Controlling costs is fundamental for every business. But where and how to address this challenge can change over time based on various economic and logistical factors.

Earlier this year, global consultancy Boston Consulting Group published a report entitled The CEO’s Guide to Costs and Growth. Within it were the results of a survey of 600 C-suite executives that found, among other things, cost management was a top priority for respondents heading into 2024. According to the survey, three of the top categories for cost-cutting initiatives were:

1. Supply chain / manufacturing. Not every company incurs manufacturing costs, but most have a supply chain. Costs and delays in this area soared during the pandemic because of global disruptions and backups. Since then, some sense of normalcy has returned, though that doesn’t mean managing supply chain costs has become easy.

Many companies find that most of their spending is done with just a few vendors. By identifying these vendors and consolidating spending with them, you may be able to put yourself in a stronger position to negotiate volume discounts. Consolidating your supplier base also tends to streamline the administrative work associated with purchasing.

It also pays to really know your suppliers. One way to gather an abundance of relevant information is to conduct a supplier audit. This is a formal process for collecting key data regarding each supplier’s performance to manage quality control and ensure you’re getting an acceptable return on investment.

2. Labor/nonlabor overhead. Controlling labor costs is tricky in today’s environment. Many industries are facing skilled labor shortages, meaning businesses would love to spend more on labor if they could find people to fill those positions. Nevertheless, with payroll being such a dominant expense category for most companies, it’s critical to monitor these costs and prevent overspending.

A logical first step in managing labor costs is to know how much you’re spending. And the answer isn’t as simple as looking at the total gross wages you pay out every month or year. You need to know the actual and total amount of these costs. Fortunately, there’s a metric for that. Labor burden rate reflects the additional costs that companies incur beyond gross wages. These generally include expenses such as payroll taxes, workers’ compensation insurance and fringe benefits. Knowing your labor burden rate can enable you to truly “right-size” your workforce.

Beyond that, outsourcing remains an option for mitigating labor costs — especially given the vast pool of independent contractors now available. Although you’ll obviously incur costs when outsourcing, the time and labor cost that it saves you could end up a net gain. Carefully chosen and implemented technology upgrades can provide similar results.

3. Marketing/sales. Much like labor, strong marketing and sales are critical to most businesses operating today. So, skimping on their related costs typically isn’t going to pay off. But, of course, you also need to ensure a strong return on investment.

Again, choosing and monitoring the right metrics can prove useful here. The optimal ones tend to vary by industry and company type, but some of the most widely used for marketing purposes include lead conversion rate, click-through rate for online ads and cost per lead. Popular sales metrics include total revenue, year-over-year growth and average customer lifetime value.

Whether it’s sales metrics, labor burden rate or supply chain management, getting objective, professional advice can help you and your leadership team obtain an accurate picture of what’s going on with your costs and target feasible solutions. Please consider our firm for assistance.

 

The IRS recently released guidance providing the 2025 inflation-adjusted amounts for Health Savings Accounts (HSAs). These amounts are adjusted each year, based on inflation, and the adjustments are announced earlier in the year than other inflation-adjusted amounts, which allows employers to get ready for the next year.

Fundamentals of HSAs

An HSA is a trust created or organized exclusively for the purpose of paying the qualified medical expenses of an account beneficiary. An HSA can only be established for the benefit of an eligible individual who is covered under a high-deductible health plan (HDHP). In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for 2025

In Revenue Procedure 2024-25, the IRS released the 2025 inflation-adjusted figures for contributions to HSAs, which are as follows:

Annual contribution limits. For calendar year 2025, the annual contribution limit for an individual with self-only coverage under an HDHP will be $4,300. For an individual with family coverage, the amount will be $8,550. These are up from $4,150 and $8,300, respectively, in 2024.

In addition, for both 2024 and 2025, there’s a $1,000 catch-up contribution amount for those who are age 55 or older by the end of the tax year.

High-deductible health plan limits. For calendar year 2025, an HDHP will be a health plan with an annual deductible that isn’t less than $1,650 for self-only coverage or $3,300 for family coverage (these amounts are $1,600 and $3,200 for 2024). In addition, annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) won’t be able to exceed $8,300 for self-only coverage or $16,600 for family coverage (up from $8,050 and $16,100, respectively, for 2024).

