Category: Uncategorized

Preface: This blog is intended to address tax audit concerns regarding the IRS’s continuing campaign to identify and shut down tax shelters, many of which involve transfers of rights or property to foreign entities. In recent years, offshore asset reporting has become one of the IRS’s primary areas of focus as it seeks to increase tax revenue.

The Inherent Risks with Dubious Tax Practices

In 2010 Congress addressed the significant issue of international tax compliance, enacting the Foreign Account Tax Compliance Act (FATCA). FATCA imposes more stringent reporting requirements and, in many cases, increased tax liability on U.S. taxpayers—many of whom are corporations—with investments in offshore accounts.  Since then, the Treasury Department and the IRS have issued new regulations to implement FATCA and its reporting and disclosure regime.

The IRS is cracking tax shelters in other ways as well. Many employees of publicly traded companies are taking advantage of the tax whistleblower provisions of the Tax Relief and Health Care Act of 2006, which often enable the IRS to provide a hefty reward to those who report tax evasion.  Additionally, the Treasury Inspector General for Tax Administration has recommended that the IRS improve its audits of small corporations, meaning that corporations with assets of $10 million or less may begin to feel a squeeze from examiners in upcoming tax years.

FATCA

In addition to requiring certain U.S. taxpayers holding financial assets outside the United States to report them to the IRS, FATCA generally require foreign financial institutions to report certain information about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. Non-compliant foreign financial institutions could be subject to a 30% withholding tax on all U.S. sourced payments.

The IRS has stressed its intent that FATCA be a reporting regime rather than a penalty regime, and that it is eager to work with industry professionals and experts into ease the law into implementation. Nevertheless, the effect of FATCA on corporate offshore tax shelters is meant to be severe on the numerous abusive tax shelters that take advantage of lower or non-existent corporate income tax rates abroad through the dubious transfer or licensing of assets.

Other Initiatives

The whistleblower rules encourage individuals to report any tax abuses or corporate fraud through generous reward offers. In 2012, the IRS paid out its largest award, more than $100 million, to an individual who disclosed tax evasion by a foreign bank.

The IRS has also maintained its campaign against dubious accounting and law firms that design or promote tax shelters. The “anything goes” attitude of past years ago is a long faded memory. And while the IRS has been enforcing the law, Congress is looking to close as many dubious loopholes as possible to prevent tax evasion. IRS examiners are still directed to look for the checklist of characteristics common in abusive corporate tax shelters. These include:

• A reported transaction has no business purpose or economic substance other than to minimize taxes;
• Investments made late in the tax year that indicate there may be deductions for prepaid expenses that are not allowable.
• A large portion of the investment made in the first year indicates the transaction may have been entered into for tax purposes rather than economic motivation.
• A loss exceeding a taxpayer’s investment indicates the possibility of a nonrecourse note.
• If the burdens and benefits of ownership have not passed to the taxpayer, the parties have not intended for ownership of the property to pass at the time of the alleged sale.
• A sales price that does not relate comparably to the fair market value of the property indicates the value of the property has been overstated.
• If the estimated present value of all future income does not compare favorably with the present value of all the investment and associated costs of the shelter the economic reality of the investment may be questionable.

Entrepreneurs should be concerned that the IRS’s focus on dubious  tax shelters will mean increasing scrutiny of other aspects of their business operations as well. Others want to undertake internal protective audit steps to set up a strategy against IRS involvement before the IRS sends out audit letters. If you would like a further analysis of how the IRS targets on tax shelters may affect you and your business, directly or indirectly, please do not hesitate to call. You are now aware that dubious tax practices are increasingly subject to audit risk.

What Employment Risks Entrepreneurs Should Be Aware of With Minors Onsite.

Preface: This week a memo from Jeff Worley of GKH, with regards to Child Labor Laws in Pennsylvania.

A Partner a GKH, Jeff practices in the areas of employment law, business law and general litigation. Jeff is a member of the firm’s Advocacy Group and Corporate Practice Group.

In the area of employment law, Jeff has extensive experience counseling employers in the context of employment–related litigation as well as general employment counsel and litigation avoidance. Representative matters include employee discipline and termination, workplace harassment, disability accommodations, FMLA leave and drafting employment policies and employment agreements.

