March 2017

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THE VALLEY BUSINESS JOURNAL 26 www.TheValleyBusinessJournal.com March 2017 Is Your Small Business Struggling Financially? by Esther Phahla Businesses are the very heart of the economy. Small businesses often face many financial obstacles if not properly managed. This could be due to several factors such as, an industry that is seasonal in nature, or aging accounts receivables, cash flow problems, a lot of debt, bad relationships with vendors or lack of profitability or trouble paying taxes. A well-managed business that maintains proper financial records and has proper controls can overcome financial struggles. But there may also be other major underlying issues that need to be addressed if the business is to survive. Some of the signs that a business may be facing financial struggles are: 1. Poor Bookkeeping: Bookkeeping is more than a record of previous transactions from your bank statements. Poor bookkeeping can affect future decisions about the company spending and growth. Not having proper bookkeeping could lead to serious financial problems such as over spending. It can also be used to cover financial improprieties, such as fraud. It is important to invest in a good bookkeeper to help you with regular bookkeeping that way you are aware of how your business is performing. 2. Cash Flow Problems: Almost every business will encounter cash flow problems from time-to-time, especially if their accounts receivable gets overloaded with late-paying customers, or diminishing sales, unproductive staff, excessive debt, or employee theft.. 3. Trouble Paying Taxes: Businesses pay several taxes depending on where they are located, such as, federal and state taxes on business income, which are paid as quarterly estimated tax payments, sales tax and paying payroll taxes for their employees. If a business falls behind on any of these tax payments they can find themselves having to pay additional fees in penalties and interest. 4. Customer/Clients Complaints: Unsatisfied customers lead to delayed paid invoices and this contributes to financial difficulties. Customer satisfaction is important. Resolve the issue as soon as possible. 5. Overdrafts: Overdrafts and payments your bank declines to make can have negative effects, causing other payments to be missed or accrue additional charges, and also causing dissatisfaction with your vendors. 6. Bad Relationships with Vendors and Creditors: Not paying your vendors on time, or payments are returned insufficient can affect your relationship with them. If your business continues to miss payments with creditors, this will ultimately impact your business credit scores. 7. Failing to Pay Employees: When a business fails to pay their employees, or payroll checks bounce, it causes the employees to lose all trust in their employer. Failing to pay the payroll taxes is also theft, as employees will have to make up for the non-paid taxes when they file their own tax returns. It is important that the business take steps to alleviate the underlying financial issues. It is normal for most businesses to occasionally feel a financial struggle at times. But a responsible business owner will take steps to manage their business finances. Sometimes business owners try to do it all by saving costs not realizing that finances are not their specialty. By focusing on their business product and service which is what they know best and investing in an experienced business accountant to help find the problems, and develop a plan to overcome the financial struggles will result in helping the business become sustainable and profitable in the long run. Esther Phahla is a Certified Public Accountant and Certified Tax Coach in Temecula. She is the Best Selling Co-Author of a tax planning book “Why Didn’t My CPA Tell Me That”. She also holds a Master’s of Science in Taxation. She can be reached at (951) 514-2652 or visit www.estherphahlacpa.com connect: www.estherphahlacpa.com
March 2017 THE VALLEY BUSINESS JOURNAL www.TheValleyBusinessJournal.com Increasing Optimism…Tempered by Reality REAL ESTATE by Gene Wunderlich 2017 is off to an inauspicious start. I’m talking about the housing market of course, the protesting and divisiveness of politics depends on your perspective I suppose. Turns out Love Trumping Hate involves a lot more arson and assault than we thought it would. Based on December pending sales, we knew January housing was not going to be great, and it wasn’t. If you don’t many much in the pipeline you can’t close them. In spite of being down 21% from December (916 / 729), sales of single family homes across the region were still up 7% over last January (679). That’s not too bad. Prices continued to ratchet up slowly. Median for the region was up just 1% over December ($327,039 / $330,127) but maintained a 6% edge over January 2016 ($310,211). Temecula’s median fell 5% ($435,000 / $414,700) from last January, Perris stayed exactly the same at $270,000, Menifee was up 9% ($290,000 / $320,000), San Jacinto jumped 13% ($214,900 / $247,450) and most other cities posted moderate gains. Interesting to note a trend that started last year in higher price areas like Orange County and the Bay area, impacting our housing market as well. Cities with the highest median price, like Temecula and Murrieta, have experienced low single digit appreciation while more affordable areas continue to surge into double digits. This, of course, is a function of affordability and availability, both of which are suffering in some areas of the state and may be visiting our region as well. Inventory has been dropping since mid-year and has fallen 33% in the past six months (2,478 / 1,658). While it’s not unusual for January inventory to fall off some, this leaves us with just 1.5 months of inventory, the lowest point in over 2 years! So much depends on the mood of the state and nation over the next 100 days, and that’s a real crapshoot. At the state level we’re well on our way to drafting 3,000 or more bills for this session! (Does California really need 3,000 more laws guiding our every breath?) Regardless, we’re going to get them. For every bill that would help housing in the Golden State like Marc Steinorth’s AB 53, which would establish a tax deductible savings account for first time homebuyers, there are 10 bills that would make it more difficult to develop, to buy or to finance. At recent state meetings our Chief Lobbyist in Sacramento joined others voicing cautious optimism that the pool of moderate Democrats may be sufficient to forestall some of the worst excesses possible under the new super-majority legislature. We’ll see. Equally concerning is the federal landscape. One of the new administration’s first moves removed a 25 basis point mortgage insurance premium reduction enacted just weeks before. We understand this was part of an overall roll-back and review of last-minute acts by the previous administration and our national association has presented documentation on why reinstating that particular reduction will stimulate the housing sector. Despite concerns and ‘calls-to-action’ within our own ranks, we are reminded that there is very little to ‘act’ on yet. The National Association of Realtors® has been a consistent advocate for private property rights and homeownership. It isn’t news to members of Congress that we consider the mortgage interest deduction to be sacrosanct and will go to the mat over this one. Any tax reform would need to address this issue very carefully as it is generally considered one of those 3rd rail items like Social Security and Medicare. Similarly the fate of the federal backstop for mortgage insurance from Fannie & Freddie is critical to the market and the availability of a 30 year mortgage. We are encouraged by recent discussion regarding changes to both Dodd-Frank and the CFPB. Dodd-Frank was a typical kneejerk reaction to issues barely understood by the act’s namesakes. It has stifled private sector investment in the housing market, kept small local bankers out of the game completely and prevented thousands of qualified buyers from purchasing their first home. Similarly the unregulated regulatory agency that is the CFPB may be due for a comeuppance as well. One can only hope. February won’t be a great housing month but keep your fingers crossed for a Spring resurgence. Winter rains may lead to blossoming home sales. Gene Wunderlich is Vice President of Government Affairs, Southwest Riverside County Association of Realtors® 27 Special events? Great sales? Exciting new products? Send us your business news via our Facebook page facebook/ thevalleybusinessjournal
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March 2017

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