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Pro Tip

glevi Blog Budgets, Cash Flow, planning, pro tip

Growth through expansion into new geographical locations is exciting, it is also expensive! Focusing on top line sales growth in this situation is common, but cash forecasting to ensure sufficient liquidity is maintained is essential. Without this part of the process the business can be put at a high risk of experiencing a cash shortfall, despite those added sales. Make sure that liquidity planning is not left out of your 2025 budgeting and strategic planning process.

Cost Segregation: A Tax-Saving Strategy

glevi Blog Strategy, Tax

Depreciation is a reduction in the value of an asset over time resulting from wear and tear, deterioration or obsolescence. The tax law acknowledges depreciation by allowing taxpayers to take deductions over a period of years. Generally, the number of years over which the property can be depreciated depends on the category into which it falls under the Modified Accelerated Cost Recovery System (MACRS), which applies to business assets acquired after 1987.

The law also permits certain assets to be further broken down into their components. For instance, the category “landscaping” can be refined as “bushes, shrubs and retaining walls.” Categorizing assets in this way allows each element under landscaping to have a different depreciable life. Using this detailed method to categorize assets can result in tax savings because assets have greater value in the first few years after they are acquired.

Cost Segregation Studies

This is the essence of cost segregation studies. They identify and reclassify personal property assets that are grouped with real property assets to shorten their depreciation time for tax purposes.

The main benefit of conducting a cost segregation study is that the business may be able to reduce its tax liability and taxable income, which can mean increased cash flow. There are a number of other advantages as well:

Assets can be depreciated over a shorter time, resulting in lower tax payments. This, in turn, can free up cash that can be used to meet the business’s other needs.
Cost segregation studies can establish the depreciable tax value of certain building components that are likely to be replaced in the future.
They can also identify opportunities for other tax credits and deductions.
It may be possible to recapture unrecognized depreciation for older properties in the year the cost segregation is completed.
Cost segregation study documentation creates an audit trail that can prove invaluable in the event of an IRS audit.

Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act of 2017 expanded the benefits of cost segregation studies. Among the most notable changes are the following:

The expansion of property qualifying under IRC Section 179, which allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. The changes apply to assets placed in service in tax years after 2017.
The rules for bonus depreciation have changed. A business must claim first-year bonus depreciation deductions for qualified property placed in service during the year unless it elects out by property class.
The same property may be eligible for both changes.

Despite these benefits, cost segregation studies aren’t appropriate for every business. There are downsides, including the cost of the study (especially for businesses that aren’t currently profitable), the possibility of triggering depreciation recapture (i.e., the amount of income that must be reported when the sale price of an asset exceeds its tax basis or adjusted cost basis) and understatement penalties for taxpayers that use cost segregation too aggressively (the penalties can be quite severe).

If you think you may benefit from a cost segregation study, the prudent thing to do is to minimize your risk by hiring a team that is familiar with how these studies are conducted and reported. Contact us to get started today.

5 Steps to Better Forecasting

glevi Blog Forecasting, Goals, Strategy

As businesses emerge from restrictions imposed due to the pandemic, they do not have a clear definition of “normal.” Whether the business was in an industry sector that thrived in the past year or one that struggled, it is almost certainly facing a radically changed landscape. Yet businesses must find a way to plan their two-to-five-year future.

Projections and scenarios are two techniques that provide better forecasting in this challenging, constantly changing environment. Being agile enough to make quick decisions is imperative.

