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Avoid These Six Debt Collection Pitfalls

Posted By Kenyatta Turner, LegalShield Independent Associate, Tuesday, May 24, 2016

Small Business News


Avoid These Six Debt Collection Pitfalls 

Your ability to collect a debt owed to your business hinges on the processes and policies you have in place. You can avoid some of the most common mistakes and improve your chance of successfully collecting a debt by understanding where problems often arise. Your LegalShield provider law firm is ready to help you understand the laws that govern collections, draft letters to debtors and assist you in taking further legal action if necessary. Call your LegalShield provider law firm if you need assistance with a collection matter or have any questions.

  1. “We didn’t have a payment policy or written contract.” Handshake deals and verbal agreements are difficult to legally enforce. It is essential to have a signed contract for any product or service for which payment will be made at a later date. Your contract or agreement should include a uniform payment policy. Your policy should include exact due dates or a timeline for payment, the name of the individual or business responsible, accepted forms of payment and any potential fees or interest for delinquent payment.

  2. “Our accounting records are a disaster.” Accurate and detailed records will help you quickly identify and manage delinquent accounts. Your customers and clients should know exactly where their account stands. Provide itemized invoices that include a specific due date for payment. If an account is delinquent, include the total amount owed, the number of days past due, the original due date and any late fees or interest owed.

  3. "We waited because we didn't want to upset the customer." If a customer's account becomes past due, consider placing a hold on the account and contact the customer. The longer a customer's account is delinquent and the more debt they accrue the more difficult collection becomes. You may have to make the determination to stop providing additional services or products until payment is made. Always remain professional and courteous.

  4. “We don’t have any documentation but I remember talking to the customer.” Good accounting practices will insure you retain copies of bills and invoices. You must also document your collection efforts. Your records should include letters and emails, as well as the dates and times of any phone calls or meetings. This information will be extremely important if legal action becomes necessary.

  5. “I was so mad I couldn’t stay calm.” Remain professional and friendly during each interaction with delinquent customers. It is illegal to threaten, harass or intimidate customers who are unable to make payment. Never threaten an action you are not willing or legally allowed to make. Making the issue personal or becoming aggressive will hurt your chances of successfully collecting the debt and could land you in legal trouble.

  6. “I didn’t really think the attorney could help.” Utilize your LegalShield small business membership. Call your provider law firm for assistance with collection matters. Your attorney can help you understand the law, draft a collection letter on your behalf, review your contracts and answer other legal questions you may have. If a collection letter does not resolve the matter, your provider law firm will advise you on additional legal remedies available to your business.  

 

For more information about LegalShield or IDShield for yourself, your family, your business, or your employees, please contact Kenyatta Turner, Independent Associate at 602-367-1069 or KenyattaTurner@LegalShieldAssociate.com.  Worry Less...Live More!

 

Tags:  accounting  Bookkeeping  contracts  CPA  debt cancellation  debt collection  family-owned business  finance  financing  legal advice  legal services  small biz  small business  Taxes 

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DOL's Revised, Final Rule on Overtime Doubles Minimum Salary Level Starting December 1, 2016

Posted By Daniel Schenck, Clark Hill PLC, Wednesday, May 18, 2016

It Still Hurts - DOL's Revised, Final Rule on Overtime Doubles Minimum Salary Level Starting December 1, 2016

By: Paul A. Wilhelm

 

On May 18, 2016, the Department of Labor ("DOL") issued its long-awaited Final Rule for overtime exemptions, focusing on the "white collar" exemptions (executive, administrative, professional and certain computer employees). The Final Rule comes after the DOL processed 270,000 public comments on its proposed rule about which we wrote you, from late last summer. The Final Rule will take effect December 1, 2016 and will:

  1. Raise the minimum annual salary level required for "white collar" exemptions to $47,476 ($913 per week), up from the current $23,660 ($455 per week) - an increase of just over 100%. (Recall, the salary level test does not apply to doctors, lawyers, or teachers, and certain computer employees can be exempt if paid at least $27.63 per hour and meet applicable duties tests.) This final level is down slightly from the $50,440 annual figure proposed last June.
  2. For the first time, allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level (i.e., up to $91/week or $4,732 total annually), provided these payments are made on a quarterly or more frequent basis. The remaining 90% of the required, new salary level is $822/week, or $42,744 annually, totaling $47,476.
  3. Raise the minimum salary for those covered under the "highly compensated employee" exemption, from $100,000 in total compensation annually, to $134,004 - an increase of 34%. This final level is higher than the proposed rule, which had called for a new level of only $122,148 - an increase of 22%.
  4. Impose an escalator provision into the FLSA, automatically "updating" the above salary levels every three years, beginning on January 1, 2020, by tying the levels ad infinitum to certain economic measures. The proposed rule had called for annual "updates."
  5. Impose no changes to the duties tests. The DOL had sought comments on possible changes to the standard duties tests for these exemptions, but decided not to make any such changes.