Jeff is a graduate of Lancaster Mennonite High School and lives in East Hempfield Township with his wife and two children.

 

Click the following link to access the memo

Child Labor Laws 2.23.18

Preface: With tax season in progress, entrepreneurs want to maximize tax deductions.  The tax treatment of deductible meal expenses varies, and proper categorization of bottled water or those chicken nugget expenses makes your tax filing more accurate. Consider discussing with your accountant sooner rather than later what meal expenses you have, and how to categorize them for financial reporting, because this blog is only an introduction to expensing business meals:

Subway Expenses: And Say Can You Deduct Business Meals?

Credit: Jacob Dietz, CPA

Does your business buy meals for employees and customers? The tax law treats meals differently, depending on the circumstances, and the new tax reform law changes treatment for some meals. This blog explores the treatment for certain meals.

Meals on Premises for Convenience of Employer

An employer may deduct 50% of the cost of meals provided on its premises for the convenience of the employer. For example, suppose ABC Store, LLC runs a huge sale for a week, and their peak sales time is 11 AM to 1 PM. The store wants to have its employees take a short lunch so that the employees can maximize their time on the floor selling to customers. ABC brings in pizza each day of the sales week so that the employees can get back to work in 15 minutes. ABC provided the meals on its premises for its own convenience, and they will deduct 50% of the cost on its tax return. In the past the expense was 100% deductible, but starting in 2018 it is only 50% deductible.

Meals while Traveling

Meals while travelling are generally 50% deductible. For example, suppose there is a 2-day product show in another state, and you send employees to the show with your product. They buy some food while at the show. You deduct 50% of the cost of those meals.

Meals with Clients

If you take a customer to lunch to discuss business, that is still 50% deductible. For example, suppose you take a customer to the local diner and finalize some details of what they will purchase from you. The diner invoice is $30. You deduct $15 on your tax return. This deduction stays the same as it was in the past.

Holiday Banquets and Company Picnics

Some companies enjoy a holiday banquet, such as for Thanksgiving or Christmas. The food for those banquets is 100% deductible. The food for company picnics is also 100% deductible.

The tax treatment of food varies, and proper categorization of food expenses makes your tax filing more accurate. Consider discussing with our  firm sooner rather than later what meal expenses you have, and how to categorize them for financial reporting.

Preface: Featuring Nevin Beiler, Esquire this week, a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. In a three segment series, you have the opportunity to learn how competent legal counsel can lead to more rewarding decision making, e.g. applied to estate planning counsel.

Seven Common Mistakes in Estate Planning—And How You Can Avoid Them (Segment III)

#5. Failing to Properly Fund a Living Trust

Revocable living trusts are a popular estate planning tool that can provide significant benefits for some (but not all) people. Potential benefits include (1) simplifying the probate process, especially for a person who owns real estate in more than one state; (2) possibly saving money on legal fees and probate costs; (3) allowing for easier property management if the grantors of the trust become incapacitated; and (4) avoiding having all the details about the grantors’ estate being filed as a public record (as is done with a will).

Living trusts, while often beneficial, require extra steps to properly document and implement. Something that is commonly missed after an attorney prepares a living trust is the essential step of transferring assets into the living trust (called “funding” the trust). For example, to transfer a home or business property into a trust, a deed must be executed. Failing to fund a living trust means the trust will not function like it was supposed to.

If you have created a living trust in the past, or decide to create one in the future, it is very important that all assets that are supposed to be in the trust are actually transferred into the trust. Some attorneys do a good job of ensuring this is done. Others seem content to collect a fee for drafting the trust without following up to ensure that the trust is properly funded. Make sure you confirm with your attorney that all assets have been appropriately transferred, and if you purchase a major asset (such as real estate) in the future, you should consider putting it directly into the trust.