Here are five steps you can take to make your forecasts as targeted as possible:

Set strategic goals, objectives and timelines. Understanding what people inside and outside the company want is key because it provides a framework to build on.
1. The company’s policy on whether to remain virtual or bring employees back to the office should consider employees’ preferences. If it does not, the response may be a higher turnover rate or the loss of key employees.
2. Similarly, understanding your customers’ value system contributes to how you approach them. A customer base that values great customer service has different needs than one that is price sensitive.
Use data to support the company’s goals, objectives and timelines. The company’s enterprise systems contain much of the necessary data. Using that data to set up a dashboard, or a series of dashboards, will let you monitor important indicators such as delayed delivery of critical raw materials.
Use metrics from social media and other marketing tools to help identify issues and problems. For instance, a retailer that sees complaints about shipping charges may choose to pick up the costs or set a dollar amount over which shipping is free to the buyer.
Do not ask for more data than you need for a particular purpose. For example, forecasting supply chain needs requires details, but forecasting receivables does not. Asking for unnecessary data can distract from what is really needed.
Use scenarios to help plan. It is impossible to plan for everything, but it is possible to envision what can be done to mitigate a situation where a supplier does not deliver as promised or a key employee leaves the company unexpectedly.

No one knows what the new normal will be or how it will evolve over time. Yet company leaders are charged with developing strategic plans for the future.

Businesses rose to new challenges quickly at the start of the pandemic, and some of the lessons learned from those challenges will carry over. Even though it is impossible to follow historical trends to anticipate when the pandemic will end, it is possible for company leaders to make the best possible decisions through value-driven forecasting. Baking the ability to monitor the right metrics into the firm’s daily activities will allow it to remain agile during these uncertain times.

5 Tips To Help Businesses Use AI

glevi Blog AI, Compliance, Security, Tech

Whether you could barely wait for artificial intelligence become mainstream or you are someone who dreaded that day ever since the inception of AI, the fact of the matter is that AI is here to stay. The technology is readily available to anyone who wishes to use it, including the general public.

But the main focus for you, as a business owner, should be how you are going to control the ethics and application of AI within your company. As you think about this, you should consider the effects on your brand and your company’s reputation if you fail to use AI wisely.

Five tips to guide you as you develop AI policies and procedures

Looking for guidance when it comes to using AI for business purposes? Here you go!

1. Always fact-check information outputted by AI tools

Take the time to check the facts and ensure that any AI-created content is truthful. AI tools can generate ideas and write copy for you, but these tools are not capable of fact-checking the content that they produce.

If you don’t look into the claims made by AI-generated content, you might end up publishing dishonest or untrue material that will negatively influence the public’s perception of your company, and that’s hard to come back from, so it’s best to avoid this outcome in the first place.

2. Analyze your company’s use of AI, both internally and externally

Make sure you review every AI-related system or process — both internally and externally — to keep everything under control. This includes an array of tasks regarding the algorithms backing AI tools.

When it comes to everything from testing and training to validating and updating AI tools, it’s important that you keep an eye out for conscious and unconscious human bias while you’re at it.

You should also communicate with your employees and provide them with ongoing training regarding AI tools, such as how to use them properly and what they can or cannot use AI tools for.

Monitoring data input and implementing data security measures are two other ways you can keep your company’s use of AI tools in check. Last but not least, make sure your business is in compliance with legal matters related to discrimination, bias, copyright law, intellectual property infringements and libel.

3. Monitor machine learning models and make regular adjustments

Monitor your AI tools, and adjust them as needed. Things are always changing, and if you don’t regularly update your company’s AI models, you could end up grappling with undesirable inconsistencies, which will result in devastating consequences.

4. Remain compliant with all AI-related rules and regulations

Stay in compliance with rules and regulations — both existing and pending — especially laws related to the jurisdictions in which your business operates.

5. Establish a standard of ethics for AI use

If you start using AI tools as part of your business, it is vital that you set ethical standards by which your AI tools must abide. Otherwise, failing to implement a formal code of AI ethics could pose problems relating to discriminatory practices

Four areas to pay close attention to

Among the many areas to keep in mind, these four are probably the most important:

Discrimination
Data privacy
Transparency
Human oversight

Discrimination

Given the nature of AI tools, bias can inadvertently be built into an algorithm. For example, facial recognition is a prime example of an AI tool that inherently incorporates bias.

While it may not seem dangerous to use discriminatory AI algorithms to recognize faces, biased AI systems can be used determine the level of health care that somebody receives, and this can result in seriously harmful consequences, especially in instances of implicit bias.

