5 Insurance Tips to Protect Your Assets and Your Bank Account
Have you conducted a business insurance review lately? Changes in your business equipment, real estate holdings, the amount of inventory, and the number of employees are all good reasons to review your insurance. Here are a few policy review tips to consider:
Keep in regular contact with your insurance company. Keep your insurance agent apprised of what you are doing in your business. Try to meet with your agent throughout the year, and conduct a detailed annual review of your insurance needs.
Understand how business changes affect your policy. Figure out how your policy covers common changes, as well as other changes you know are happening soon. This involves understanding the limits and terms of your policy. You can start by asking if you’re properly insured for property damage, liability coverage, health and disability, and life insurance.
Conduct a competitive review. Periodically conduct a competitive review of your insurance needs. Bring in at least two other insurance providers, as well as your current provider. The frequency of the review will be driven by changes in your business, the stability of your current insurance provider, and the need to understand the evolving landscape of business liabilities. A review will keep your premiums competitive, as well as help you learn about coverage holes in your current policy.
Identify evolving coverage risks. As the business climate evolves, so should your insurance coverage. Think about what’s on the horizon. Who would have anticipated the need to cover cyber attacks and identity theft 10 years ago?
Review safety plans and company policies. This goes hand-in-hand with a business insurance review. Make sure your team is adhering to established employment and operations policies. Getting an insurance claim approved and maintaining reasonable premiums often depend on specific factors you can reinforce through these policies.
Finding the right level of coverage for the right price is possible, but it takes some preparation and planning. Invest some time now to review your insurance policies to save a lot of potential pain and money down the road.
Knowing the tricks makes you a better decision-maker
There are many reasons for you to lease a car versus buy a car, but too often it is the auto dealer’s profit motive that determines which method you use rather than what’s best for your budget and lifestyle. To help you make an informed decision, here are some things to consider:
When to lease
You want a car with lower down payments and monthly costs.
You don’t like making your own vehicle repairs.
You prefer a new car every couple of years.
You don’t drive many miles each year.
You are not hard on your vehicle.
When to buy
You plan to have the vehicle for many years.
You are willing to drive a used car.
You drive more miles than a lease allows.
You are worried about keeping the car in excellent condition.
You want to work on or modify the car.
Tips to know if you decide to lease
If you think leasing a vehicle is an option for you, here are some tips to ensure you are making the best deal:
Negotiate before revealing your intentions. Negotiate the price before telling the dealer you wish to lease. The purchase price you negotiate should be the price the dealer uses in calculating the lease payments as well as an outright purchase. If it is not, this technique forces the dealer to disclose this fact.
Ask about the annual percentage rate (APR). Ask the dealer to disclose the effective APR built into the lease. If the dealer gives you a lease factor instead of an interest rate, multiply the lease factor by 2,400 to get a general interest rate. For example, a lease factor of 0.0025 multiplied by 2,400 returns an interest rate of 6 percent.
Question the residual value. Ask what the projected residual value of the car is at the end of the lease. This value is often overstated by the dealer to artificially lower your lease payment, but can impact your ability to purchase your vehicle at the end of the lease. Future residual value is an estimate and can often be negotiated with the dealer.
Compare with a loan. Use the negotiated purchase price to calculate your loan payments. Use this information to compare your monthly lease payment with your car loan payment.
Read the lease agreement! If ever there is a time to read the fine print, leasing a car is one of them. Pay special attention to early termination clauses and cost for excess miles. These two factors can dramatically impact your lease versus buy decision.
Even the best, well-prepared business plans can unravel quickly without a process in place to evaluate performance. Creating a scorecard with quality metrics can give you the daily insight you need to successfully run a business without drowning in the details.
Create a scorecard that works
An effective scorecard gives you a holistic view of the state of your business in one report. The report consists of key financial and non-financial metrics to provide a daily look at the health of your business. To be useful, your measures should be concise, available on-demand, and include properly targeted data to help you quickly spot trends and react appropriately.
Effective business metrics to consider right now
Quick Ratio (financial)
Add up your total cash, short-term investments and accounts receivable. Then divide that total by your current liabilities. This is your quick ratio. It’s a simple way to see if you have enough funds on hand to pay your immediate bills. A value of 1.0 or more means your liquid assets are sufficient to cover your short-term debts. A value less than 1.0 may mean you’re relying too heavily on debt to fund your operations or pay expenses.
Retention Percentage (customers)
First, create a list of customers who made purchases this year and a list of customers who made purchases last year. Then, remove all new customers gained in the current year. Divide the total number of customers from last year by the remaining number of customers for this year. This is your customer retention percentage. Measure this over time to see if your business is retaining or losing core customers. If you have a condensed sales cycle, you can shrink the period down further. For example, by looking at this calculation each month, you can see how it builds over the year.
