Keeping it Normal

Life will be anything but normal for several weeks, but that doesn’t mean we can’t have a little fun and remind people there are some good aspects about working from home. To add a little fun, and say hi to my team, I sent “traffic reports” on my “commute” to the office every morning on our instant messenger service (group broadcast function). Here are the messages from last week:

Traffic was light, but I did have to change lanes several times to avoid the cat toys the cats left in my way in an attempt to trip me up. I hope your week is off to a good start.

I had to pull over at the stairway to avoid getting caught up in a high-speed chase, but it was over quickly enough and didn’t hold me up long. I later heard on the police blotter that while Velcro was sure he was younger and faster, Violet decided to prove she was older and had more insurance. I hope your day is off to an exciting start.

Traffic was reduced to one lane today as the fort constructed for the purr-babies partially collapsed like the leaning tower of Dallas and most of the lanes were closed for safety. However, traffic was light and I was able to make it through in almost the same time as normal. I hope all your paths are clear today.

Traffic was light and the temptation to speed was almost overwhelming, but I caught sight of the Fuzz in her favorite hideaway ready to swat me with a ticket, so I kept my speed right at the limit and made it to work without a hitch. I hope you find a smooth pace in your work today.

Animal control made an early morning sweep (i.e., my daughter relocated the cat carrier to the garage) and all suspects went into hiding so my commute was clear sailing all the way in. Hope you have clear sailing all day today.

What are you doing to keep the team engaged and having a little fun?

Forced Change

While much work must be done at a certain place (construction, brick and mortar retail, barber service), Covid-19 is forcing many organizations to face the reality of letting employees work from home if the work can be performed away from the office. In our profession, the fact is that almost everything can be done without going into the office. So, across the country, organizations are implementing, sometimes under duress, telecommuting for their employees on a full-time basis. Organizations that already embraced telecommuting, even on a part-time basis, are making the transition with relative ease.

Those organizations already had the basic infrastructure set up; VPNs and security tokens were in place. Employees already practiced connecting in from home and were used to forwarding calls or using a cell phone as their primary number. If organizations are new to telecommuting, they need to think through how remote access will work. How will data be secured? Does the computer in the office need to be turned on to access it remotely or does everyone have access? Do people know how to get into servers, systems and data? Do clients know how to contact you if you’re not in the office?

Numerous articles are being published that cover all sorts of aspects about remote/from home working. I won’t try to cover all those issues here, but I want to mention one thing not to forget. Even after you work through all the technical issues, you still have at the core people in your organization you’re responsible for leading and interacting with. Out of sight, out of mind will not work in this environment. At first, you might need to be deliberate about your interactions. Set up time to talk to each other. Those hallway conversations aren’t taking place and people will be starved for information. Make sure you’re asking how they’re doing, what problems they’re facing and how do they suggest resolving them. (Yes, make them take ownership of the resolution.)

If done right, this forced experiment may result in a realization that telecommuting, even if only on a part-time basis, works and that employees are happy you’re willing to work with them and help them adapt during this tumultuous time. If not handled well, your employees may come out the other end looking for opportunities at organizations their friends tell them handled the situation with flying colors.

Not the Time to Panic

After one of the worst weeks ever on the stock market, here are the top seven things you should be doing with your retirement savings:

7) If you need to feel better, look at your return over the last 10 years, not the last 10 days.
6) Keep contributing – you’re buying stocks on sale.
5) Don’t rebalance unless it is time you do that according to your preset plan.
4) Keep following your preset plan; trust your judgments when you weren’t filled with fear.
3) Don’t look at your balances every day; keep on the same review schedule you already set.
2) Remember, you will suffer more “big losses” over your lifetime; this is just part of the normal investment cycle. Over time, your gains will overcome your losses.
1) Whatever you do, don’t panic.

For some of you, this will be the first big downturn you’ve suffered in your working lifetime. These things happen. I’ve seen several major downturns/bear markets in my lifetime and the key is to keep your plan in mind. A good plan takes into account that the market will periodically suffer major downturns that last more than a few days. A good plan is like Linus’ blanket. With it, you can handle anything. Without it, you will turn green and get sick at the slightest event.

Take Your Own Advice

Many larger companies and firms implement an annual salary treatment process, so all salaries are adjusted at the same time every year no matter when you were hired. In some companies, this occurs in the fall and others in the spring. My employer adjusts salaries every spring, March to be exact. As I eagerly anticipate seeing what change is in store for me, I started thinking of advice we often give others when asked about financial matters.

  1. Getting a raise is the perfect time to increase your contributions to a 401(k) or other retirement savings. Taking a portion of the raise means you’ll never miss the increased contribution because you were never getting the extra money in the first place.
  2. If you’re already maxing out the tax advantaged contribution to a 401(k), consider switching a higher portion of your contribution to a Roth 401(k) if that’s available from your employer. The increase in salary can be used to offset the higher taxes you pay now but will give you the ability to earn a tax-free return on those contributions forever.
  3. If you’re maxing out your Roth contributions or you do not have that option, consider increasing your contributions to a Health Savings Account (HSA), if you’re eligible. You can contribute to an HSA if you participate in a high deductible medical insurance plan. The magic of an HSA is that contributions are made tax free, earnings are tax free and withdrawals for medical expenses are also tax free. There is no better way to save.
  4. If you’re already maxing out your HSA, consider putting a portion of your salary increase away for current medical expenses and don’t touch your HSA for those costs. Instead, save your HSA for retirement. As long as you use the withdrawals for medical expenses, it’s a better tax deal than a Roth or regular 401(k), and according to every prediction I see, we’ll all need plenty of money to cover medical expenses in our retirement.