Data privacy

Even without the use of AI, policies and procedures pertaining to the protection of customer data are key, especially when it comes to how private information is collected, used and stored. However, this is just as important for scenarios involving AI tools.

An example of the implementation of a data privacy policy is notifying candidates or applicants that AI tools access the data they submit when responding to job function opportunities. That said, people who hold higher positions within your company — such as a supervisor — should be able to access more sensitive information, but other employees — such as customer service representatives — should not be able to, and this should be disclosed in the data privacy policy.

Transparency

They say honesty is the best policy, and while it may sound cliche, it still rings true, particularly when incorporating AI in the workplace. It’s imperative that you notify clients and consumers that AI is utilized by your company. As an example, allowing access to information about the AI’s decision-making process is a way of being transparent with your clientele.

Human oversight

Just like humans, AI makes mistakes. This essentially stems from the fact that AI tools can only work with preexisting information. In other words, AI is merely capable of gathering and organizing information using its preprogrammed algorithm.

Likewise, AI cannot determine the difference between factual information and fictitious details. So while AI tools are very advanced and reliable, they should be monitored via human oversight. This is the best way to ensure that the information outputted by AI is true, honest and in alignment with your brand.

Pro Tip

glevi Blog pro tip

Very often, staffing decisions are made in a reactionary way that ultimately does not benefit the organization. Alternatively, staffing decisions can be made proactively and with a goal of increasing accountability amongst team members. Anytime organizational growth or change creates a need for additional members of the team, the overall team workflow should be considered to ensure that the job description of the new team member supports the organizational goals and accountability overall. Without this approach, an addition to the team is more likely to create confusion and conflict.

Tax Implications of Bonuses

glevi Blog Staffing, Tax

If you get pleasure from rewarding your team’s performance with bonuses, you are not alone. But it’s important to consider how those bonuses are given, along with the tax implications for both you and the employee.

One-time bonuses are generally calculated by percentages. The rates cluster around 3% to 5% of annual salary for clerical and support staff. Managers might receive in the low-double-digit percentage range and executives in the mid-double-digit range. However, bonuses can also be flat rate.

You can generally deduct the cost of bonuses, assuming the bonus is compensation for services rather than a gift. If you use cash-method accounting, remember that you can’t deduct bonuses paid in 2024 on your 2023 tax returns. Accrual-method businesses benefit from the rule that lets them deduct a bonus paid for performance in the past year if the employee receives it within 2 1/2 months of the year’s end. If you miss that window, the IRS assumes that the bonus is deferred compensation, which is deductible in the year paid rather than the year earned.

An important caveat is that the 2 1/2-month rule applies only to nonrelated employees. If the employee is your spouse, child, sibling, parent or grandparent, you must deduct the bonus in the year the bonus recipient reports it as income, which most likely is the year it’s paid.

Tax considerations

Bonuses are considered supplemental wages. (Other forms of supplemental wages are commissions, overtime compensation, severance pay, awards and prizes, back pay, tips, payments for nondeductible moving expenses, retroactive raises, and payments for accumulated sick leave.) That means that you will withhold the usual FICA and federal unemployment tax as well as any applicable state taxes. The federal income tax withholding amount depends on the total amount of supplemental wages received by the employee during the tax year.

If the supplemental wage payment exceeds $1 million, the first million gets taxed at 22% and every dollar over that is taxed at 37% or the highest income tax rate for the year.

For supplemental wages of $1 million or less, you can choose one of the following methods for calculating tax:

If you pay supplemental wages with regular pay without specifying the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period.
If you pay supplemental wages separately, or combine them in a single payment with wages and specify the amount of each, you can:
- Withhold a flat 22% of the bonus. (So if the bonus, paid separately, was $100, you’d withhold $22 and cut a $78 check.)
- Use the aggregate method — an IRS formula based on the employee’s tax bracket (as given on a W-4) — to calculate the amount to withhold. This is a more complicated way to calculate taxes and may better ensure that you cover the employee’s tax liability.

