by Daniel Kittell | Accounting News, Debt, Financial goals, News
With inflation at an all-time high since the 1980s, more Americans are living paycheck to paycheck and sinking further into debt. If you’re trying to get out of debt, you’re not alone. Creating a plan is possible, and you don’t need to start off with a bang. Here are some practical steps you can start today to help set you on the path to becoming debt free.
Decide on a Debt Payoff Strategy
Here are a few proven approaches to boosting the speed of your debt payoff:
- Debt snowball: This strategy focuses on paying off your smallest debt first while continuing to pay the minimum monthly amount on all others. Once your first debt is paid off, you roll the amount you had been paying on that debt into payments on the next largest debt. You continue this method until your last and largest debt is paid off. This approach can be effective if small wins motivate you to keep going.
- Debt avalanche: This strategy tackles the debt with the highest interest rate first while continuing to pay the minimum monthly amount on all others. Just like the snowball method, once your debt with the highest interest rate is paid off, you roll that amount into payments on the debt with the next highest interest rate, and so on. This approach can be effective if you’re worried about high interest rates as it may help save money over the course of your debt repayment plan.
- Debt consolidation: This strategy involves rolling all debt into a single new one, ideally at a lower interest rate. This helps to make payments more streamlined, and could possibly shorten your payoff timeline. You can consolidate debt with balance transfer cards and personal loans. This approach can be effective if you’re overwhelmed by the number of debts and payment dates to keep track of.
- Debt management plan: This strategy involves working with a nonprofit credit counseling agency. They can set up a debt management plan to help decrease your interest rate and get you started on a repayment plan. This approach can be effective if you have substantial credit card debt and haven’t made much progress in paying it off.
Tally Your Debt
Once you have an idea of the approach you want to take in paying off your debt, you need to take a deep dive into your accounts. Gather the most recent statements from all your loans and credit cards, and make an inventory of your debts. List each debt with the following information:
- Creditor name
- Current balance
- Due date
- Minimum monthly payment
- Interest rate
- Target date for a zero balance
Once you have all that cataloged, determine your monthly total in debt payments. Note that for credit card payments, if you’re not paying them in full each month, you’ll want to specify the minimum monthly amount due.
Build a Budget
First, get precise with your income, including side hustles, seasonal work, etc. Knowing how much you’re brining in each month from all sources of income helps to paint a clear picture of the available funds to spend. Next, add up your monthly expenses. This needs to include both essential expenses (mortgage, utilities, etc.) and discretionary expenses (typically optional purchases). Once you know your monthly income and expenses, you’ll know how much you can devote to paying down debt.
One way to boost your debt repayment journey is to scale back to a bare-bones budget, focusing on just housing, food, utilities, transportation, and bills while eliminating all discretionary expenses. If you go with this budget style, remember that it’s not forever, and the end goal will be worth it.
Cut Back on Spending
Many of us can’t do a hardcore bare-bones budget, but we can find ways to cut back on spending. Check your online subscriptions, streaming services, gym memberships, etc. How can you lower these costs, or cut them out altogether? Try preparing meals at home and bringing a sack lunch to the office. Keep an eye on water and electricity usage. Try to negotiate lower rates for insurance and cell service. The more you can scale back on spending, the more “found” money you’ll have to put toward debt.
Increase Income
If you find that you’re doing everything you can to tighten your financial belt and still barely making a dent in your debt, it might be time to consider increasing your income. While taking a second job is a viable option, you could also consider taking the initiative to ask for a raise from your employer, especially if it’s been a while since your last pay bump and your work performance has been consistently on point. However, if you’re new to the company or your position, it would be wise to hold off on this approach.
Additionally, side gigs such as dog walking, driving for companies like Uber or Door Dash, babysitting, and cleaning can all help to bring in extra income, and you can work around your full-time job. Also consider selling items you already own on reselling platforms like eBay, Poshmark, Mercari, and Facebook Marketplace.
Lower Your Interest Rates
Lowering your interest rates would allow you to put more funds toward paying down debt. Here are a few approaches:
- Balance transfer: A balance transfer allows you to shift debt from one account to another, ideally one with a lower interest rate. Many balance transfer cards offer a 0% APR for a limited amount of time. Moving high-interest debt to a credit card with 0% APR can help you knock down that debt at a much fast clip than sticking with a card with a high APR.
- Consolidate debt: Debt consolidation involves combining multiple debts into a single monthly payment. Many creditors offer debt consolidation loans, which are created specifically for paying off debt. Their terms typically specify a repayment period with a fixed interest rate.
- Negotiate a lower rate with creditors: Some creditors will work with you to come up with a repayment method that might better help you meet your goal. This could be a reduced interest rate or a smaller minimum monthly payment. Not every lender will offer to help, but it’s worth the inquiry.