Finally, if you’re doing all of the above, then consider taking a well-deserved vacation with your extra income, because you’re already well on your way to a secure future.

Thoughts on Kobe Bryant

The sad news that Kobe Bryant recently passed away along with his daughter in a helicopter crash reminded me of a blog I wrote a few years ago when Kobe set the NBA record for missed field goal attempts. As noted in the blog below entitled Failure is an Option, Kobe’s greatness was not only the number of points he scored or the longevity of his career, but his willingness to risk failure time and time again in an effort to succeed.

The blog was written when Kobe was still playing. His final career stats included making 11,719 field goals and missing 14,481 out of 26,200 attempts for a 44.7% lifetime field goal percentage.

Failure is an Option (A Tribute to Kobe Bryant)

It was a big deal last week when Kobe Bryant became the all-time leader in missed field goal attempts in the NBA. As of this writing, he had missed 13,421 field goal attempts and counting. But there is a big problem with focusing on that “negative” supremacy. The real point (pun intended) is that it takes failing that many times to also make 11,121 field goals and be considered one of the best to ever play the game. A .453 lifetime field goal percentage for a guard is phenomenal. You have to fail 13,421 times to succeed 11,121 times.

If we don’t risk failure, we will never achieve success. Kobe Bryant has risked failure 24,542 times. That is 32 times for every hour he plays. How many times have you risked failure in the past 40-hour week you worked – was it 1,280 times like Kobe? We like to tell our kids that sports teach a lot of life lessons. Maybe the most important lesson is that you have to take risks in order to succeed.

Why You Should Care About This IFRS Proposal

Unless you work for a subsidiary of a foreign company reporting under International Financial Reporting Standards (IFRS), most U.S. based CPAs generally feel there is little reason to pay attention to IFRS activities. Therefore, many of you probably missed the release of a proposed change to the standard on general presentation and disclosures in a financial report in the middle of December. However, this standard is one you might want to pay attention to, because it may push the Financial Accounting Standards Board (FASB) to tackle some similar issues in the U.S. Some key highlights from the standard include:

  • Required subtotals in the Income Statement, including Operating Profit which, unless the entity is a bank or similar financial services company, will generally exclude interest expense and interest income. Even interest income on customer receivables will be excluded unless you conclude a principle function of your business is to provide customer financing.
  • The disclosure of unusual items in the footnotes to the financial statements. Unusual is defined as unusual in occurrence or unusual in amount. And the proposed disclosures allow companies to show the impact of these items on the Income Statement, so you essentially get to include the “normalization” for such items in the audited financial statements.
  • The disclosure of “management performance measures” in footnotes defined as amounts:
    • Used in public communications outside financial statements,
    • Complementing totals or subtotals specified by IFRS standards, and
    • Communicating management’s view of an aspect of an entity’s financial performance to users of financial statements.

The disclosure will include information on how the management performance measure is calculated, how it reconciles back to the most similar IFRS total or subtotal, and how management believes it (better) portrays a financial aspect of the business.

  • The movement of all interest expense into the financing section of the cash flow statement, and interest and dividends received into the investing section. This means such amounts will no longer be included in the operating section of cash flows for most (non-financial services) companies.

The standard provides a lot of opportunity for companies to better tell their stories in the financial statements, but with that comes a price. The disclosures become part of the financial statements subject to auditing procedures if an audit is obtained on the financial statements. Whether or not you want to send comments on the IFRS is your choice, but this proposed standard may be one worth taking a look at to see potential changes that FASB might consider in the future.

New Year’s Resolutions

After last year’s soapbox, I thought it would be good to get back to a simple top 10 list à la David Letterman (showing my age to those younger readers). So, without further fanfare, here is my list of resolutions all CPAs make and then quickly break each new year.

After last year’s soapbox, I thought it would be good to get back to a simple top 10 list à la David Letterman (showing my age to those younger readers). So, without further fanfare, here is my list of resolutions all CPAs make and then quickly break each new year.

10. I will take some CPE every month so that by the time my birthday or the end of the year rolls    around, I will already comply with my state’s CPE requirements.

9. I will reread my emails before I send them out to make sure they are free from silly mistakes and typos.

8. I will give timely feedback to my staff when they do something well or need to improve.

7. I will incorporate exercise into my schedule, even if it is just a 20-minute walk at lunch, each day no matter how busy I am.

6. I will say no to a new project, client or request for my time at least once a month.

5. I will not look at email at least one whole day while I am on vacation.

4. I will spend 15 minutes at the end of each day clearing my desk and planning so I can start the next day productively.

3. I will eat lunch with someone else at least twice each week. Maybe I can also hit Resolution #7 by walking to lunch with the person!

2. I will not multitask during conference calls so I know what is said and don’t have to ask people to repeat the question.

1. I will not wish ill will on the members of FASB despite having to deal with the new CECL standard!

What other resolutions do CPAs need to make and which ones do you think we will be able to keep this year?