Asset Turnover Ratio (internal process)
Divide your total sales by average total assets from your company balance sheet. (beginning assets plus ending assets, divided by two) for the same time period. The end result tells you the amount of sales generated for each dollar committed to your assets. The number may not reveal much by itself, but when reviewed over time, you’ll have a better understanding of whether the assets used to run your business are becoming more or less effective.
Net Income Per Employee (growth)
Divide your net income by your total number of employees for a given time period. In theory, as your workforce develops, it should generate more income per employee. Remember to account for part-time employees prior to making your calculation (e.g., a part-time employee working 20 hours per week is 1/2 an employee for purposes of this calculation). If the income per employee is getting lower over time, figure out why. Perhaps you have high employee turnover, or there is an area of your company that can benefit from training.
While each ratio may help you analyze different aspects of your business, they don’t tell you the whole story. Finding the right mix of metrics for your scorecard can take some time, but the end result is a valuable tool that can take your business to the next level.
Too often major life decisions have tax implications attached to them. For the unwary, this can create a fairly large and unexpected tax bill. Here are four examples of major life changes that can have complicated tax implications:
Changing jobs. Whether it’s a new, exciting opportunity or a result of being laid off, a job change is going to affect your tax obligation. The termination of your previous job likely adds additional taxable income in the form of accrued vacation or a severance package. Review how your former employer handles tax withholdings, especially for big payouts. Your new job also brings new tax implications with a new salary, new benefits and possibly different taxing jurisdictions if you also move to a new location.
Selling your house. When selling a house or other residential property, the first thing to determine is whether it’s your primary residence. If so, the IRS provides an exemption from tax for up to $250,000 ($500,000 for joint couples) of the gain realized from the sale of your home as long as you lived in it for at least two of the previous five years. Any gain above the exemption is subject to capital gains tax. If the property you are selling is not your primary residence, capital gains tax applies, and you also have to deal with other more complicated tax code issues.
Adding a second job. The extra money you earn when adding a second job or business also brings extra taxes. How much additional tax this second income creates depends on your situation. Employment status, type of business, and how it relates to your other tax activities need to be considered. The extra income alone can send you into a higher tax bracket.
Deciding when to retire. Your retirement plans and timing of retirement plan distributions play a big role in how much tax you will pay on your retirement earnings. For example, with traditional IRAs, there are early withdrawal penalties before you reach age 59½ and required minimum distributions after reaching age 70½ years old. For Social Security, collecting benefits early means less in monthly benefits and potentially a higher tax obligation if you have additional earnings. Each source of retirement income has its own set of taxation rules which can create a very complicated tax environment.
When a big life decision is on the horizon, go in with your eyes open to the potential tax implications. Carefully weigh all your options and seek help before you act.
As the school year rolls into February, suddenly the realization sets in that high school seniors only have a few months left before graduation. Here are five things each graduate should understand before their big graduation day:
Debt needs to be managed carefully. It is way too easy to burden oneself under a pile of debt. This is especially true with college loans and credit card debt. While college debt may be unavoidable, try to minimize the size of the loans as much as possible. Regarding credit cards, help your student find the one that best fits their circumstance. This card can be used to create a great credit score for future loans by paying off the whole balance every month. If they can’t, the card should only be used for emergencies. And they should never buy something they can’t afford.
Students need to invest in themselves. As it stands right now, high school students consist of 18 years of experiences, nurturing and decision-making. Now they are faced with a big decision. “Should I pay for college or a trade school?” Just remind them, the more employable they are, the greater their life-long income potential. So while tempted to take another path, the best return on most young student’s investment is often one that is made to create a better employment future for themselves.
Comfort is overrated. It is in our nature to be comfortable – to take the path of least resistance. The times where you step outside of your comfort zone are often the times you learn the most about yourself. These experiences often grow confidence to tackle more difficult challenges when they come along. So encourage your teen to work hard and gain the wisdom that comes with these early experiences.
Life is expensive. Utilities, insurance, taxes, association dues and medical expenses are just some examples of typical “hidden” expenses. Before every big decision, teach your young graduate to research the costs and talk to people that have been in their shoes. In addition to recurring expenses, these new grads need to plan for unforeseen emergencies like dropping a phone in the sink or having unexpected car repairs. So teaching a student how to make a budget and save three to six months of expenses in an emergency account are two great habits to encourage.
Enjoy the journey. Graduating from high school is an exciting time, but can also bring tremendous uncertainty. As your student moves on to their next phase, new emotions will arrive and others will fade away. Encourage your young adult to steal moments each day to reflect on where they’ve been and focus on the positive aspects of their current situation. Each phase of life brings its unique set of challenges to be experienced. Encourage them to enjoy their journey.