Debt repayment is usually a journey, not a sprint, but the steps outlined above can help to pay off debt faster. The sooner you start, the sooner you’ll be debt free.
by Daniel Kittell | Accounting News, Healthcare, Industry - Healthcare, News, Uncategorized
Medical debt in the United States outpaces student loans, auto loans, and credit card debt. And with more financial responsibility falling on the patient than ever before, healthcare practices are being forced to come up with new ways to collect money owed — for profitability, but also for patient flexibility in order to incentivize patients to seek the care they need without fear of how it will affect their pocketbooks. Below are some successful, reliable methods for improving payment processes while providing convenience and options for patients.
Flexible Payment Options Are a Post-Pandemic Reality
The Covid-19 pandemic accelerated the move to more digital payment options for patients. Contactless payments were safe during the height of the pandemic, but they’re also convenient. Online portals, mobile apps, and mobile wallets allow patients to pay their medical bills quickly and safely without needing to stop by the office or wait on a phone call during specific business hours. Here’s how flexible payment options help greatly in retaining satisfied customers.
They Address Patient’s Financial Needs While Also Benefitting Providers
Flexible payment options include methods like splitting large balances into manageable monthly installments, and offering lump-sum discounts or automatic recurring payment plans. Not only does research back the success of these methods in collecting payment from customers, but flexible payment options also reduce bad debt and boost patient loyalty.
Digital Payment Options Translate to Quicker Payment Collection
Digital payment methods are fast and simple, and research backs that patients pay their medical bills more quickly when prompted via digital notification such as text, email, or automated phone call rather than through regular mail. When you send quick reminders through familiar digital platforms that patients already use, the result is typically quicker payment collections and fewer outstanding balances.
Reduce Paper Waste
The cost of healthcare billing can be cut drastically by moving from paper statements to digital reminders. Flexible payment options eliminate the need to over-send paper billing statements. For instance, implementing a card-on-file option can provide a way to process an outstanding balance with a patient’s stored credit card once insurance claims are determined. Additionally, many online payment solutions include email billing reminders, giving providers the opportunity to prompt collection of payments from one platform.
By leveraging technology to implement digital and automated payment methods, healthcare organizations can boost efficiency, cut billing expenses, and allow staff more breathing room to concentrate on improving patient experiences.
by Daniel Kittell | Accounting News, IRS, News, Tax, Tax Planning - Individual
On August 16, 2022, President Biden signed into law the Inflation Reduction Act. It’s a wide-sweeping bill that addresses climate, health care, and some mix of tax breaks and tax hikes, as well as additional funding for the IRS. Below you’ll find a summary of how the Inflation Reduction Act could affect you.
Health Care
Funding for the Affordable Care Act (ACA) was due to expire at the end of 2022, but the Inflation Reduction Act extends funding through 2025. This will allow eligible individuals to continue to purchase insurance with lower premiums through the federal Health Insurance Marketplace.
The Inflation Reduction Act also extends the temporary exception from the American Rescue Plan Act (ARPA) that allows taxpayers with incomes above 400 percent of the Federal Poverty Level to qualify for the Premium Tax Credit (PTC). The PTC makes health insurance more affordable by helping eligible consumers pay premiums for coverage purchased through the Health Insurance Marketplace. To get this credit, you can claim the PTC on your tax return, or you can choose to have amounts paid directly to the insurance provider as long as you qualify for advance payments of the premium tax credit.
Energy Efficient Home Improvement Credit
Previously known as the Nonbusiness Energy Property Credit, the renamed Energy Efficient Home Improvement credit was extended through 2032. Beginning next year, the credit will be equal to 30 percent of the costs of all qualified home improvements made during the year. Furthermore:
- A $1,200 annual limit on the total credit amount will replace the current $500 lifetime limit.
- Annual limits for particular types of qualifying home improvements will be as follows:
- $150 for home energy audits;
- $250 for any exterior door ($500 total for all exterior doors) that satisfy appropriate Energy Star requirements;
- $600 for exterior windows and skylights that meet Energy Star most efficient certification requirements;
- $600 for other eligible energy property, including central air conditioners; electric panels and various similar equipment; natural gas, propane, or oil water heaters; oil furnaces; water boilers;
- $2,000 for heat pump and heat pump water heaters; biomass stoves and boilers. This group of upgrades is not restricted by the $1,200 annual limit on total credits or the $600 limit on qualified energy property; and
- Roofing and air circulating fans will no longer be eligible for the credit.
So, if you stretch your qualifying home projects over a few years, you can claim the maximum credit each year.
Electric Vehicle Tax Credits
The Inflation Reduction Act extends the Clean Vehicle Credit for ten years — until December 2032 — and creates new credits for previously-owned clean vehicles and qualified commercial clean vehicles. Taxpayers can qualify for a credit of up to $7,500 for a new electric car or $4,000 for a used one. However, in order to qualify for the tax credit, electric vehicles must be assembled in North America, and the Biden administration has already prepared a list of 20 EVs that qualify.