#6. Not Considering How an Inheritance May Affect Those Who Receive It

Professionals working in the estate planning field generally assume people want to leave all their assets to their children, with perhaps a small amount left to charitable purposes. There is great emphasis given to preserving and passing along family wealth. This might seem like the normal thing to do, but is it the right thing? Obviously, the answer is not going to be the same for everyone. Many people would probably agree that winning millions, or even several hundred thousand, in the lottery can be harmful to a person’s work ethic and spiritual well-being. But those same people may not think twice about leaving a multi-million dollar estate to their adult children who are already financially self-sufficient.

For Christians who seek to follow the teachings of the Bible, failing to give any thought to “how much is too much” when leaving behind a sizable estate to their children can perhaps be the biggest financial mistake of their lives—because it can have eternal significance. The Bible clearly does not encourage heaping up wealth, but instead warns of the dangers of riches (e.g. Matt. 6:19-20; Mark 10:23-25; Luke 16:13; 1 Tim. 6:9-10). While a reasonable amount of inheritance may be a blessing to children, too much can potentially cause serious harm. Take the time for careful thought and prayer about who should receive your assets when you are gone. Consider getting counsel from other people such as trusted friends or church leaders, not just your attorney or financial advisor.

#7. Not Obtaining Good Legal and Tax Counsel

Many of the above mistakes can be avoided by seeking trusted and competent legal and tax counsel to assist in the estate planning process. Unfortunately, with the availability of low cost or free will templates and other legal documents, “doing it myself” becomes a tempting option. Some people with small, simple estates have been able to successfully draft and sign their own wills that ended up working just fine. But many others that tried to do it themselves ended up costing their family much more (in money and headaches) than it would have cost to do it right the first time.

Unfortunately, going to an attorney for assistance does not always mean that everything will be done right. Some attorneys offer estate planning services, but know little more than the basics of estate planning. Others are so busy that they fail to take the time necessary to work with clients before and after the estate plan is signed, which may result in substandard work. When hiring an attorney to assist with estate planning, make sure that at least a significant part of that attorney’s legal practice involves estate planning. This will increase the likelihood that the attorney has more than a basic understanding of the estate planning process.

Also, make sure the attorney takes the time to understand your goals and values, so that the plan drafted by your attorney is consistent with those goals and values, and so that the attorney’s advice does not lead you astray. Finally, consider involving your tax adviser in the estate planning process so that you can avoid unpleasant tax surprises. While the best estate planning attorneys have a strong understanding of relevant tax issues, many attorneys do not. Having your trusted legal and tax advisors work together can add an extra layer of protection and quality for your plan.

Conclusion

The foundation of estate planning is good stewardship and love for people. It is being responsible and caring for those we leave behind. It is also, for many of us, a lifelong process. Take time to plan. Update your plan as your life changes. Communicate. Organize your affairs. Seek counsel. Learn from the mistakes of others. And may God bless you in your journey.

Nevin Beiler is a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. Nevin is part of the conservative Anabaptist community and is passionate about practicing law in a way that builds the Kingdom of God and is consistent with the Anabaptist faith. He lives and works in Lancaster County, PA, and can be contacted by email at nevin@beilerlegalservices.com or by phone at 717-287-1688.

Preface: Featuring Nevin Beiler, Esquire this week, a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. In a three segment series, you have the opportunity to learn how competent legal counsel can lead to more rewarding decision making, e.g. applied to estate planning counsel.

Seven Common Mistakes in Estate Planning—And How You Can Avoid Them (Segment II)

By Nevin Beiler

“You must learn from the mistakes of others. You can’t possibly live long enough to make them all yourself.” – Samuel Levenson.

#3. Not Organizing Records Prior to Passing Away

We all live with varying levels of organization in our lives. Some people can live quite happily in a rather disorganized state. They can mostly remember what things are stored where, and can usually find a bank statement or deed without too much paper shuffling. The problem arises when a completely new person suddenly has to manage all the affairs of a disorganized person. This is essentially what happens in many cases for executors. A disorganized estate can be a major headache for an executor, and can significantly increase legal fees if an attorney is needed to assist with more of the administration. Even if organizing your records does not seem worth it to you personally, consider those who are coming after you.

