September 30, 2019

What Employers Look for in Recent Accounting Graduates

Accounting is an extremely competitive industry, especially for those fresh out of college. Accounting firms are always trying to recruit the best up and coming accountants to grow their staff. Accounting graduates may have certain firms that they are interested in, or may just be waiting for the best offer to come their way. Even though firms are always looking for emerging accountants, they won’t choose just any graduate. There are specific skills and attributes that many firms look for.

Plans to Pass the CPA Exam

Many firms want students who have already completed their 150 hours by the date of hire. Other firms expect new associates to complete the CPA Exam within the first one or two years of employment. It’s important that recent graduates know what their hour status is and if/when they will be sitting for the exam. Keep in mind that some firms offer bonuses to associates who have already passed the exam or pass it within a certain amount of time after their hire.

Comfort with Technology

We’re in the age of ever-evolving technology. Accounting graduates need to have at least a basic understanding of Excel and the ability and willingness to quickly learn new software programs. Many firms are now looking for candidates with experience in data analytics. This area of technology will become more popular in the coming years, and it’s in every student’s best interest to take classes in and outside of school in this area to be a more competitive applicant.

Strong Communication Skills

The ability to speak and write clearly and effectively is vital for most careers, but especially accounting. Interpersonal and customer service skills help new employees create relationships with their clients and their team.

A Diverse Resume

The resume is the first thing a recruiter sees about an applicant. Firms are looking for accounting graduates that have some work experience, involvement on campus, volunteer work and more. The impressive GPA is not going to cut it, because it doesn’t make an applicant stand out. Diverse experience and involvement help show that an applicant has experience interacting with different people in different situations, which shows important soft skills that translate to the accounting field.

A Team Player

Teamwork makes the dream work. It’s rare that an accountant wouldn’t have to collaborate with others in their firm. If a recent graduate has never worked in a team situation, whether in school, sports, or clubs, they are missing a necessary skill for the job.

Ready for Office Culture

Whether this comes from previous office experience, or the way a candidate carries themselves in an interview, the maturity and manners required in office culture is a big plus for a recent graduate that wants to stand out amongst their peers.

Soft Skills

Non-technical skills such as organization, time management and integrity are the extra skills that round out a candidate. Again, the impressive GPA won’t cut it if an applicant is late to the interview or doesn’t answer an email because their inbox is a mess. Remember to highlight these skills in your resume or interview as well.

Appropriate Social Media Presence

Last but certainly not least, firms and their recruiters will look at a recent graduate’s social media accounts to make sure the applicant doesn’t have any inappropriate or alarming posts. Once someone is hired, they represent the firm and add to the reputation of the firm. Any social media posts that are in poor taste will certainly knock a candidate off the list of consideration.

Interested in learning about the open positions at Anders? Check out our current openings.

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September 24, 2019

Charitable Giving is Down Following Tax Reform: How Not-for-Profits Should React

The Tax Cuts and Jobs Act (TCJA) significantly changed the tax benefits of donating to your favorite charity starting in 2018. Now that we’ve seen a full year with the new provisions, not-for-profit organizations are taking a look at the effects on charitable giving.

Tax Law Changes

The deduction for donations increased to 60% of AGI under the TCJA, but the standard deduction nearly doubled to $24,000 for a married couple. Combined with new limits on other itemized deductions, this provision caused millions of taxpayers to file using the standard deduction instead of adding up all tax breaks from mortgage interest payments, state and local taxes and charitable gifts, like they had in the past. The estimated 88% of taxpayers who took the standard deduction in 2018 no longer reap the tax benefits of writing off their donations.

The Impact on Charitable Giving

According to Giving USA, charitable giving declined overall by 1.7%, adjusted for inflation. Individual charitable donations, which made up about 68% of all giving in 2018, declined by an estimated 3.4% last year, adjusted for inflation. Corporate giving also fell an estimated 1.7% after inflation to $427.7 billion. While individual donations account for more than 2/3 of all giving, the increase in donations from foundations helped offset some of the losses.

In 2018, charitable giving amounts declined in many organizational sectors, including religious, education, foundations and public-society benefit organizations. Giving stayed relatively flat in human services, health, arts, culture and humanities organizations. Despite the declines and flat percentages year over year, a few sectors did see increases. International affairs organizations increased by 7%, adjusted for inflation, and environmental and animal organizations saw a 1.2% increase in charitable contributions, adjusted for inflation.

What This Means for Not-for-Profits

Not-for-profits that rely on individual donations will need to find new, more creative ways to incentivize them to continue giving. One way is the use of Donor Advised Funds (“DAF”). DAFs are increasing in popularity and allow donors to use a strategy called “bunching deductions. Donors “bunch” as much as possible in a given year, thereby qualifying for the itemized deductions. Then, on subsequent years, they do not have the same or any deductions, but they still will have the new, higher standard deduction. The charitable giving that goes into the DAF gets distributed to the charities over time in accordance with the donor’s wishes.