Heath Reimbursement Arrangements

The IRS also announced an inflation-adjusted amount for Health Reimbursement Arrangements (HRAs). An HRA must receive contributions from an eligible individual (employers can’t contribute). Contributions aren’t included in income, and HRA reimbursements used to pay eligible medical expenses aren’t taxed. In 2025, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA will be $2,150 (up from $2,100 in 2024).

Collect the benefits

There are a variety of benefits to HSAs that employers and employees appreciate. Contributions to the accounts are made on a pre-tax basis. The money can accumulate tax-free year after year and can be withdrawn tax-free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the workforce. Many employers find it to be a fringe benefit that attracts and retains employees. If you have questions about HSAs at your business, contact us.

© 2024

If your company has been in business for a while, you may not pay much attention to your payroll system so long as it’s running smoothly. But don’t get too complacent. Major payroll errors can pop up unexpectedly — creating huge disruptions costing time and money to fix, and, perhaps worst of all, compromising the trust of your employees.

For these reasons, businesses are well-advised to conduct payroll audits at least once annually to guard against the many risks inherent to payroll management. Here are seven such risks to be aware of:

1. Inaccurate recordkeeping. If you don’t keep detailed and accurate records, it will probably come back to haunt you. For example, the Fair Labor Standards Act (FLSA) requires businesses to maintain records of employees’ earnings for at least three years. Violations of the FLSA can trigger severe penalties. Be sure you and your staff know what records to keep and have sound policies and procedures in place for keeping them.

2. Employee misclassification. Given the widespread use of “gig workers” in today’s economy, companies are at high risk for employee misclassification. This occurs when a business engages independent contractors but, in the view of federal authorities, the company treats them like employees. Violating the applicable rules can leave you owing back taxes and penalties, plus you may have to restore expensive fringe benefits.

3. Manual processes. More than likely, if your business prepares its own payroll, it uses some form of payroll software. That’s good. Today’s products are widely available, relatively inexpensive and generally easy to use. However, some companies — particularly small ones — may still rely on manual processes to record or input critical data. Be careful about this, as it’s a major source of errors. To the extent feasible, automate as much as you can.

4. Privacy violations. You generally can’t manage payroll without data such as Social Security numbers, home addresses, birth dates and bank account numbers. Unfortunately, possessing such information puts you squarely in the sights of hackers and those pernicious purveyors of ransomware. Invest thoroughly in proper cybersecurity measures and regularly update these safeguards.

5. Internal fraud. Occupational (or internal) fraud remains a major threat to businesses. Schemes can range from “cheating” on timesheets by rank-and-file workers to embezzlement by those higher on the organizational chart. Among the most fundamental ways to protect your payroll function from fraud is to require segregation of duties. In other words, one employee, no matter how trusted, should never completely control the process. If you don’t have enough employees to segregate duties, consider outsourcing.

6. Legal compliance. As a business owner, you’re probably not an expert on the latest regulatory payroll developments affecting your industry. That’s OK; laws and regulations are constantly evolving. However, failing to comply with the current rules could cost you money and hurt your company’s reputation. So, be sure to have a trustworthy attorney on speed dial that you can turn to for assistance when necessary.

7. Tax compliance. Employers are responsible for calculating tax withholding on employee wages. In addition to deducting federal payroll tax from paychecks, your organization must contribute its own share of payroll tax. If you get it wrong, the IRS could investigate and potentially assess additional tax liability and penalties. That’s where we come in. For help conducting a payroll audit, reviewing your payroll costs and, of course, managing your tax obligations, contact us.

© 2024  

 

Every business wants to find them, but they sure don’t make it easy. We’re talking about cost cuts: clear and substantial ways to lower expenses, thereby strengthening cash flow and giving you a better shot at strong profitability.

Obvious places to slash costs — such as wages, benefits and overhead — often aren’t a viable option because the very stability of your operation may depend on them. But there might be other ways to lower expenses if you dig deeply enough. Here are three ways to perhaps uncover some cost-cutting opportunities.

1. Study your suppliers

Many companies find that just a few of their suppliers account for most of their spending. By identifying these vendors and consolidating spending with them, you may be able to put yourself in a stronger position to negotiate volume discounts. Consolidating your supplier base also tends to streamline the administrative work associated with purchasing.