If you end up withholding more tax than necessary, the employee receives a refund. If you withhold too little, the employee gets taxed by surprise.

A tax-free bonus is basically impossible. If you pay the employee’s share of taxes on the bonus, taxes paid are considered additional wages and are themselves subject to tax.

You may use bonuses to increase productivity, improve employee retention, thank your team for their efforts and/or create a positive work environment. A bonus is always a welcome bump in pay. You may want to calculate the bonus yourself or consider consulting with your accountant or tax adviser to learn how bonuses affect company and employee taxes.

5 Tips for Attracting and Retaining Gen Z

glevi Blog Scaling, Staffing

Gen Z is a generation like no other, and in order to maintain your business, you’ll need to think about how you can accommodate the up-and-coming workforce.

How does Gen Z feel about work?

Surveys have found that 54% of Gen Zers are often disengaged at work. Meanwhile, 68% of Gen Z workers feel stressed out, and 77% of them actively prioritize a work-life balance.

Now that Gen Z accounts for approximately 30% of the global population, you can expect them to make up 27% of the workforce come 2025. This means business owners must learn how to work with Gen Z, not against them.

How to work with Gen Z, not against them

Let’s look at five areas you should focus on as you evolve to suit the needs and preferences of Gen Z employees.

Offer benefits for overall wellness

The high level of stress reported by this generation is beyond understandable. After all, just think about the events they have had to — and will continue to — witness on a state, national and global level. As an employer, you should take it upon yourself to care for your employees to the best of your abilities, and this means placing an emphasis on overall wellness, especially in the context of mental health.

By implementing wellness-related perks, like coaching and mentoring programs, you can create an inclusive culture that openly addresses topics like mindfulness, encourages healthy habits like weight loss programs and gym memberships, or adopts flexible time-off programs for those who need a break every once in a while.

Provide opportunities for financial security

There’s nothing like the stress that a lack of money creates, and unlike prior generations, Get Z has no problem openly discussing this matter. Companies should take note because financial security is often a make-or-break aspect of Gen Zers’ job searches.

From competitive salaries to all-inclusive benefits, companies should also consider providing Gen Z employees with access to financial wellness programs. That way, employees will have the chance to learn how to budget, save and invest the money they earn.

Promote a flexible work schedule

Flexibility is key to attracting, engaging and retaining Gen Z. Keep in mind that about 72% of this newer generation has either quit a job or considered leaving one strictly because the workplace did not offer any flexibility.

Emphasize career growth

Workplaces as we once knew them seem to be changing at the speed of sound. In the midst of the rapid changes, what has become more obvious than ever in this fast-paced environment are the skills that are needed both now and in the future.

This allows for growth, both personally and career-wise. Some of the most important skills are business management, creativity and familiarity with technology, especially data analysis.

Cater the positions to each person

Traditionally speaking, companies would create job descriptions and then find people who can become the person described in the job post. However, with Gen Z, business owners should approach things differently by thinking about how individuals can perform tasks authentically rather than expecting them to fit a predetermined mold.

More than ever before, Gen Z is filled with young minds who are cultivating their own ideas of what work should look like. In turn, companies can either defy these evolving perspectives or evolve with the times.

While it can be challenging to adopt new business models and ideologies, the effort is worthwhile. And while you’re at it, remember that Gen Zero are still adjusting to life after the major disruption that the COVID-19 pandemic imposed, so you’re not alone in the process of establishing a new normal.

Small Business Resilience Depends on Being Focused

glevi Blog Budgets, Finance, Small Business

Small businesses are resilient, and resilience is especially important in challenging times such as these. This type of strength and agility relies, in part, on good business instincts. But it also depends on a clear understanding of the measures that may impact results.

Know the context

It’s important to consider data in the context of what your business does and where it is located. For example, the unemployment rate for a business located in an area that is experiencing a lot of growth means something different from what it does for an area that is experiencing a reduction in its population. Places with growth will have more people spending more money on a variety of goods and services. Areas that are stagnant are likely losing businesses as people are spending less and less.

