Financial Literacy For Business

Financial literacy is a term that has been used quite a bit since the financial crisis, which has left an indelible mark on the millennial generation that is rapidly becoming the largest group in the workforce.

Understanding the ramifications of financial literacy and personal finance are clearly important themes, but another aspect of financial literacy is often left unexamined. Small and medium size businesses form the backbone of the national economy and the economy in New Jersey. Either as stand-alone entities operating across the state, or as businesses that are embedded into supply and support chains for the numerous multinationals located in the state, small and medium size businesses are an important economic force. The harsh reality is, however, that most new businesses fail within a few years of opening, and a primary reason for their failure is a lack working capital and funding. Financial literacy is undeniably linked to business strategy and business objectives – if entrepreneurs and business owners do not truly understand the financial ins and outs of business, they are much less likely to successfully achieve stated objectives.

pexels-photo-237675To do what any business owner wants to do, to focus on growing the business and providing top notch quality to customers, the money has to be right. Getting the money right, however, is not something that will just take care of itself; it requires work and an understanding of what needs to be done. The impact of financial literacy on your business is not an abstract concept from a book. Obviously, every business and every market is different, but there are several concepts and tactics that can be used to make sure that the business has its money in the right place. Working with a financial professional familiar with the business is a great start, but the driving force must be the entrepreneur or business owner.

The first thing to understand, as it connects financial literacy and business strategy, is that income is not the same as cash flow. Income is an accounting concept, and as a CPA, I know that there are specific ways to differentiate income from the cash flows entering and exiting the business. For a business, cash flows are the most important financial metric that should be tracked – without being literate in cash flow, the business will not be able to grow and succeed. Since virtually everyone has a smartphone, and since with every smartphone, there are any number of apps, this is an opportunity to leverage technology for productivity. Snap-chatting is certainly important, but there are apps and tools that you can and should put on your phone and tablet to manage business. Many are available free of charge, and there are apps to help small business owners track everything from rental payments to inventory levels – and there is no reason to not leverage these tools.

The second thing to understand, and not reliant on technology, is that any business must have a financing plan in place, and this links directly back to the connection between strategy and financial literacy. Every new idea, product, website, app build-out, or services in new markets requires funding to support these initiatives. This is where financial literacy, business planning and strategy really are meshed together; without understanding the financing resources and tools available to the organization, the leaders of the organization will not be able to execute their goals and plans. There are obviously financing options that include selling ownership stakes in the business, and borrowing money, but there are new options starting to influence the business landscape. Crowdfunding, and raising capital on Kickstarter are just two of the high-profile options that have recently emerged as viable options. Understanding the opportunities and implications they have for the organization, both strategically and financially, are critical for entrepreneurs and business owners to understand.

business-cash-coin-concept-41301Third, and lastly, is the importance for business owners to have the confidence and ability to articulate the financing requirements and objectives for the business. The ability to articulate and explain the driving needs for financing, and financial implications of proposed business objectives will make doing business with external partners simpler. In addition to explaining the goals and financial framework of the business, the objective presentation of business goals, capital needs, and the uses of that capital will make obtaining that capital easier. Instead of feeling like the contestants on Shark Tank, often caught unaware of just how much capital they truly need to fund their business goals, entrepreneurs with a firm grasp of both their business strategy and financial literacy will be in a strong position to negotiate and obtain financing.

Financial literacy is important, good for your personal finances, good for business, and the tools are available to help any entrepreneur achieve improved business success. Resources include CPAs, certified financial professionals, and freely created and vetted resources such as //

The time to start is today, and your business will do better for it.

Business Tune-up: The Three Essentials

Working exclusively with closely-held companies provides a perspective that can benefit other business leaders in similar circumstances. If your company is underperforming, look inside and outside for clues to addressing these challenges. Most external issues concern the obsolescence of the offering, changes in the way customers buy the offering, or the strong economic forces of a consolidating industry. A good example of consolidation, combined with changing buy patterns, might be car insurers like GEICO grabbing lots of online customers that were once the domain of a neighborhood agent.

External challenges are generally beyond the control of the business. But, internal matters, when addressed early can improve the outlook rather quickly.  A growth or turnaround plan differs only in urgency.

Underperforming companies are confronted by operational deficiencies, have culture issues, or they lack a sufficient system for customer finding. At the core of most complaints from owners or business leaders about their operations, is that one or more of the three fundamental systems is operating ineffectively.

What’s your problem?

  1. Operational deficiencies – Consider the fact that customer satisfaction is the most important key to longevity. Your marketing sets expectations that the other parts of your enterprise must be able to bring to life. Consistently satisfying customer expectations depends on strong systems and dedicated people.