On a related note, how well do you know your suppliers? One way to ensure you’re working off an abundance of relevant information is to conduct a supplier audit. This is a formal process for collecting key data points regarding a supplier’s performance to manage quality control and ensure you’re getting an acceptable return on investment.

2. Go green

Given the already noticeable effects of climate change, operating an environmentally friendly company has become imperative. But going green can, under the right circumstances, save you money as well.

Refurbished computers or office furniture often can be found at substantial savings compared with their brand-new counterparts. If you no longer need equipment, computing devices or office furniture, you may be able to sell them to a liquidator or dealer. You’ll not only bring in some money on the sales, but also free yourself of the need to store and maintain the items.

In addition, look at your facilities. If you own the property on which you operate, research energy efficient upgrades to the HVAC and lighting systems. Naturally, making such upgrades will cost you money initially, but you may be able to lower energy costs over the long term. What’s more, you might qualify for tax credits for installing certain items.

3. Explore outsourcing, tech upgrades

Many business owners try to cut costs by doing everything in-house — from accounting to payroll to HR. But if the staffing and expertise just aren’t there, these companies often suffer losses because of mistakes and mismanagement. Although you’ll obviously incur costs when outsourcing, the time and labor it saves you could end up being a net gain.

Carefully chosen and implemented technology upgrades can serve a similar purpose. Many products on the market today are so robust and fully featured, upgrading to them is almost comparable to outsourcing.

Again, you’ll need to spend money in the near term but, eventually, you could lower the cost of doing business. For example, the right customer relationship management system can help you generate sales leads and focus on your most profitable existing customers.

Snip, snip, snip

Lowering expenses is often difficult, but looking for ways to do it is an important activity to undertake regularly. This is particularly true now that inflation is a major factor in the economic landscape. Please contact us for help identifying and lowering your company’s most “cuttable” costs.

© 2023

 

Most growing small businesses reach a point where the owner looks around at the leadership team and says, “It’s time. We need to offer employees a retirement plan.”

Often, this happens when the company is financially stable enough to administer a retirement plan and make substantive contributions. Other times it occurs when the business grows weary of losing good job candidates because of a less-than-impressive benefits package.

Whatever the reason, if you don’t have a retirement plan and see one in your immediate future, you’ll want to carefully select the one that will work best for your company and its employees. Here are some basics about three of the most tried-and-true plans.

1. 401(k) plans offer flexibility

Available to any employer with one or more employees, a 401(k) plan allows employees to contribute to individual accounts. Contributions to a traditional 401(k) are made pretax, reducing taxable income, but distributions are taxable.

Both employees and employers can contribute. For 2023, employees can contribute up to $22,500 (up from $20,500 in 2022). Participants who are age 50 or older by the end of the year can make an additional “catch-up” contribution of $7,500 (up from $6,500 in 2022). Within limits, employers can deduct contributions made on behalf of eligible employees.

Plans may offer employees a Roth 401(k) option, which, on some level, is the opposite of a traditional 401(k). This is because contributions don’t reduce taxable income currently but distributions are tax-free.

Establishing a 401(k) plan typically requires, among other steps, adopting a written plan and arranging a trust fund for plan assets. Annually, employers must file Form 5500 and perform discrimination testing to ensure the plan doesn’t favor highly compensated employees. With a “safe harbor” 401(k), however, the plan isn’t subject to discrimination testing.

2. Employers fully fund SEP plans

Simplified Employee Pension (SEP) plans are available to businesses of any size. Establishing one requires completing Form 5305-SEP, “Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement,” but there’s no annual filing requirement.

SEP plans are funded entirely by employer contributions, but you can decide each year whether to contribute. Contributions immediately vest with employees. In 2023, contribution limits will be 25% of an employee’s compensation or $66,000 (up from $61,000 in 2022).

3. SIMPLEs target small businesses

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a type of plan available only to businesses with no more than 100 employees. It’s up to employees whether to contribute. Although employer contributions are required, you can choose whether to:

• Match employee contributions up to 3% of compensation, which can be reduced to as low as 1% in two of five years, or
• Make a 2% nonelective contribution, including to employees who don’t contribute.

