September CFO Newsletter- Business Tips & Advice

Greetings and Happy Fall,

As we continue into Fall 2024, we hope to help you stay ahead in this dynamic business environment. This month, we're focusing on key tax/economic changes, business news, and strategic advice to help your business thrive.

In this issue, we'll cover:

• Economic Update
• Tax Update
• Financial Planning Tips
• Important Dates
• Valuable Articles

Important Dates

Federal Deadlines

September 15, 2024:

• Estimated Tax Payment: Third quarter estimated tax payments due for the 2024 tax year.
• Extended Partnership and S Corporation Returns: If your business filed for an extension, this is the final due date for submitting your 2023 returns.

October 15, 2024:

• Extended C Corporation and Individual Returns: Final due date for 2023 returns if you filed for an extension.

Economic Update

As we enter the final quarter of 2024, the global economy is contending with several key challenges that are impacting businesses and individuals alike. With inflationary pressures, rising interest rates, and geopolitical tensions, financial planning and budgeting have become even more critical. Below is a brief overview of the current economic landscape and considerations for your financial outlook.

Inflationary Pressures Continue

Inflation rates remain elevated across major economies due to lingering supply chain disruptions and persistently high energy costs. Despite central banks’ efforts to control inflation by raising interest rates, prices for essential goods and services have continued to rise, impacting consumer spending power and business profitability. It's important for businesses to review pricing strategies and manage operational costs carefully during these inflationary times.

Interest Rate Hikes Affect Borrowing

Throughout 2024, central banks, including the Federal Reserve, have responded to inflation by significantly increasing interest rates. While this is necessary to prevent runaway inflation, the side effect is that financing costs for both businesses and individuals have increased. Clients with loans or lines of credit should consider reviewing their debt structure and possibly locking in fixed rates before further increases occur.

Geopolitical Tensions Create Uncertainty

Ongoing geopolitical conflicts, particularly in Eastern Europe and the Asia-Pacific, continue to create uncertainty in global markets. Disruptions in trade and supply chains have contributed to price volatility in key commodities, which could lead to fluctuating costs for businesses reliant on international suppliers. Diversifying supply sources and closely monitoring market trends can help mitigate these risks.

Key Considerations for Accounting and Financial Planning

1. Cash Flow Management: With increased costs, maintaining healthy cash flow is crucial. Regularly review your cash flow projections to ensure you can meet obligations and invest in growth opportunities.
2. Tax Planning: Rising interest rates and inflation can have tax implications, especially around interest deductions and capital gains. It may be beneficial to review your tax strategy ahead of year-end to optimize your liabilities.
3. Cost Control: As inflation persists, it’s essential to reassess your operating expenses. Consider renegotiating contracts with suppliers, optimizing inventory levels, and finding efficiencies in your processes.

While the economic outlook may seem challenging, proactive planning and close attention to financial details can help safeguard your business during these turbulent times. We’re here to support you with strategic advice tailored to your unique situation.

Tax Update

Federal:

On the federal front, no major tax policy changes have been enacted in recent months. However, businesses should stay alert for possible legislative updates that could impact tax planning and compliance, especially with the Presidential election upcoming. Here are the key areas to watch:

1. Potential Adjustments to Tax Rates: While no immediate changes to federal tax rates have been passed, discussions around adjusting corporate and individual tax rates continue. It’s crucial for businesses and individuals to stay informed about potential tax reforms that may be introduced in late 2024 or early 2025.
2. Tax Credits and Deductions: There has been an increased focus on expanding tax incentives in key areas. Businesses should monitor potential updates to tax credits related to clean energy, technology, and research & development, as these could provide significant savings. Additionally, any modifications to deductions for employee benefits, like healthcare or retirement contributions, should be closely watched.
3. Regulatory Updates: The IRS continues to refine its compliance and audit procedures. It’s important to stay updated on new guidelines for electronic filing requirements, any changes to deadlines, and audit protocols to avoid compliance issues and late filing penalties.

