing products and purchasing equipment.
Focus on substance
Increasingly, entrepreneurs are using AI to develop pitch decks. AI-powered software can assist with design, organization and content suggestions. However, if you use AI, be sure to review all financial information and statistics to ensure accuracy and content to ensure personalization. Experienced investors can usually recognize generic or overly polished presentations that lack substance.
Be sure to contact FMD for other pitch deck suggestions. We can help you develop reliable financial data that strengthens your overall investment presentation, making you more likely to get to “yes.”
Balancing Financial Reporting Needs with Compliance Costs
Issuing financial statements that comply with U.S. Generally Accepted Accounting Principles (GAAP) requires significant time, expertise and resources. Although lenders and other stakeholders often prefer — or require — GAAP statements, some small business owners may find that tax-basis reporting is a practical alternative. If you use financial statements only for tax compliance and internal decision-making, this framework may better align with your needs. Let’s take a closer look.
Why are businesses exploring alternatives?
The Financial Accounting Standards Board has issued several major accounting rule changes over the last decade, including updated guidance on revenue recognition, leases and credit losses. For many private businesses, the most challenging update has been the guidance under Accounting Standards Codification Topic 842, Leases. The updated standard became effective for most calendar-year private businesses in 2022, but it continues to create compliance and reporting challenges today.
To alleviate the burden of complying with complex GAAP reporting requirements, some private businesses are now opting for a special reporting framework, the most common of which is tax-basis reporting. This framework is popular among small businesses because it aligns financial reporting with federal tax return preparation. But it’s not right for every business.
How does tax-basis accounting differ from GAAP?
GAAP requires businesses to follow accrual-basis accounting. Under this method, revenue is recognized when earned (regardless of when it’s received), and expenses are recognized when incurred (not necessarily when they’re paid). It matches revenue to the corresponding expenses in the proper period. So, it minimizes fluctuations in profit margins over time and facilitates comparisons with other businesses.
Under tax-basis accounting, financial statements are prepared using the accounting methods and principles applied for federal income tax reporting. As a result, book income and taxable income are generally aligned, reducing the need to maintain separate accounting records for financial reporting and tax purposes.
Historically, tax-basis reporting was used by businesses that had relatively straightforward operations and financial reporting needs. Often, these businesses transitioned to accrual-basis accounting as they grew and developed more sophisticated financial reporting requirements. In recent years, some private businesses have reconsidered whether the benefits of GAAP reporting outweigh the additional costs and complexity of ongoing compliance requirements.
However, there’s a risk in switching accounting methods. An unexpected change could upset investors and lenders, who generally prefer accrual-basis statements. GAAP is designed to prevent businesses from overstating profits and asset values. By contrast, tax rules are designed to maximize government revenue, so they generally prevent businesses from understating profits and asset values. As a result, the two frameworks can produce different results for the same business activities and may paint different pictures of your business’s financial performance.
What’s the right fit for your business?
Selecting the right financial reporting framework involves more than simply reducing compliance costs. The right choice depends on various factors, including your business size, growth plans, financing arrangements, ownership structure and stakeholder expectations. Contact FMD for help evaluating whether your current reporting method supports your business goals.
Proper Planning can Ease the Pain of the Probate Process
When a loved one passes away, settling his or her financial affairs can be an emotional and complex task. One legal process that often comes into play is probate. Understanding how probate works — and implementing strategies to minimize or avoid it — can help you protect your assets and simplify matters for your family after your death.
Downsides (and upsides) of probate
Probate is a legal procedure in which a court establishes the validity of your will, determines the value of your estate, resolves creditors’ claims, provides for the payment of taxes and other debts, and transfers assets to your heirs. Depending on applicable state laws, the probate process can be expensive and time consuming. Not only can probate reduce the value of your estate due to executor and attorney fees, but it can also force your family to wait through weeks or months of court hearings. In addition, probate is a public process, so you can forget about keeping your financial affairs private.
However, there are instances where the probate process can work in your favor. Under certain circumstances, for example, you might feel more comfortable having a court resolve issues involving your heirs and creditors. Another possible advantage is that probate places strict time limits on creditor claims and settles claims quickly.
Simple strategies to avoid probate
The simplest ways to avoid probate involve designating beneficiaries or titling assets so they can be transferred directly to beneficiaries outside of your will. So, for example, have appropriate, valid beneficiary designations for assets such as life insurance policies, annuities, IRAs and other retirement plans.
For assets such as bank and brokerage accounts, consider the availability of pay on death (POD) or transfer on death (TOD) designations, which allow these assets to avoid probate and pass directly to your designated beneficiaries. Keep in mind that while the POD or TOD designation is permitted in most states, not all financial institutions offer this option.
Strategies for homes and other real estate
Some people avoid probate on their homes or other real estate (as well as bank and brokerage accounts and other assets) by holding title with a spouse or child as “joint tenants with rights of survivorship” or as “tenants by the entirety.” But joint ownership has several significant drawbacks.
First, unlike with beneficiary designations, once you retitle property you can’t change your mind. Second, holding title jointly gives your spouse or child some control over the asset and exposes it to his or her creditors. Finally, adding someone to the title may be considered a taxable gift of half the asset’s value.
A handful of states permit TOD deeds, which allow you to designate a beneficiary who’ll succeed to ownership of your real estate after you die. TOD deeds allow you to avoid probate without making an irrevocable gift or exposing the property to your beneficiary’s creditors.
Strategies using trusts
For larger, more complicated estates, a living trust (sometimes called a revocable trust) is generally the most effective tool for avoiding probate. It involves setup costs but allows you to manage the disposition of your wealth in a single document while retaining control and reserving the right to modify the trust’s terms. Assets in the trust will be distributed to your heirs according to the trust’s provisions, without having to go through probate.
Other types of trusts can be beneficial for specific situations. For example, placing life insurance policies in an irrevocable life insurance trust (ILIT) can provide significant tax benefits.
Making it easy for your family
Avoiding probate isn’t appropriate for every situation, but thoughtful estate planning can reduce costs, delays and administrative burdens for your surviving family members. FMD can help you develop strategies to minimize probate costs, reduce taxes and achieve your other estate planning goals. Contact us today.
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.