Employees are immediately 100% vested in contributions, whether from themselves or their employers. The contribution limit in 2023 will be $15,500 (up from $14,000 in 2022).

A big step forward

Obviously, choosing a retirement plan to offer your employees is just the first step in the implementation process. But it’s a big step forward for any business. Let us help you assess the costs and tax impact of any plan type that you’re considering.

© 2022

#ERM #RISK #Threats #CPA #Business |
Hundreds of years ago, prosperous towns managed the various risks of foreign invaders, thieves and wild animals by fortifying their entire communities with walls and towers. Today’s business owners can take a similar approach with enterprise risk management (ERM).

Assessing threats

In short, ERM is an integrated, companywide system of identifying and planning for risk. Many larger companies have entire departments devoted to it. If your business is ready to implement an ERM program, be prepared for a lengthy building process.

This isn’t an undertaking most business owners will be able to complete themselves. You’ll need to sell your managers and employees on ERM from the top down. After you’ve gained commitment from key players, spend time assessing the risks your business may face. Typical examples include:

• Financial perils,
• Information technology attacks or crashes,
• Weather-related disasters,
• Regulatory compliance debacles, and
• Supplier/customer relationship mishaps.

Because every business is different, you’ll likely need to add other risks distinctive to your company and industry.

Developing the program

Recognizing risks is only the first phase. To truly address threats under your ERM program, you’ll need to clarify what your company’s appetite and capacity for each risk is, and develop a cohesive philosophy and plan for how they should be handled. Say you’re about to release a new product. The program would need to address risks such as:

• Potential liability,
• Protecting intellectual property,
• Shortage of raw materials,
• Lack of manufacturing capacity, and
• Safety regulation compliance.

Again, the key to success in the planning stage is conducting a detailed risk analysis of your business. Gather as much information as possible from each department and employee.

Depending on your company’s size, engage workers in brainstorming sessions and workshops to help you analyze how specific events could alter your company’s landscape. You may also want to designate an “ERM champion” in each department who will develop and administer the program.

Ambitious undertaking

Yes, just as medieval soldiers looked out from their battlements across field and forest to spot incoming dangers, you and your employees must maintain a constant gaze for developing risks. An ERM program, while an ambitious undertaking, can provide the structure for doing so. We can assist you in managing risks to your business in a financially sound manner.

© 2017

Grant Bennett Associates had its firm management retreat at the rustically, chic Mission Ranch Inn in the very picturesque city of Carmel.  The whole firm and a +1 were invited.

We spent two and a half days eating some great food and discussing our firm's unique culture and values. 

This year for our last day of our firm's management retreat we focused a lot on charities and a little bit on public speaking. Local, world-wide, and everything in between; Dawn Brenner, our Managing Partner, thought up a wonderful idea to give each team member the opportunity to research a charity of their choice and present it to the rest of the firm. 

• Planning the audit
• Performing the audit
• Internal control over compliance
• Compliance testing
• Audit sampling
• Single audits - special considerations
• Reporting on the compliance audit

AICPA

Starting a business is an exciting time for entrepreneurs. 

It gives them the opportunity to control their destiny, freedom to have a flexible schedule, the challenge to leave a legacy behind, and unlimited earning potential.  There are many challenges that entrepreneurs face over the lifetime of their business with some being in the initial startup phase. 

Step 1: Create a business plan

Step 2: Choose a location for your business

Step 3: Choose an entity type

Step 4: File your tax and employer identification documents

Step 5: Obtain the required licenses or permits for your business

Another annual Grant Bennett Associates team appreciation day is in the books. This year we were pleased to be able to sail around the bay on the sailboat, Cat Ballou. 

We shoved-off from the picturesque town of Sausalito and did what they called the "three bridge route".

Not many company's in today's world get to celebrate their 55th year in business. 

There have been so many great memories made through out the years. We appreciate all the many clients we have been able to serve. 

To celebrate we decided to invite everyone to come to the office for some yummy hors d'oeuvres, drinks and friendly conversation. We recently expanded our office space to the suite next door, so it made perfect sense to hold the event here. We had a great turnout and enjoyed seeing many of our clients, family and friends. Here's to another 55 years in business!! 

Here are some of our favorite pictures from the party.