Another strategy that works with some older donors is to encourage them to make charitable donations from their Required Minimum Distributions (RMDs) or from their IRA directly to a charity. Some taxpayers prefer this as they are not taxed on these distributions, and the charity still benefits.

Not-for-profits should evaluate their 2019, 2020, and beyond budgets to see if further reductions may be necessary if the giving decline continues.

To learn more about how your organization can encourage tax-advantaged charitable giving, contact an Anders advisor or learn more about the Anders Not-for-Profit Group.

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September 17, 2019

Powerful Ratios to Start Tracking Before You Sell Your Business

Baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try. Businesses utilize their debt-to-equity as a leveraging ratio. Acquirers also like tracking ratios and the more ratios you can provide a potential buyer, the more comfortable they will get with the idea of buying your business. If you’re planning to sell your company one day, below is a list of ratios to start tracking in your business now.

1. Employees per square foot

By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space.  Commercial real estate agents use a general rule of 150–200 square feet of usable office space per employee.

2. Ratio of promoters and detractors

Bain & Company and Satmetrix developed the Net Promoter Score® methodology, which is based around asking customers a single question that is predictive of both repurchase and referral. Here’s how it works: survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend (insert your company name) to a friend or colleague?”  Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters”. Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score. Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters. The average company in the United States has a Net Promoter Score of between 10-15%.

3. Sales per square foot

By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.

4. Revenue per employee

Payroll is the number-one expense for most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2017 report, Business Insider analyzed technology companies. Apple enjoys one of the highest revenue-per-employee ratios, at $1,859,000 per employee, followed by Facebook at $1,621,000 and Google at $1,253,000. The benchmark for this ratio can vastly change depending on the industry of your business. More traditional people-dependent companies may struggle to surpass $100,000 per employee.

5. Customers per account manager

How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration, such as slowing sales or a drop in customer satisfaction. That’s when you know you have probably pushed it a little too far.

6. Prospects per visitor

What proportion of your website’s visitors “opt in” by giving you permission to e-mail them in the future? There is no such thing as a typical opt-in rate, because so much depends on the source of traffic. The key is rather than benchmarking yourself against a competitor, you benchmark against yourself by carrying out tests to beat your site’s current opt-in rate. You could reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero.

7. Prospects to customers

Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.You should monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio. The trick is to establish your benchmark and tinker until you can improve it.

Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes. Learn more about Anders Business Transition Planning Services, or contact an advisor to discuss how we can help your business become more marketable.

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September 12, 2019

The Basics of 529 Savings Plans

As tuition costs continue to rise, contributing to an IRS 529 plan can help offset future expenses. Before enrolling in a 529 plan, it’s important to know who can contribute, how you can use the funds and benefits of the plan.

Who can contribute to a 529 plan?

Almost anyone can open a 529 plan account. Parents and grandparents can open one for their child or grandchild, but other relatives and even friends can open accounts. The account owner will make all decisions associated with the plan such as the investments and assigning beneficiaries. The beneficiary can be a child, grandchild, friend, or even yourself. Per the IRS, to be an eligible beneficiary, the individual must be a U.S. citizen or resident alien with a valid social security number or other taxpayer identification. If the current beneficiary decides to not continue pursuing higher education, or they no longer need the funds in the 529 Plan, the beneficiary may be changed to an eligible family member who can then benefit from the savings plan.

What expenses and schools are eligible?

Money in a 529 plan may be withdrawn tax-free to pay for qualified education expenses at any time. Eligible expenses include:

  • Tuition for elementary, secondary and higher education
  • Room and board for higher education
  • Books for higher education
  • Supplies for higher education
  • Fees for higher education
  • Computers or computer software used while enrolled in an eligible higher education institution

Eligible education institutions include:

  • Elementary and secondary schools (new under the Tax Cuts and Jobs Act)
  • Post-secondary trade schools
  • Vocational schools
  • 2 and 4 year colleges
  • Postgraduate programs

529 plans are typically sponsored by an individual state. Missouri has their own called the MOST 529 College Savings Plan. Although each 529 Plan is state sponsored, the beneficiary may attend any eligible education institution abroad or in the United States.

New Law

Under the Tax Cuts and Jobs Act, 529 plans are available for Kindergarten through 12th grade expenses, in addition to post-secondary education. Distributions for elementary or secondary school are limited to $10,000 per beneficiary per year. There are no annual limits for post-secondary education expenses. If a child attends a public, private or religious school that charges tuition, the child can take distributions from the 529 plan to cover these expenses up to the annual limit. These distributions, including earnings, are tax-free. This is a great way to help cut education costs.