North Carolina:

North Carolina has passed a new budget for 2024-2025 that includes several noteworthy tax provisions affecting businesses and individuals in the state:

Corporate Franchise Tax Reduction (Effective for tax filings in 2025): The state has approved a reduction in the corporate franchise tax, which will benefit many C corporations.

• Current rate: $1.50 per $1,000 of the tax base.
• New rate (starting in 2025): A flat fee of $500 for the first $1 million, plus $1.50 per $1,000 for any amount exceeding $1 million.

This change is designed to enhance North Carolina’s business-friendly tax environment, reducing the tax burden for many corporations and encouraging growth.

Standard Deduction Increase: North Carolina has also raised the state’s standard deduction for individual filers starting in 2025. This change will provide some tax relief to residents by allowing higher deductions against taxable income, particularly benefiting lower- and middle-income earners.

Recommendations for Businesses:

• Plan for Corporate Franchise Tax Changes: Ensure that your business is prepared for the 2025 corporate franchise tax changes. Review your company’s tax base calculations to understand how the new rates will affect your future tax obligations.
• Maximize Available Credits: Take advantage of any existing or upcoming federal and state tax credits, particularly those related to clean energy, R&D, and workforce benefits. Planning ahead can yield significant tax savings.
• Stay Informed: With potential federal rate adjustments and evolving state regulations, it’s crucial to monitor tax policy developments at both the federal and state levels. Consulting with us as your tax advisor regularly can help you navigate changes and optimize your tax strategy.

Difference Between a CFO, Controller, and Bookkeeping

To help you better understand how CFO Consultants can support your business, we’ve created the above infographic to illustrate the different levels of financial management within a business, dividing responsibilities across three key roles: CFO, Controller, and Bookkeeping. Each layer corresponds to different levels of responsibility, expertise, and leadership.

No matter what level of service you need, CFO Consultants can support your business.

1. Bookkeeping (Bottom Level)

• Focus: Day-to-day operational accounting tasks.
• Responsibilities:

This level is controller-led and deals with the more transactional, day-to-day aspects of accounting and finance.

2. Controller (Middle Level)

• Focus: Managing financial processes and reporting.
• Responsibilities:

The controller role sits between the day-to-day operations and strategic financial leadership, focusing on more advanced financial reporting and process management.

3. CFO (Top Level)

• Focus: Strategic planning and high-level financial oversight.
• Responsibilities:

This level is CFO-led, focusing on the long-term financial strategy and providing leadership at the executive level.

Summary:

The structure moves from bookkeeping, which handles the foundational financial operations, up to the controller, who manages reporting and processes, and then to the CFO, who leads strategic financial planning and overall business direction. The arrows indicate a flow from the foundational bookkeeping tasks to higher-level strategic and leadership tasks as you move up the pyramid.

Investing Advice

There can be confusion and uncertainty around the type of retirement plan a business owner should have in place and offer to employees. Here’s a few thoughts on the 3 main types of retirement plan available and some of the pros and cons of each.

This simplified chart can help get the wheels turning on which kind of retirement plan may be right for you and your business. Depending on your circumstances, one plan may be more appropriate and have more upside than the others.

Talk with your CPA, CFO, or Financial Advisor about the plan that might work best for you. The bottom line: businesses with retirement plans will reduce their tax burden and reduce the turnover of their key employees.

By Nathan Cherry at Fidelis Financial- nathan@fidelisfinancial.us

New & Valuable Articles

1. 5 Signs It’s Time to Outsource Your Bookkeeping
2. Time Management Hacks for Busy Entrepreneurs
3. What is a Good Gross Profit Margin?  

New & Valuable Videos

1. Powerful Interview With an Insurance Risk Expert
2. 5 Tips for Small Business Owners
3. What Does a Fractional CFO Do?
4. Are all accountants the same?
5. Why Succession Planning Matters
6. Why I love consulting for clients!

Let’s make this a great second half of 2024!

Ben

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