As you get older, consider consolidating your financial accounts. Do you have multiple bank accounts, investment accounts, or IRA accounts with different companies? Consider consolidating them. If there is the possibility of adverse tax or management issues, consult with tax or legal counsel prior to the consolidations. Leave written instructions for your executor explaining where all your financial accounts are held and where your important records are located.

Ensure that your executor has access to important your records. If you have financial records on a computer that is password protected, make sure your executor can obtain the password. The same goes for online accounts. Make sure your executor knows about any safe deposit box you might have, and how to access it. If you have made private loans to other individuals, make sure there is adequate documentation for all those loans, including the current balance. If you want any of those loans to be forgiven upon your death, ensure the loan documentation or your will specifies this (don’t relay on just verbal agreements!). Taking a few hours to organize your records will likely save your executor many times that amount of time, and perhaps hundreds or thousands in legal fees.

#4. Not Coordinating Non-Probate Assets with the Overall Estate Plan

Many people believe that a will is to be carried out exactly as written, but wills have limitations when it comes to controlling the distribution of assets. For example, a will can only direct who gets assets that go through the probate process. Examples of assets that typically do not go through the probate process include the following:

​

1. Real estate that is held in joint tenancy with a right of survivorship (with anyone), or as tenants by the entirety (with a spouse).
2. Assets that have a valid “payable on death” or “transfer on death” designation.
3. Financial accounts such as IRAs, 401(k)s, or life insurance policies, that have a valid beneficiary designation.
4. Jointly owned bank accounts.
5. Property held in a revocable living trust.If a will tries to direct that an asset from the list above be given to a certain person, that attempted gift will usually fail. Instead, the asset will go to the joint owner or designated beneficiary. For example, consider a married man who owns a rental property jointly with his brother, with a right of survivorship (meaning the property will avoid the probate process and go directly to the joint owner). If the man dies first, his brother will automatically become the sole owner of the rental property, even if the man’s will directs that his share of the rental property should go to his wife. This is also a common problem with IRA or other retirement accounts, where the will might try to divide the account equally among certain heirs, but a beneficiary designation on the account leaves it all to one person (such as the oldest child or a sibling who is the executor). This would defeat the intent of the will, causing the named beneficiary to end up with an unintended share of the inheritance. Some IRA accounts contain hundreds of thousands, even millions, of dollars. Even if the beneficiary decided to “do the right thing” and voluntarily shared the account with the intended heirs as stated in the will, the tax consequences could be unpleasant. To avoid this problem, review your estate plan to ensure that your property ownership and beneficiary designations are all consistent with your overall estate plan, and that your non-probate property will end up where you want it upon your death.

Nevin Beiler is a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. Nevin is part of the conservative Anabaptist community and is passionate about practicing law in a way that builds the Kingdom of God and is consistent with the Anabaptist faith. He lives and works in Lancaster County, PA, and can be contacted by email at nevin@beilerlegalservices.com or by phone at 717-287-1688.

Preface: Featuring Nevin Beiler, Esquire this week, a a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. In a three segment series, you have the opportunity to learn how competent legal counsel can lead to more rewarding decision making, e.g. applied to estate planning counsel.

Seven Common Mistakes in Estate Planning—And How You Can Avoid Them (Segment I)

By Nevin Beiler, Esquire

“You must learn from the mistakes of others. You can’t possibly live long enough to make them all yourself.” – Samuel Levenson.

We all appreciate when we can learn from the mistakes of others, because avoiding those same mistakes can save us a great deal of money and heartache. It is no different when it comes to estate planning. It pays to learn from those who have gone before us.

To help you get started on your estate planning journey, or to assist with your current plans, let’s look at some of the common mistakes people make when it comes to estate planning, and what you can do to avoid these mistakes.

#1. Failing to Plan

Doing nothing is probably the most common mistake people make when it comes to estate planning. Everyone should have a plan, not just the old or wealthy. Doing nothing is easy and cheap—until you are gone and your heirs are left with a mess to sort out. If a person dies without a will, the law provides a court-supervised process to distribute assets, and a judge appoints someone to administer the estate and someone to be a guardian for minor children, but what a judge chooses is not always what the deceased would have chosen.