IRS Funding
The Inflation Reduction Act also includes about $80 billion of additional funding over ten years for the IRS. The exact plans for those funds aren’t clear yet, but we know that $25 billion is intended to improve IRS operations. Additionally, law makers anticipate that the IRS would use $45 billion of the funds to improve tax enforcement. This could include expanding staff and modernizing outdated processing systems.
by Daniel Kittell | Accounting News, Industry - Professional Services, News, Professional Services
Positive cash flow is obviously critical to the growth and survival of any company. With technology ever-advancing, professional services firms are tasked with refining sales processes, improving transparency, streamlining core operations, and maintaining flexibility when forecasting strategic moves in order to thrive. Without positive cash flow, none of that is possible. Here are ways to increase cash flow for a financially healthy business.
Invoice for Completed Work as Soon as Possible
The terms in your contracts with clients should include progress payments in accordance with reasonable milestones. This offers a sense of financial protection for your clients while ensuring your firm remains cash-flow positive. If you’re working with a repeat customer on a new project, you may be able to bill for more up front. After all, you want to turn your services into cash as soon as possible. Just be sure that your receivables department aligns with your payables department. You want to be sure you are billing your customers at the same rate your vendors are billing you so that the money coming in covers or exceeds the money going out.
Use Project Accounting Software for Accurate Billing
Invoices that contain errors need to be re-issued, which is time and money lost, or at least delayed. Delayed money can disrupt your collection cycle, and you run the risk of looking unprofessional to the client. You can use project accounting software, which allows for reviewing and editing details prior to approval, to eliminate rework and catch any errors. This ensures that the customer receives an accurate invoice they can quickly approve, which translates to quicker payment for you.
Optimize Team Utilization
An underworked staff equates to lost money, so be sure every employee is valuable and needed. Also think about cross-training staff and hiring contractors who have variable-based compensation arrangements. Both of these moves will help to keep payroll costs under control. Finally, no matter how swamped you are with projects, it’s important to stay the course on your sales and marketing plan. Putting a pause on sales and marketing efforts even for a short period of time will have negative consequences for your cash flow down the road.
Aim for a Mix of Small and Large Contracts
Large contracts are a boost for your bottom line, but they don’t come without issues. Payment timelines get drawn-out, contract requirements increase, and resources are stretched. There’s no denying that large contracts can be game-changers, but smaller contracts will sustain your business, especially when you can retain repeat customers and apply standard processes.
by Daniel Kittell | Accounting News, Industry - Veterinary Medicine, News
It’s no secret that inventory costs, payroll demands, and overhead expenses are climbing due to inflation, supply chain issues, gas price hikes, and a broad staffing shortage. Thus, prices are going to need to increase in order to maintain profitability and stay afloat. Read on for industry-specific challenges and how to solve them while remaining dedicated to offering quality care.
Trim Payroll Expenses
Day-to-day practice management continues to be affected by staff shortages, a competitive hiring environment, and higher payroll expenses. You’ll need to make the judgment for your own practice about trimming payroll. It may mean cutting some hours for staff whose jobs can be done in a shorter amount of time, or it may mean letting go of staff whose contributions no longer serve your practice.
Reduce Inventory Overabundance
Pricing is higher in just about every category. Any steps you took to prepare for expected higher expenses likely didn’t cut it, and your bottom line is feeling the effects. Think about the medications you offer, and rather than trying to stock a small pharmacy, pick just a handful that are most in demand, and that the majority of your staff can get behind.
Offer More In-House Services
While now might be a good time to scale back your in-house pharmacy offerings, it could be an optimal time to invest in new equipment so you are able to offer more services to your clients. Think about lab services that you’ve been neglecting or outsourcing: cytology, urinalyses, and fungal cultures to name a few.
Raise Prices
Increasing prices can be tricky, and it can be done incorrectly, so you need to be thoughtful about how to go about raising prices. The last thing you want is for clients to feel that you’re insensitive to their financial reality. You’ll want to pinpoint areas where it’s defensible to raise fees by just a small amount. This will vary across practices, but even a small amount can make a difference. For instance, given today’s supply chain issues and energy costs, it makes sense to focus on items and services that rely on transportation and energy consumption. Whatever your focus, forgo large fee hikes for small and steady increments.
Show Appreciation for Clients
Make sure your clients know that despite the current rocky economy, your priority is to serve them and their pets with the high quality of veterinary care they’ve become accustomed to when they visit your practice. Most clients will understand that in order for your doors to stay open, prices may need to inch up. Still, you’ll want to show appreciation for a client’s loyalty and the opportunity to care for their pet. You can also instruct staff to share information about preventative care plans, pet insurance, and third-party financing to help pet owners handle the cost of care.