Misclassification of salaried-exempt employees is among the fastest-growing civil actions in both federal and state courts. With the Final Rule, the incentive for employees (and/or the DOL) to claim misclassification has increased. We advise clients to begin assessing whether they wish to pay the higher salaries and/or take other measures. We also advise them to review the duties of their employees that are or may be classified as salaried-exempt to ensure they meet the various duties tests for the white collar exemptions.

 

Look for an announcement regarding the launch of Clark Hill's FLSA Compliance Toolkit through HR Advantage coming soon. If you have additional questions, contact Paul A. Wilhelm at (313) 309-4269 | pwilhelm@clarkhill.com, or another member of Clark Hill's Labor and Employment Practice Group.

Tags:  finance  legal  salary  small business 

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How To Save $100,000

Posted By George (Clint) Frederick CPA PLLC, George Frederick CPA PLLC, Wednesday, April 6, 2016

 

HOW TO SAVE $100,000

 

The American Institute of Certified Public Accountants publication Journal of Accountancy published today (April 6, 2015) contained an article on fraud.  As I read the article, as titled below, it occurred to me the article could have been titled “How to Save $100,000”. For example, specific operating ratios, employee guidelines, and company policy tailored to the unique characteristics of your company will deter fraud.

 

 

Antifraud controls cut significantly into losses

 

The presence of antifraud controls such as management reviews and telephone hotlines can greatly reduce the damage done by fraud schemes, and the use of such controls is slowly on the rise. Those are two of the trends identified in the 2016 Report to the Nations on Occupational Fraud and Abuse, released Wednesday by the Association of Certified Fraud Examiners.

 

The biennial report, based on thousands of fraud cases reported by fraud examiners worldwide, provides a detailed look of fraud, its perpetration, detection, and how battled and prevented in various industries and regions. Fraud takes a significant toll on organizations. The fraud examiners who participated in the survey estimated that the typical organization loses 5% of revenues to fraud in a given year. The fraud losses

in the study totaled more than $6.3 billion, an average loss of $2.7 million per case. The 23.3% of cases with losses of $1 million or more boosted that average significantly. The median loss was $150,000. Asset misappropriation (83%) caused the smallest median loss at $125,000. In contrast, financial statement fraud (10%) caused the biggest median loss at $975,000.

 

HOW TO SAVE $100,000

 

Antifraud controls limit damage. Organizations that implement antifraud controls inflict much smaller losses. Organizations that engage in proactive data monitoring and analysis, lose $92,000. Whereas organizations without that control lose double or $200,000. Organizations with fewer than 100 employees were the most likely to suffer from fraud in the study, representing about 30% of the cases reported.

 

FRAUD CONTROLS TO ADOPT

 

The study found proactive data monitoring, management reviews, and hotlines reduce loss by 50%. Fraud training for employees, anti-fraud policies, and codes of conduct in an employee manual are also deterrents to company fraud. We recommend a professional external overview of an organizations fraud control.

 

Tags:  fraud  management  small business 

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Is It Time to Separate Business Checking From Personal?

Posted By Julie Smith, Horizon Community Bank, Wednesday, April 6, 2016

When starting up a brand new business, it can be easy to fall into the habit of mingling funds – using your personal checking account to handle both household and business expenses.

Perhaps you’re careful to differentiate business from personal expenses and deposits when you enter line items on your checkbook register, but everything is funneled through a single account.

This might not be in your best interests, even in the short-term. Here’s why:

A BUSINESS CHECKING ACCOUNT CLEARLY SEPARATES A BUSINESS FROM A HOBBY.

Managing a business is no small thing—it’s a serious endeavor with the goal of profitability and growth, which the government supports through tax incentives and deductions.

In contrast, a hobby is typically done for entertainment purposes, even if a modest amount of sales helps the hobby support itself.

To qualify as a business and receive tax benefits, you must be able to show you are serious about your small business in a way that might impact the community or economy, and that it’s far more than a hobby.

The government wants businesses that fuel jobs and economic growth, and stabilize communities–not ones that just pays for the amethyst beads and sterling silver wire in someone’s craft room, or the expensive new computer used to create a website for a friend.

Mingling your business and personal funds can indicate a casual attitude about the business that comes back to hurt you later.

IT SIMPLIFIES DOING YOUR TAXES.

Mingled checking accounts significantly increases the amount of time spent on recordkeeping. You have to sort through them in great detail, rather than reviewing one streamlined record.

