The best way to prevent overdue accounts is to avoid doing business with customers who have bad credit histories. I have seen one too many small business owners fail because of poor cash flow that resulted from high accounts receivable.

Here are five steps that can help your cash flow.

1. Watch for new customers with a bad credit history.

You can’t expect that a company or a person with a history of bouncing checks or paying their bills late will change their ways when dealing with you. If you must do business with the chronically late, lay down your credit rules early and firmly and start the relationship off slowly. Keep the amount of product or services you offer a company with an iffy credit record to a minimum until they’ve proven themselves worthy. And no matter how much you need the business, never start doing business with another person or company until you have a signed contract clearly stating and agreeing to payment terms.

2. Once you begin doing business with someone, make sure you stamp your invoices with the date that payment is due to you.

Don’t rely on the customer to look at the invoice date and add 30 days – or whatever your payment terms are – to determine the pay date.

3. Offer discounts for early payment and add interest to late payments.

A typical discount is two percent to three percent off the total if the bill is paid within 10 days of the invoice date. The maximum amount of interest that can be charged varies by state.

4. Phone customers and start trying to collect the day after a payment is due.

Never wait – let them know that you keep close track of your accounts receivable.

5. Until a customer pays their bills, don’t do any more business with them.

Do not bend on this rule – you’ll only cause yourself more problems and scuttle any chance of collecting what you’re owed. If you really want to keep doing business with a customer who owes you, insist that any new products or services they receive from you are c.o.d. – cash on delivery.

Finally, and perhaps most importantly, make sure you review your Aging Accounts Receivable Report at least quarterly, preferable monthly.

After you have integrated the advice I have shared here to your collection process, you will find the days of high Accounts Receivables a thing of the past.

if you have any questions, please don’t hesitate to contact me at Salim@Omargroupcpa.com or visit my website at www.OmarGroupCPA.com.  We are an entrepreneurial CPA firm that helps New Jersey small business owners and professional practices with maximizing their profitability and cash flow.

]]> http://www.omargroupcpa.com/wordpress/?feed=rss2&p=346 http://www.omargroupcpa.com/wordpress/?p=350 http://www.omargroupcpa.com/wordpress/?p=350#comments Tue, 13 Mar 2012 05:03:19 +0000 admin http://www.omargroupcpa.com/wordpress/?p=350

One of the questions that frequently comes up when Chris and I meet with clients when reviewing their finances is what property is subject to Probate. Here’s a brief education on probate……..Probate is the legal process of settling the estate of a deceased person, resolving all claims, and distributing the decedent’s property.

At death, not all property is transferred through a will. Certain assets are automatically transferred to a beneficiary or beneficiaries when you die. Assets transferred in this way might include retirement plan accounts and life insurance proceeds. These are considered “non-probate” property. Property held in a trust and joint bank or brokerage accounts are other examples of non-probate property.

“Probate” property is passed though your will. If you don’t have a will, the probate court will decide, based on the state’s law, how your property should be distributed.

If you would like to sit with Chris for a review of your finances or would like a reference of an attorney you can talk to about this, send me an email at Salim@OmarGroupCPA.com and I’ll be happy to facilitate that.

Generally deductions are denied for travel expenses paid or incurred for a spouse, dependent or employee of the taxpayer on business unless the:

a) Spouse, etc is an employee of the taxpayer, and

b) Travel of the spouse is for a bona fide business purpose, and

c) Expenses would otherwise be otherwise deductible by the spouse, etc.

The law allows for a deduction for the single rate for lodging and frequently there is no difference between one or two occupants.  Thus virtually the entire lodging expense for an accompanying spouse will be deductible.

When traveling by car, the law does not require the allocation because the spouse is traveling in the vehicle. Thus, if traveling by vehicle the entire cost of the transportation would be deductible. That would generally also apply to taxis at the destination.  The only substantial cost that is not deductible is the cost of the spouse’s meals which even if they were deductible would be reduced by the 50% rule.

My firm specializes in small business accounting and tax services in New Jersey and if you have any questions, please do not hesitate to contact my office at (732) 566-3660 or send me an email at Salim@OmarGroupCPA.com.

Instead, I’ll share with you an important tip relating to employees.  From my 15+ years experience being in practice and having worked with lots of business owners, many miss on this one.

Employees play such an important role in any organization that understanding this critical to building a strong team.

Let me ask you a rhetoric question: What do employees want most from working for you?

The answer isn’t just “more money.” The deeper reasons I share below are more important and useful to business owners:

* Fair treatment. Reasonable compensation is vital, but so is respect.

* Achievement. Employees want a chance to do good work; they want to feel proud of what they do and whom they work for.

* Camaraderie. Workers want an atmosphere where they can have fun and enjoy each other’s company as they work.

My CPA firm specializes in providing accounting and tax services to growing businesses in New Jersey. I welcome your comments and questions.  I can be reached at Salim@OmarGroupCPA.com.

I want to establish a traditional individual retirement arrangement (IRA) for my spouse and I need additional information. What is the most I can contribute to a spousal IRA during the tax year?

Here was my response to the doctor:

* If both you and your spouse work and both have taxable compensation, each of you can generally contribute to a separate traditional IRA. In addition, subject to certain limitations, if you file a joint return and the amount of your taxable compensation is less than your spouse’s taxable compensation, each of you can contribute to a separate traditional IRA based on your combined compensation, even if one of you has little or no compensation

* The amount that you can contribute to each IRA is subject to a limit that can be found in Publication 590.

* Your total contribution to both your IRA and the spousal IRA for the year is limited by certain factors such as your taxable compensation, contributions to a traditional and Roth IRA, and your age.

If you are not sure how much you should contribute towards your retirement plan for 2011 or 2012, feel free to send me an email at Salim@Omargroupcpa.com and I can help you through the process.

Thanks

Salim Omar, CPA

New Jersey CPA firm