written by Scott Vickery, Senior Vice President, and Charlotte Mattei, Senior Vice President, Webster Business Banking Webster Business Banking
If you’re like most business owners, you’re preparing to wind down 2018. Now is the optimum time to review your financial position with your accountant, attorney and banker. Go over your sales figures, profit-and-loss positions, revenue projections, and budgets together. It will help you plan for both Q4 and beyond, especially because there may be new disruptions ahead: You may need to hire more staff or add equipment, face tax and regulatory issues, or even acquire additional space.
To make the most out of your sprint for the finish line, consider these tips.
- Understand the implications of the Tax Cuts and Jobs Act.
Do you have an LLC or S Corporation? The 2017 Tax Cuts and Jobs Acts provides a 20 percent deduction for pass-through businesses—if you qualify. That’s a grey area, especially if your company provides services rather than tangible products. Consult your tax advisors to make sure you’re eligible for the deduction.
- Plan ahead for a potential rate hike on your health benefits plan.
If your benefits plan renews on the calendar year, you’re about to find out just how big a hit your budget will take when rates increase. That’s going to skew your cash flow position. The time to recalibrate your benefit plans and costs is now.
Many employers are turning to Consumer-Directed Health Plans (CDHP) as a way to give employees more control over their healthcare decisions. A CDHP offers tax benefits with the potential to lower premiums and hold down healthcare costs—all while providing the care your employees want and need. HSA Bank, a division of Webster Bank, offers comprehensive health benefit solutions that include Health Savings Accounts (HSA), Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA), Commuter Benefits and COBRA. See if a Health Savings Account may be the right option.
See if a Health Savings Account may be the right option.
- Prepare for end-of-year cash demands.
If the holiday season is a hot time for sales, you may need to staff up to handle orders or bulk up on inventory. That takes capital. And if you have receivables dragging past their due date, you could be looking at a major crunch.
That’s why it can be crucial to have an established line of credit at this time of year. It gives you the flexibility of filling those cash gaps without delay. One quick solution to a need for fast cash: a Webster Fast Track loan, with one-day approval for business loans up to $250,000.
(And if you’re already carrying significant debt, now may be the right time to consider debt restructuring to ease some of the pressure.)
- Consider timely purchases to offset positive accruals.
A Q4 influx of cash may mean a need to offset taxes with big-ticket purchases. This situation prompts a discussion with your advisors:
- Should you use the cash on capital investments?
- Should you wait until the trade situation shakes out? You have to consider how the current tariff tit-for-tat may affect the price.
- Should you capitalize on current interest rates before they rise again?
- Make more of the cash you have at hand.
You also have other options to leverage that year-end cash. For example:
- For long-term planning: See if you have enough at the end of Q4 to fund retirement plan contributions.
- For short-term planning: Consider growing your excess cash in a money market or CD account to stimulate growth.
Looking ahead to 2019 and beyond, Q4 is also the right time to see if your cash management protocols are working their hardest. Simplify your billing and payment processes with online payments like Webster Payment-Link. It can speed up receivables by providing customers with a fast, direct way to pay their bills—scheduling timely collections and eliminating the cost and risk of processing and reconciling paper checks.
- Schedule a meeting with your planning team.
All these multi-faceted issues are just one more reason to talk to your tax and financial counselors now. That includes your bank’s Relationship Manager; if you don’t have one, we can help. At Webster Bank, we work with attorneys and accountants to help businesses of all sizes improve their cash flow, from cash management systems to lines of credit. As you review your Q4 goals and beyond, we stand ready to support your decisions with products and services that make them more effective.
The opinions and views in this blog are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your individual situation. All lines and loans are subject to credit approval. The Webster symbol is a registered trademark in the U.S. Webster Bank, N.A. Member FDIC. Equal Housing Lender © 2018 Webster Financial Corporation. All rights reserved.