As competing these days is like an extreme sport, we are all typically up against really good competitors. Tackling operational weaknesses bends the satisfaction meter in your favor. Assess your internal structure like a franchisor might; qualifying every step and procedure in pursuit of the most efficient protocols.

  1. People problems – Your people dictate whether you fly high, or crash and burn. The “rank and file” wants to be led. Owners may believe that employees embrace the goals and feel invested in the organization, but most really don’t. Lead with a regular drumbeat of encouragement and personal interest.

Think like the coach of a professional sports team. Make sure each individual knows what is expected of them and how their work contributes to the goals of the organization. Hire the right people using clear criteria for job descriptions. Let go of underperformers while always on the lookout for talented people.

  1. Obsolete customer finding methods – No business lasts very long without a robust system for attracting and retaining customers. Continuing to employ grandpa’s old methods, or waiting for customers to call, “like they used to,” are not the cornerstones of a sustainable process.

Nail your value proposition, build on what satisfied customers might say about you and “stimulate” those with sales responsibilities. Develop a killer database/CRM of prospects, customers and friends of your company. Stay in touch with your “constituents” regularly and be the resource they come to rely upon.

Note to business owners – The leader is usually the one that has to change the most. As you address the 3 essentials consider what will be required of you. Leading will be your most important role. Ask yourself, how much personal change is needed and if you are prepared to see it through.

Steve Lauterback and his associates have worked with owners of privately-held companies to build robust business development platforms, optimize operational systems and improve the business culture. Our takeover partner option may be the right solution for your underperforming company.


New Jersey Business Action Center Awarded $750,000 to Help Businesses Go Global

Are you a business owner who has already realized the potential of a global market, or an entrepreneur seeking to increase sales and profit by taking your business worldwide?

The New Jersey Business Action Center (NJ BAC) has been awarded a $750,000 State Trade Expansion Program (STEP) grant from the U.S. Small Business Administration to help NJ businesses gain access to foreign markets. This award is a 51 percent increase from last year, meaning more funds are available for qualifying businesses.

Now in its fourth year, the NJ STEP program has helped businesses like Fornazor International. The Hillside-based specialty animal feed blender supplies a wide range of ingredients to the export market. Through a NJ STEP grant, the company was able to attend two trade shows in Dubai and successfully grow its business.

“The trade shows have had a tremendous impact on our business. Thanks to funds from the NJ STEP grant, we project a million-dollar revenue increase over 18 months,” says Fornazor’s Business Development Manager, Susan R. Jay. “All businesses should be aware of the financial support the government offers. There is nothing difficult about the record keeping involved.”

Another example is International American Supermarkets (IAS), based in Piscataway. The company is a dynamic food and beverage export management organization representing a diverse portfolio of recognized U.S. brands in overseas markets. Through funds awarded by the 2015 NJ STEP grant program, the company was able to attend trade shows in Shanghai, China, and Bogota, Colombia.

“Our business is 100% exports, so for us, growth comes from entering markets we are not currently in, like China and Latin America,” says Suhayl Sauma, CEO of IAS. “There is a real market looking for our products overseas and the NJ STEP grant can give local businesses the opportunity to explore that.”

In addition to trade show expenses, an NJ STEP grant can also cover costs to translate websites and participate in trade missions, as well as fees for U.S. Department of Commerce resources.

Since 2013, the New Jersey Business Action Center has helped 138 New Jersey companies qualify for NJ STEP grants in the amount of $976,473. As a result of this assistance, these firms have export sales projections of over $310 million in goods and services to over 45 countries.

The goal is to provide NJ companies with the resources and the knowledge needed to succeed when entering the global marketplace. This year’s increase in funding will allow the BAC to help additional companies realize export opportunities.


Pinpoint Document Scanning: An Essential in Today’s Fast-Paced Office Environment

Ever since the business world has gone digital, the need to scan/capture, store, recall, reprint, send, track vital sensitive information and make secure that information has grown exponentially. Moreover, with the onset of smart phones, tablets, laptops, and the advent of the “virtual office,” this task becomes even more important from both a company and an individual worker’s efficiency and security point of view.

The Paperless Office

This has been an elusive concept for the past 20 years bSignpost "Paperless vs. Less Productivity"ut digital scanning is working towards making it more of a reality each day. Document scanning is now one of the most important processes in offices today.  Bottom line, it works to eliminate the old filing cabinet system that takes up enormous amounts of space and avoids the problems of people taking files, altering them or not even returning them.  It also allows multiple people to view/share information simultaneously. And finally, it may be an important piece of your disaster recovery strategy. This system is greatly simplified and enhanced by utilizing a “Document Management” or “Content Management System Library.”