Even if you are very careful to indicate business versus personal in your checkbook register, and keep business receipts and deposit slips in a separate file, it can be a herculean task figuring things out later. You’ll have to review each individual item and it’s far easier to miss important details.

Not only that, sloppy recordkeeping skills or lack of attention to details can make this separation virtually impossible.

One other thing to consider is this: if you are paying an accountant or tax professional to help, figuring out blended accounts will significantly increase their time, which bumps up what you pay for their services. It also gives them access to your personal finances, which can make some people uncomfortable.

Keeping a separate business checking account streamlines this process, and gives you a leg up if you ever become audited. Clear, written records make the process go far more smoothly, providing a clean trail of bank statements that are easy for the auditor to follow.

BUSINESS CHECKS ARE MORE PROFESSIONAL AND PRIVATE.

If you write checks to pay business vendors for their products or services, using a personal check provides them with your home address. If a challenge with funding results in past due payments, this loss of privacy can become a problem.

Sending a personal check also looks less professional. Appearing as credible and professional as possible gives a vendor confidence in your success and ability to pay on time. It also allows others to write checks to the business, instead of you personally, which supports that credibility and impression of success.

SEPARATION PROVIDES ADDED LEGAL PROTECTION.

There is one last benefit of separate business checking accounts that few think of, unless they are sued.

If your business has been set up as an LLC or corporation, you’re provided a certain level of protection because the court system is required to consider legal liabilities of the business separate from that of the individuals involved. This ensures personal assets are likely to be safe, such as a home and savings accounts.

In fact, the very process of setting up your business through a legal entity requires a separate business account if it is a corporation, partnership or incorporated sole proprietorship.

But what if it’s an LLC or an early start-up that hasn’t filed yet? What if you are a freelancer or consultant who doesn’t see the need for setting up an LLC?

Separating your accounts is still important from a legal perspective.

If you mingle your finances, it can allow the court system to pursue your personal assets. The degree of separation between the financial activities of the owner and that of the business can influence whether or not the court finds you personally liable.

The negligible costs of having a business checking account are nothing, compared to the benefits it can provide.

If you’d like to discuss your business, learn more about business checking versus personal checking accounts, or discuss your financial goals, let us know. We’re here to help.

*This article is not intended to provide legal, accounting or tax advice. Please seek appropriate professional support to obtain answers specific to your own situation.

Tags:  business checking 

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Debt Cancellation is Taxable Income – Yes or No

Posted By George (Clint) Frederick CPA PLLC, George Frederick CPA PLLC, Tuesday, March 1, 2016

 

Debt Cancellation is Taxable Income – Yes or No 

The best advice you can get – “It Depends”.  Discuss your personal situation with your CPA or tax advisor.  The IRS published tax tip 2016-30, on March 1 titled Top 10 Tax Tips about Cancellation.  Usually debt cancellation is taxable income; however, an exclusion may apply to homeowners who had mortgage debt cancelled in 2015. Even if the debt is not for your home, there may be other means to escape the debt cancellation taxability.  Following are what I consider pertinent:

1. Main Home. Does the debt cancellation pertain to your main home?  Was it for purchase of your home, or for improvements to your home?  Does your main home secure the mortgage?  A movie, nominated for best picture, ‘The Big Short’, is based on the housing collapse of 2007 and 2008.  The collapse resulted in new legislation in 2009 that is still in effect for 2015 and 2016, but scheduled to expire on Dec. 31, 2016.

2. Loan modification.  Debt cancelled or modified on your main home could be excluded as taxable income under the Home Affordable Modification Program, or HAMP.

3. Refinanced Mortgage. Did you refinance your mortgage and use the additional funds (up to the amount of the original mortgage) to improve your main home?  The debt cancellation may qualify under HAMP.

4. Other Cancelled Debt.  Other types of cancelled debt, i.e. credit card debt, rental mortgage debt, car loans or foreclosures, normally do not qualify for special exclusion.  However, other programs might be available to exclude those cancelled debts from being taxable.

5. Form 1099-C.  This is the form used to report debt cancellation to the IRS – it is due by February 1.  Did you receive a 1099-C from your lender?

6. Form 982.  Provides a form to attach to your tax return for discharged debt.  Title 11, bankruptcy is one course; however, debt could be discharged and not taxable if you are destitute or have qualified farm, business or residence debt.

Note:  More individuals are filing their own tax returns this year and not using tax professionals.  Individuals filing their own tax returns are more susceptible to identity theft since they do not have the safeguards in place as do tax professionals.  The IRS (IR 2016-34 issued March 1, 2016) estimates there has been a 400% surge in phishing and malware incidents so far this tax season. 

Tags:  debt cancellation  phishing  Taxes 

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