The same is true for other data. Supply chain disruptions will be harder to deal with for small businesses than they will be for large companies because bigger businesses have the resources to pay for faster deliveries. Some business and service providers can get a snapshot of what is happening by looking at information specific to their industries.

Keep in mind that statistics have a subtext that may not be easily apparent. For example, are multisite businesses reporting their data for each location, or is it all on an aggregate basis? Questions like these are why it is important to put this information into a context that is meaningful to your business.

One way to do this is to think about the information in the framework of a SWOT analysis — strengths, weaknesses, opportunities, and threats — for your service or industry. Then look at the analysis again through the filter of what is happening in your specific market. Doing so will allow you to have a clearer picture of your needs and where resources should be allocated.

Consider inflation

Along with the other financial concerns that small businesses are facing, inflation has become a major factor. Predictions differ when it comes to how long the current inflationary cycle will last. Consequently, business owners need to assess how they will be affected by the higher cost of money in both the short term and the long run.

Taking these three steps can help:

Budgeting: Cut costs — but in a thoughtful way. This should be your strategy when making any major purchases, from software to a new hire or anything in between. Understand what you really need as well as the costs of any bells and whistles. Maybe it is best to start with the basics now and then add on to your list of purchases as needed when your budget allows for it. For example, does it make more sense for your business to hire a freelancer who can maintain your company’s social media platforms, or is a full-time employee what you need instead? Writing out a job description and then comparing the costs of hiring each type of person should help you figure out the answer.
Margins: Take a long, hard look at your margins. How much is every sale costing you? Is there a way to use new manufacturing methods or sales channels so that you can increase your margins?
Financing: If you need help with financing, turn to government sources first. Low-cost funding may be available, for example, if your business is located in an economic development zone.

Putting the information that you gather into a meaningful context and following through on that consensus will help ensure that you are keeping a perspective that makes sense for your small business.

Learn the Rules on Consumer Privacy

glevi Blog Security

Your business has employees’ and may have customers’ personal information (names, Social Security numbers, credit card information) stored both physically and electronically. You use this data to meet payroll, fill orders and perform necessary business functions.

But if this information falls into the wrong hands, it can lead to fraud or identity theft. Have you considered how to protect this sensitive data? What are the threats for your business? What does your security look like? How do you keep only what’s essential? How long has it been since you reviewed your security plans and policies?

The cost of a security breach is huge: Not only will your employees be upset, but you may lose your customers’ trust. You might find yourself defending your company against a lawsuit. That makes safeguarding personal information a good business decision.

The Federal Trade Commission has outlined how to protect the information you keep and how to properly dispose of what you no longer need in “Protecting Personal Information: A Guide for Business.” The agency urges you to create a plan to respond to security incidents.

Getting down to basics

Here are five key principles of a sound data security plan.

1. Assess. Know what personal information you have in your offices and files.

Inventory company servers, laptops, mobile devices and flash drives to discover where sensitive data is stored. Pay particular attention to Social Security numbers, credit card information, bank account numbers and other financial data.
Inventory nonowned devices. What information is received through websites, from contractors and at call centers? What information is saved on employees’, contractors’ or vendors’ personal computers, phones or digital copiers?

2. Reduce. Collect and keep only what you need for your business.

Restrict access to sensitive data: Each employee should have access only to those resources needed for the job.
Consider how much information nonemployees should have access to.
Use information lawfully.

3. Secure. Protect the information that you collect and keep.

Create effective security plans to assess physical and electronic security, employee training, and the security practices of contractors and service providers. Security is the responsibility of everyone in the company.

4. Delete. Properly dispose of what you no longer need.

Implement information disposal practices from paper shredders to secure data erasing. Make sure employees who work from home follow the same procedures.