Document Capture While Scanning

Scanners embedded with an intelligent capture application firmware can greatly aid document indexing by reducing the time consumed scanning documents and then manually entering data before filing them. Auto indexing software expedites cataloging document images so they may be found again logically and immediately. This can be done by using Bar Code Recognition, Optical Character Recognition or full page Optical Character Recognition software. These will then auto file the document image(s) where they belong automatically.

The Continued Importance of Maintaining Hard Copy

There’s just no getting around the fact that when the business world has become so reliant on digital data, the looming threat of cyber data breaches and unexpected technology “crashes” demand hard copy backups. We also must mention their possible importance as a needed indisputable proof source in our hyper-litigious society. From what I’m regularly told by our clients, hard copy is their “preferred” reading source compared to the computer display screen.  Furthermore, it is the ultimate means of disaster recovery when your originals need to be pulled from a long-term storage location in response to an unexpected fire, flood, hurricane, or mold destruction. Hard copy is not going away anytime soon, but it doesn’t have to be sharing expensive office space alongside your staff.

Electronic Office Systems of Fairfield, New Jersey will be more than happy to explain today’s scanning technologies and how they can help make your company more efficient, productive and competitive with your peers.



Section 2704: Major Changes on the Way?

A Brief History of Section 2704

In 1990, Congress enacted section 2704 of the Internal Revenue Code, titled “Treatment of Certain Lapsing Rights and Restrictions,” in an effort to limit the valuation discounts for gift and estate tax purposes applicable in the case of intra-family transfers of interests in family-owned, or “closely held,” corporations and partnerships. Here is what it said:

  • Under section 2704(a) if an individual and the individual’s family hold voting or liquidation control over a corporation or partnership, the lapse of a voting or liquidation right shall be taxed as a transfer subject to gift or estate tax.
  • Under section 2704(b) when an interest in a family-owned corporation or partnership is transferred within the family, if a restriction limits the ability of the corporation or partnership to liquidate and that restriction can be removed by the family, that restriction is disregarded in valuing the transferred interest for gift or estate tax purposes.
  • Under section 2704(b)(4), Congress authorized Treasury to issue regulations providing “that other restrictions shall be disregarded in determining the value of the transfer of any interest in a corporation or partnership to a member of the transferor’s family if such restriction has the effect of reducing the value of the transferred interest for purposes of this subtitle but does not ultimately reduce the value of such interest to the transferee.”

For the last decade there has been an expectation of change to these regulations which were first adopted into law more than 25 years ago.

So What’s Finally Happened?

On August 2, 2016 newly proposed regulations were offered that would put into effect major changes to the valuation of interests in many family-controlled entities for estate, gift, and generation-skipping transfer tax purposes which would result in treating the lapse of voting or liquidation rights as an additional transfer while disregarding certain restrictions on liquidation in order to determine the fair market value of a transferred interest.

What Will the Changes Look Like?

As published by the IRS in the Federal Register on August 4 under 81 Fed. Reg. 51413-51425, if and when finalized, the regulations would:

  • Treat as an additional transfer the lapse of voting and liquidation rights for transfers made within three years of death of interests in a family-controlled entity, thereby eliminating or substantially limiting the lack of control and minority discounts for these transfers
  • Eliminate any discount based on the transferee’s status as a mere assignee and not a full owner and participant in the entity
  • Disregard the ability of most nonfamily member owners to block the removal of covered restrictions unless the nonfamily member has held the interest for more than three years, owns a substantial interest in the entity, and has the right, upon six months’ notice, to be redeemed or bought out for cash or property, not including a promissory note issued by the entity, its owners, or anyone related to the entity or its owners
  • Disregard restrictions on liquidation that are not mandated by federal or state law in determining the fair market value of the transferred interest
  • Clarify the description of entities covered to include limited liability companies and other entities and business arrangements, as well as corporations and partnerships

The Impact on Your  Business

When the regulations are finalized, if they are at all similar to the proposed regulations, taxpayers in corporations and partnerships, as well as in limited liability companies and other entities and business arrangements, will have lost a significant estate planning technique, and the tax cost of transferring interests in family-owned entities will increase.

Here are some of the areas of key concern:

  1. Lapse of voting or liquidation rights
  2. Disregarding certain restrictions on redemption or liquidation
  3. Restrictions imposed or required by law

Now What?

It is anticipated that there will be challenges to the proposed regulations being adopted in their present form raised at the public hearing scheduled for December 1, 2016 – especially because of the broad sweep of the proposed regulations. Therefore it is a safe guess that the earliest the regulations will not become final sometime in 2017.

So if you are considering transferring interests in family-controlled entities (that are not controlling interests and do not have liquidation rights) you might consider making the transfers soon.  There are, as always, mitigating circumstances that would need to be discussed by you and your trusted advisors to determine what is best for your company and your situation. To be prudent, you should always give careful consideration to your company’s existing and future operating agreements and other governing documents.


Photo Credit: MPI