by Karin Mueller Price
Small businesses are not just in competition for customers. It's a fight to attract and keep employees, too.
Offering a retirement plan is one incentive that can make the difference. Yes, it will cost you, but it may be the best investment you can make in the future of your business.
"Cost is even more of a problem with the scheduled increases in taxes and health care about to hit small business in 2011," says Rick Kahler, a certified financial planner with Kahler Financial Group in Rapid City, S.D. "Employers will be under pressure to cut costs, and retirement plans will be on the short list of potential places to save money."
While eliminating a retirement plan or simply not offering one may seem like a smart move, having a plan will help your business save money (in the form of tax deductions for your contribution) and headaches (by retaining valuable workers).
What Type of Plan Should You Offer?
When many people hear "retirement plan," they jump straight to the 401(k). If you have a large company with more than 50 employees, a 401(k) could be the best option. But that's what it is: an option. Small companies and sole proprietors should look beyond 401(k)s because the cost could be prohibitive. Many companies might be better off with a different kind of plan.
Before looking at specific plan types, think about what you want to accomplish. Of course you want to offer retirement savings opportunities for employees and for yourself, too, but there are other considerations:
•How much money do you personally want to save every year? You can give your business a tax deduction and lower your own taxable income with some plans. And with any plan, you'll be taking steps to secure your retirement.
•Do you want the flexibility to contribute different amounts based on annual cash flow? Some plans require the same contributions each year, while others allow you to determine contribution amounts based on your cash flow and the health of the business for the year.
•Do you want to match funds for your employees? "A match is free money for the employee and an immediate return to the employee," says Ronald Garutti, a certified financial planner with Newroads Financial Group in Clinton, N.J. "Today, many companies are reducing or cutting match plans. Any company with an aggressive match should result in happier employees, and it should be a sign of the employer rewarding the employee."
Your answers to those questions will narrow down the kind of plan you should investigate.
Next, learn about the different offerings:
•Solo 401(k): If you and your spouse are the only employees, this plan will allow you to save more than others. That's because you make two types of contributions: as the employer and as the employee. As the employee, you can set aside up to $16,500 in 2010. As the employer, you can add a profit-sharing contribution of up to 25 percent of compensation, for a maximum of $49,000. If you're over age 50, you can add an extra $5,500 to the pot for your "catch up" contribution.
•SEP-IRA: If you have a few employees, a SEP-IRA could fit the bill. It offers great flexibility in contributions. Employers make the only contributions, with a maximum of 25 percent of salary and up to $49,000 for 2010. But if business is slow, you don't have to make contributions, or you can make smaller ones--as long as you contribute the same amount for each employee.
•SIMPLE IRA: These may be appropriate for businesses with 100 or fewer employees. Matching rules are more complicated for the SIMPLE IRA, and the matches are required, but they're flexible. You can choose either to match the contributions of the employees who participate in the plan, or you can contribute a fixed percentage of all eligible employees' pay. "You can cut back SIMPLE-IRA employer match below 3 percent to a minimum of 1 percent, as long as you do it in two or fewer years out of five years," says Kahler. "The employer can also switch from a match to a 2 percent nonelective contribution at any time." Employees can save up $11,500 for 2010 (and there's a "catch up" contribution allowed for those over age 50).
•Profit-Sharing Plans: Employers make contributions--employees don't--and contributions are flexible and don't have to be made every year as long as they are "recurring and substantial." When you do make contributions, your company will have a predetermined formula for how contributions will be calculated, with a maximum of 25 percent of compensation, or $49,000 in 2010.Defined-Benefit Plans: This is a type of pension plan. The employer sets aside funds that will eventually pay for a specific monthly benefit when the employee retires. The amount saved--and eventually received as a pension--is determined by a formula that accounts for an employee's salary history, years of service and age.
Finding the Right Plan Administrator
You may be a do-it-yourselfer in many areas, but setting up a retirement plan for your company should be handled by a pro. Interview several advisors so you can compare advice and costs, and make sure your business isn't being treated in a one-size-fits-all fashion.