5. Plan. Create a response to security incidents.

Designate a senior member of management to be the point person for any response to security breaches.
Employ a comprehensive response, ranging from disconnecting compromised equipment to knowing who needs to be notified of the breach. Be sure to consult your attorney to be sure you are following applicable laws when contacting customers, law enforcement, credit bureaus and other businesses that may be affected.

It is also important to review any legalities that may impact your plans. Statutes like the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act and the Federal Trade Commission Act may require you to provide reasonable security for sensitive information. California, Colorado, Connecticut, Utah and Virginia have consumer data privacy laws with provisions like the right to access and delete personal information and to opt out of the sale of personal information. Other states that are working on such legislation include West Virginia and Georgia, where the legislation has passed but is not yet signed into law, as well as Rhode Island, Vermont, Kentucky and Wisconsin.

Understanding how sensitive information moves into, through and out of your business and who has — or could have — access to it is essential to assessing security vulnerabilities.

Ransomware Is Targeting Small Businesses

glevi Blog Security

During the pandemic, data breaches disproportionately affected smaller companies; they were targeted at twice the rate of larger businesses. Since the pandemic, those same smaller companies have been struggling with COVID-19 fallout ranging from supply and labor shortages to bouts of inflation. All those preoccupations have left them more vulnerable to ransomware attacks.

Enemy at the gates

Typically, ransomware is triggered when an employee downloads an attachment or responds to a phishing or scam email. Ransomware can also penetrate a network through server vulnerabilities or an infected website. A third way that ransomware works is by sneaking in through security holes in older, unpatched versions of operating systems.

Once the ransomware has infiltrated, it will lock users out of their computers. Their devices will display a message demanding a ransom to unlock the hardware and restore access. The ransom is often payable only in bitcoin or other cryptocurrency. Those transactions are quick and easy, and because they are anonymous, difficult to trace. Although bitcoin is the most popular ransom currency, ethereum, zcash, monero or another may be stipulated. In the past, gift cards for Amazon or iTunes were popular for smaller scale extortion.

The ultimate damage may greatly exceed the cost of the ransom itself. Being locked out of computers or servers has a ripple effect, resulting in business downtime and the concurrent lost revenue, lost customers or lost new business, as well as negative publicity.

Prevention beats cure

It is essential to take precautions to ward off any impending threats:

Run antivirus software programs regularly.
Maintain a firewall.
Back up your business data systematically and store a copy away from your servers.
Train employees to open only trusted attachments.
Update security patches frequently.
Install two-factor authentication.
Buy a cyber insurance policy, even though costs have risen since COVID-19 and tighter underwriting often now requires multifactor authentication and encrypted data. (Your regular property and liability insurance policies may not cover you, as most exclude cyber damages.)
Monitor published security vulnerabilities.
Keep a registry of all your software, hardware and cloud data.
Put your emergency response plan in writing and share it.

Even if you religiously follow security best practices, ransomware may still break through. The first step in your response plan is to not panic. Take a photo of the infected screen before you unplug everything; pay particular attention to any deadlines mentioned. Next, try to isolate the infection by disconnecting any vulnerable hardware from the network.

Contact your help brigade, including your data privacy lawyer (or other attorney) and your cyber insurance company. It is a good idea to report the incident to your local FBI office too.

Next, implement your internal procedures:

Reset all passwords, since many computers are likely to be corrupted.
Notify your employees and customers.
If your screens are locked, get expert help to try to regain access.
Restore and back up the most recent data.

Paying up

Across the industry, many experts counsel victims against paying a ransom. The risks are like those of kidnapping: How do you know the gang will practice thieves’ honor? What is the guarantee they will unlock your systems? Will they keep demanding further payments?

However, businesses are increasingly willing to pay to salvage their operations, so if you do succumb, you are not alone. Since 2020, the number of organizations that have paid ransom has risen by 5.4%, amid a 9% increase in attacks over the past two years.

Before transferring funds, at least consider requiring a so-called proof of life — evidence that the wrongdoers can decrypt and restore at least one file.

Talk to your security team and professional technical advisers about any other safeguards you can set up in advance.