What are the tax benefits of a 529 plan?

Tax-Free and Income Tax Deduction

A 529 Plan can be utilized as a great tax saving tool. Earnings within the plan grow tax deferred and withdrawals for qualified expenses are tax-free. Some states, such as Missouri, also allow contributions to be deducted on a state income tax return as long as the account owner is a resident of that state. Missouri allows a deduction of up to $8,000 for single filers and $16,000 for married joint filers.

Gift Tax

There is also a federal gift tax incentive for 529 plans. An individual can contribute up to $14,000 per year as a single filer and $28,000 per year if married filing jointly without triggering federal gift tax. Another option is to combine 5 years of gifts into one year and contribute a larger sum of $70,000 as a single filer or $140,000 per beneficiary if married filing jointly. This lump sum would avoid gift tax by being treated as being contributed across a five year span. If additional gifts are made to the beneficiary during this five year period, those gifts may incur a gift tax.

Can you use 529 funds for non-qualified expenses?

If a withdrawal is made for non-qualified expenses, the account owner may have to pay state income taxes on a portion of contributions that were previously deducted on the state return. The earnings that are withdrawn may be subject to a 10% federal tax penalty in addition to federal, state, or local income taxes.

To learn more about benefits and enrolling in a 529 plan, contact an Anders advisor.

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September 10, 2019

Startup Fundraising 101: Convertible Notes

Deciding how to finance your high-growth startup company is important. Most startup companies rely on outside sources of financing, and there are many forms of capital that investors can provide. One of these forms is a convertible note.

What is a Convertible Note?

Convertible notes are a hybrid between debt and equity, with the initial structure being a debt investment. These notes have a provision that allows, at a later date, the principal and accrued interest to convert into an equity investment. This structure is beneficial because the original investment can be done faster and is cheaper due to lower legal fees, but allows the investor to receive the economic benefit of an equity investment.

Components of Convertible Notes

There are several components that make up a convertible note. These components include:

Maturity Date: Convertible notes have defined maturity dates, which makes the note due to the investor if the note has not been converted to equity. In some cases, notes are automatically converted at maturity.

Interest: Like every other debt investment, the funds in a convertible note produce a rate of interest that accrues over the life of the note.

Conversion Provisions: The most common method of conversion happens when qualified financing occurs. Qualified financing is when a certain threshold is exceeded by a subsequent equity investment. At this moment, accrued interest plus principal converts into shares of the new equity that was just sold. This typically provides note holders with more shares than they would have received if they waited for the equity round of financing.

Conversion Discount: Investors usually receive a discount on the price per share of the new equity purchased after a qualified financing event.

Valuation Cap: A hard cap on the conversion price for noteholders, regardless of the price per share on the next round of financing. Conversions that occur automatically on the maturity date are usually lower than the valuation cap.

Pros and Cons of Convertible Notes

Pros:

  • Since seed-stage companies do not have enough operating experience to properly evaluate the company, convertible notes avoid placing a valuation on the company
  • Good bridge-capital financing options
  • Less expensive and faster to execute because they are simpler to legally document

Cons:

  • Companies could be pushed into bankruptcy if future equity rounds do not occur because the note will still be redeemed as debt
  • Price expectations from valuation caps could complicate future equity rounds
  • To avoid the issue mentioned above, terms and conditions can be set for convertible notes. This may defeat the purpose of the convertible note and end up taking as much time and effort as equity financing

Convertible notes encompass the best attributes of both equity and debt investments. If utilized properly, they can be a powerful method to raise capital, but it is important to understand all of the implications of convertible notes. Startup companies should weigh all of the pros and cons of all investment options to determine which one is best for fundraising. Contact an Anders advisor with questions on how convertible notes can help fund your startup company, or learn more about the Anders Startup Group.

Learn about other types of fundraising options in our post on Startup Fundraising 101: Fundraising Options.

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September 6, 2019

New Phone Scam Impersonating the Social Security Administration

The IRS has issued a consumer alert regarding a new phone scam in which a recording pretends to be calling from the Social Security Administration (SSA). The recording threatens to suspend your social security number if you do not respond. The scammers are so advanced that the caller ID can sometimes display the Social Security Advisory Board’s telephone number, or may try to spoof numbers with your local area code to hide their location.

What to do if You Receive a Call from the “Social Security Administration”

It’s important to beware of these types of calls and recognize that they are scams and to hang up the phone or don’t pick up the call. 

Here are some important facts to know and share:

Your Social Security number cannot be suspended, revoked, frozen, or blocked. It anyone tells you that, hang up immediately.