"Advice and assistance are critical to instituting the best plan, as every employer is unique and a plan should be tailored to the owner and the employees," Garutti says.
There are lots of potential commissions to be made by managers of retirement plans. Instead of finding someone who works on commission, seek out someone who bills themselves as a fee-only advisor or fee-only third-party administrator.
Kahler says a commissioned broker managing your plan will mean your plan will be limited to only the mutual fund investments offered by that one company.
"Not only will the hidden costs be much higher, but no fund company can offer great managers in every asset class," he says. "An independent team of advisors will work together to select fund managers that are the best in an array of asset classes."
Be sure you offer five or more asset classes (different areas of the stock and bond markets) for your employees to choose from. Go beyond stocks and bonds, and give diverse options such as REITs, commodities and other asset classes.
Ask your advisor about the costs before you make a final decision.
The costs to manage retirement plans vary by plan type and by administrator, so make sure you understand what you're getting into. You'll be responsible for the cost of potential matching contributions, plus fees to establish the plan and to properly notify the IRS of the set-up.
Go in smart. Starting a plan only to give up on it a few years later isn't an option. Your employees--and your own retirement--will be counting on the benefits.
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Karin Price Mueller is an award-winning personal finance and consumer writer.
You can read her work at www.KarinPriceMueller.com.
Monday, July 12, 2010
Monday, July 5, 2010
Summer Work Experience Program hosted by SD Dept of Labor
Every month the Tripp County Unified Development Committee meets here at the Jeff Moore meeting room. We have representatives from our city council, Tripp County Commission, the chamber, the school, the SD Dept of Labor (DOL), South Central Development Corp and a member at large. During these meetings, each entity gives a brief report on their office and happenings that effect the social and economic fiber of the county...I refer to it as News I Can Use.
This month, Lynn Coonrod from the DOL shared some information about the Summer Work Experience Program. Basically, the state can provide additional funding if your organization can take on extra workers and provide some real work experience for those in the program. Sounds like a win-win to me.
Read the official press release below or contact Lynn at the DOL. His number is (605) 842-0474 and email is lynn.coonrod@state.sd.us. -TCB
___________________________________________
South Dakota Department of Labor (DOL) and Department of Social Services have received $3 million in federal funding, and we are putting it to use! The Summer Work Experience program is a super way for you to hire eager workers right away.
Designed for people aged 16 through 24,this program allows you to hire employees, and DOL will pay up to $5,000 of their wages. Private sector businesses and non-profit organizations all encouraged to create job training opportunities. Employers should be dedicated to providing adequate training and supervision. This is an excellent way to make a positive difference in the lives of our future workforce.
The work site should offer participants the opportunity to establish a work history, gain references, build good work habits and learn new talents. Employers who can provide a meaningful work experience and teach employment skills will get an employee at virtually no cost.
If you want to hire someone, we want to help. Visit your local DOL office where your workforce experts are ready to assist you. Additional information in available at www.sdjobs.org.
This month, Lynn Coonrod from the DOL shared some information about the Summer Work Experience Program. Basically, the state can provide additional funding if your organization can take on extra workers and provide some real work experience for those in the program. Sounds like a win-win to me.
Read the official press release below or contact Lynn at the DOL. His number is (605) 842-0474 and email is lynn.coonrod@state.sd.us. -TCB
___________________________________________
South Dakota Department of Labor (DOL) and Department of Social Services have received $3 million in federal funding, and we are putting it to use! The Summer Work Experience program is a super way for you to hire eager workers right away.
Designed for people aged 16 through 24,this program allows you to hire employees, and DOL will pay up to $5,000 of their wages. Private sector businesses and non-profit organizations all encouraged to create job training opportunities. Employers should be dedicated to providing adequate training and supervision. This is an excellent way to make a positive difference in the lives of our future workforce.