Government agencies, including the IRS, SSA or Medicare will NEVER ask you to wire money, send cash or buy gift cards as a form of payment.

SSA employees would never threaten to have you arrested or send the police to your home.

You never have to verify your Social Security number to someone who makes an unsolicited call to you.

The SSA will only call you if you’re working with the agency on an issue or claim. To make sure it’s truly the SSA calling you, hang up and call SSA’s main number at (800) 772-1213 (TTY 1-800-325-0778).

The IRS reminds taxpayers to guard against all sorts of scams that continually change. Visit Tax Scams and Consumer Alerts on IRS.gov to stay updated on tax scams.

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September 5, 2019

Anders Partner Dave Finklang Named a Best St. Louis Accountant

Dave M. Finklang, CPA/CGMA, MBA, tax partner at Anders, has been named a Best Accountant in St. Louis by Small Business Monthly (SBM). Each month, SBM polls readers and asks them to help identify the best in the region in a particular industry. Finklang was nominated and selected for the annual list of Best Accountants for St. Louis business owners. The list of 2019 Best Accountants can be found in the October issue of SBM.

About Dave Finklang

Finklang has wide-ranging, specialized experience in tax planning and compliance, startup services and consulting, and accounting services. As the founder of the Anders Startup and Entrepreneurial Services Group, Finklang particularly enjoys working with entrepreneurs and emerging companies by helping them raise capital, structure their businesses, implement accounting systems, and minimize their tax burdens. He also advises individuals, family and closely-held businesses, as well as their owners, on tax-saving strategies and tax planning. Finklang works with technology and software companies, manufacturers, distributors, and commercial real estate companies. Before joining the CPA profession, Dave was a commercial airline pilot. This experience helped him build a professional skillset that has allowed him to better serve his clients and his community. Dave was named the youngest 2016 40 Under 40 by the St. Louis Business Journal.

View the full list of St. Louis Small Business Monthly’s Best Accountants.

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September 3, 2019

Top Mistakes to Avoid to Maximize the QBI Deduction

The 20% Qualified Business Income (QBI) deduction was arguably the most complicated change taxpayers faced during the 2019 tax filing season. Coincidentally, it happened to be an area where we identified significant opportunities for clients to save tax dollars in future years by tweaking situations to maximize the benefits of the QBI deduction.

The Basics of QBI

The QBI deduction is fairly straightforward for taxpayers with taxable income below $315,000; the deduction is a flat 20% of flow-through income not to exceed 20% of taxable income. When a taxpayer’s taxable income exceeds $315,000, the 20% QBI deduction is limited by the greater of 50% of allocable W-2 wages or 25% of allocable wages plus 2.5% of the unadjusted basis of income-producing assets (UBIA). For small businesses, there’s generally not a whole lot of UBIA planning that can be done to substantially increase the QBI deduction, but we have seen significantly more planning opportunities as it relates to increasing the wage base.

Don’t Miss Out on the QBI Deduction

Below are a few scenarios that could result in lower than optimal QBI deductions.

Sole proprietorships and partnerships with a limited number of employees

Because sole proprietors and partners in partnerships don’t pay themselves a wage, they often miss out on some of the QBI deduction because 50% of their allocable wages from the business is less than 20% of their total income.

For example, a partnership with $750,000 of net taxable income and $100,000 of wages would be limited to a QBI deduction of $50,000 ($100,000 x 50%) rather than $150,000 (750,000 x 20%). Business owners in this scenario should weigh the pros and cons of electing to have their business taxed as an S Corporation and paying the owner(s) a salary to maximize the QBI deduction.

S Corporations with minimal shareholder wages

Many businesses are formed as S Corporations to avoid the excess payroll taxes shareholders would otherwise pay as sole proprietors or partnerships. However, oftentimes S Corporation shareholders keep their salaries artificially low, which compromises their ability to maximize the QBI deduction. In addition to reasonable compensation considerations, taxpayers need to weigh the cost of additional payroll taxes on wages versus the QBI deduction and possible retirement planning benefits associated with increasing shareholder wages.

C Corporations

C Corporations enjoy a flat 21% tax rate, but are still subject to a second layer of tax on dividends and are not eligible for the 20% QBI deduction. While a C Corporation is advantageous in many situations, the effective tax on C Corporation income after considering dividends may very well be higher than the tax paid on flow-through income at the shareholder level. Taxpayers should weigh the pros and cons of changing their corporate structure to remain as tax efficient as possible.

Now that the year is well underway, it’s time to do a deep dive into the tax planning opportunities that can make next April less painful. Contact an Anders advisor to discuss opportunities to maximize the QBI deduction.

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