The work site should offer participants the opportunity to establish a work history, gain references, build good work habits and learn new talents. Employers who can provide a meaningful work experience and teach employment skills will get an employee at virtually no cost.
If you want to hire someone, we want to help. Visit your local DOL office where your workforce experts are ready to assist you. Additional information in available at www.sdjobs.org.
Tripp County Farmers & Charities Eligible for Monsanto Fund Awards
Monsanto Fund is excited to bring the America’s Farmers Grow Communities Project to Tripp County. This program, which Monsanto Company initially rolled out to counties in Iowa, Missouri and Arkansas, was created as a unique new way to support local farm communities. The program has been extended to select counties in California, Kansas, Nebraska, North Carolina, Ohio, South Carolina and South Dakota.
This is a great opportunity for farmers in Tripp County to win the right to direct a $2,500 donation from Monsanto Fund to a local nonprofit organization. All they have to do is complete a short entry form at www.growcommunities.com or call 1-877-267-3332. One winner per county will be selected at random for each eligible county and announced in August 2010.
Farmers, age 21 and over, who are actively engaged in farming a minimum of 250 acres of corn, soybeans and/or cotton, or 40 acres of open field vegetables, or at least 10 acres of tomatoes, peppers and/or cucumbers grown in protected culture, are eligible.
The application period expires on July 31, 2010. The program is open to all qualifying farmers, and no purchase is necessary to enter or win. Monsanto Fund will announce winning farmers and recipient organizations that are important to them and their communities.
Looking to apply? Follow the link to Monsanto's Grow Communities Project.
This is a great opportunity for farmers in Tripp County to win the right to direct a $2,500 donation from Monsanto Fund to a local nonprofit organization. All they have to do is complete a short entry form at www.growcommunities.com or call 1-877-267-3332. One winner per county will be selected at random for each eligible county and announced in August 2010.
Farmers, age 21 and over, who are actively engaged in farming a minimum of 250 acres of corn, soybeans and/or cotton, or 40 acres of open field vegetables, or at least 10 acres of tomatoes, peppers and/or cucumbers grown in protected culture, are eligible.
The application period expires on July 31, 2010. The program is open to all qualifying farmers, and no purchase is necessary to enter or win. Monsanto Fund will announce winning farmers and recipient organizations that are important to them and their communities.
Looking to apply? Follow the link to Monsanto's Grow Communities Project.
Thursday, July 1, 2010
Managing Your Cash Flow
Ten Tips to Manage Cash Flow
Cash flow is one of the top concerns business owners are discussing with bankers these days. They need help managing their cash flow, and they're looking for advice.
Cash flow is the movement of funds in and out of your business. You can track this weekly, monthly or quarterly. Positive cash flow is when the cash entering your business from sales and accounts receivable is more than the amount of cash leaving your business through accounts payable, monthly expenses and salaries. Negative cash flow occurs when your outflow of cash is greater than your incoming cash.
Cash flow is one of the most critical components of success for a small business, but many business owners who are launching new enterprises don't realize how important it is. Remember, cash flow is not the same as profit--profit is revenue minus expenses. We often counsel entrepreneurs not to get confused into thinking their profit and loss statement (P&L) will help assess their cash flow.
The SBA has a worksheet you can download that may be helpful in determining your cash flow. You may also wish to seek advice from your banker or financial advisor.
Here are tips to help improve your cash flow:
1. Collect receivables and accelerate receipts. Speed up collection of your merchant services accounts. Aggressively collect receivables and rein in credit and terms. Offer discounts to clients who pay quickly and charge a penalty to those who do not. To speed up receipt and processing of receivables, turn to a financial institution that offers a lockbox service, enabling customers in far locations to mail payments directly to the bank. Also, centralizing your banking at one bank may help speed the process.
2. Increase sales. Attracting new customers takes time and money, and may temporarily weaken your cash flow. Selling more to current customers is an option that may increase your cash flow. When you do so, however, make sure your customers can pay.
3. Tighten credit requirements. If you extend credit to your customers, be sure to assess their credit history. Ask them to fill out a credit application to determine whether they will be able to pay for the goods or services they are purchasing.
4. Consider every expense. Look carefully at each expense and find ways to cut costs that don't add to your bottom line.
5. Trim inventory. Keep levels as low as possible.
6. Delay hiring. Allow positions to remain unfilled if staff members leave, or consider part-time, temporary or consulting services for support.
7. Seek credit. For qualified business owners, securing credit may be a smart way to obtain additional funding and help maintain cash flow. Even if you don't have an immediate need for the money, it may provide a cushion if business slows in the future.
8. Recycle and reuse. Recycle or sell equipment that you only use occasionally. Negotiate to lease or rent equipment and software only when needed.
9. Consider refinancing. Watch for a rate that best suits your situation, and ask your banker to alert you to falling rates.
10. Manage your budget. Create weekly reports to monitor expenses. If your spending exceeds the budget, quickly step in to investigate and take steps to curtail it.
Business owners who learn how to manage cash flow may increase their probability of success. Take time to assess your cash flow and ask for advice from your banker when needed.
By Martha Pineda
Published June 21, 2010 by WomenEntrepreneur.com
Cash flow is one of the top concerns business owners are discussing with bankers these days. They need help managing their cash flow, and they're looking for advice.
Cash flow is the movement of funds in and out of your business. You can track this weekly, monthly or quarterly. Positive cash flow is when the cash entering your business from sales and accounts receivable is more than the amount of cash leaving your business through accounts payable, monthly expenses and salaries. Negative cash flow occurs when your outflow of cash is greater than your incoming cash.
Cash flow is one of the most critical components of success for a small business, but many business owners who are launching new enterprises don't realize how important it is. Remember, cash flow is not the same as profit--profit is revenue minus expenses. We often counsel entrepreneurs not to get confused into thinking their profit and loss statement (P&L) will help assess their cash flow.
The SBA has a worksheet you can download that may be helpful in determining your cash flow. You may also wish to seek advice from your banker or financial advisor.
Here are tips to help improve your cash flow:
1. Collect receivables and accelerate receipts. Speed up collection of your merchant services accounts. Aggressively collect receivables and rein in credit and terms. Offer discounts to clients who pay quickly and charge a penalty to those who do not. To speed up receipt and processing of receivables, turn to a financial institution that offers a lockbox service, enabling customers in far locations to mail payments directly to the bank. Also, centralizing your banking at one bank may help speed the process.
2. Increase sales. Attracting new customers takes time and money, and may temporarily weaken your cash flow. Selling more to current customers is an option that may increase your cash flow. When you do so, however, make sure your customers can pay.
3. Tighten credit requirements. If you extend credit to your customers, be sure to assess their credit history. Ask them to fill out a credit application to determine whether they will be able to pay for the goods or services they are purchasing.
4. Consider every expense. Look carefully at each expense and find ways to cut costs that don't add to your bottom line.
5. Trim inventory. Keep levels as low as possible.
6. Delay hiring. Allow positions to remain unfilled if staff members leave, or consider part-time, temporary or consulting services for support.
7. Seek credit. For qualified business owners, securing credit may be a smart way to obtain additional funding and help maintain cash flow. Even if you don't have an immediate need for the money, it may provide a cushion if business slows in the future.
8. Recycle and reuse. Recycle or sell equipment that you only use occasionally. Negotiate to lease or rent equipment and software only when needed.
9. Consider refinancing. Watch for a rate that best suits your situation, and ask your banker to alert you to falling rates.
10. Manage your budget. Create weekly reports to monitor expenses. If your spending exceeds the budget, quickly step in to investigate and take steps to curtail it.
Business owners who learn how to manage cash flow may increase their probability of success. Take time to assess your cash flow and ask for advice from your banker when needed.
By Martha Pineda
Published June 21, 2010 by WomenEntrepreneur.com
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