Consider the following scenario: A middle-aged man dies and leaves a wife and three young children. He did not have a will, but he always told his wife that if he died she could sell his business and live off of the proceeds of the sale until she finds a way to make a living. The business eventually sells for a liquidation price of $400,000, but the widow discovers that under the laws of Pennsylvania she is entitled to only $215,000. The children equally split the remaining $185,000, and a guardianship is established to manage the children’s inheritance until they turn 18. Also, the husband had purchased the family home before they were married, and the wife’s name had never been added to the deed. This means that the children are also entitled to own a portion of the home, rather than the widow owning it outright. A simple estate plan can avoid this complicated result, and ensure that the husband’s wishes are carried out.

Even if a married couple owns all assets jointly, and therefore the surviving spouse can receive everything, some simple planning is still important. In the event both parents pass away, a plan can ensure their children will be cared for by trusted caregivers, not whomever a judge decides to appoint as guardian. Also, a plan can reduce the chance of siblings, children, or in-laws fighting in court about what should happen to children or assets. Furthermore, having a plan in place usually means that administering an estate after death requires less work and is less expensive.

Discussing your goals with a trusted estate planning attorney can help you think through the unique challenges of your situation and adopt a plan that will be a blessing both to your heirs and to your peace of mind. And then, don’t forget to periodically review and update your plan as necessary. Remember, failing to plan is planning to fail.

#2. Not Communicating About Plans While Living

Adopting an estate plan early in life, and then updating that plan throughout life as circumstances change, is a great first step. But don’t forget to communicate your plan to your heirs and key people like executors and guardians. This can avoid surprises and hurt feelings later on.

Prior to naming someone to serve as guardian of your minor children, it is important to discuss this appointment with them to ensure they are able and willing to serve. Also, talk to your executors to ensure they feel comfortable in that role, and that they know where to get help if they need it. If the people you name are not able or willing to serve, then naming them in your will is useless.

Also, consider having a family meeting with all your heirs to discuss your plans for your estate. If you are not comfortable sharing all the details, you do not need to, but be as open and detailed as you can. Discussing your plans with your heirs can avoid unpleasant surprises and conflict down the road. It can help reduce misunderstandings that can arise after you are gone, and might raise some issues that you missed in your plans that can then be addressed before you pass away.

Many people are raised in a setting where estate plans, and money matters in general, are not often discussed and perhaps take on an air of secrecy. However, this can be harmful to relationships if it results in disagreements or unmet expectations later on. Make the effort to communicate.

Nevin Beiler is a PA-licensed attorney who practices primarily in the areas of estate planning, business law, and nonprofit law. Nevin is part of the conservative Anabaptist community and is passionate about practicing law in a way that builds the Kingdom of God and is consistent with the Anabaptist faith. He lives and works in Lancaster County, PA, and can be contacted by email at nevin@beilerlegalservices.com or by phone at 717-287-1688.

 

Preface: Cash basis accounting is applicable to certain construction businesses and other qualifying enterprises. When applicable, cash basis tax accounting can provide certain tax benefits. While retail and wholesale business are required to account for inventory with accrual accounting, cash basis is simple and taxes only income on cash received.

Cash Basis

Credit: Jacob M Dietz, CPA

The cash basis of accounting is an accounting method that determines when a taxpayer should report income and expenses. Correctly using the cash method can avoid trouble in an audit. Cash basis taxpayers generally report income when received and report expenses when paid. There are various exceptions and rules, however, and this blog explores some of them.

Income

Cash basis taxpayers report income when it is received, even if the income was only constructively received. The IRS states that “Income is constructively received when an amount is credited to your account or made available to you without restriction.” What are some examples of cash receipts?

1. Cash is handed to you or your employee
2. A check arrives in the mail on December 28th
3. A check is handed to your employee
4. A customer pays with a credit card, and the amount is electronically deposited into your bank account
5. A customer writes you a check on December 31, and tries to hand it you as payment for their purchase

In all these examples, and there would be more we could list, the cash basis taxpayer received the income and should report it on the tax return. It doesn’t matter if the money made it to the bank or not. What if the taxpayer refused to take the check offered by the customer in example 5 and told the customer to mail it next week? It should still be reported as income for the year because the taxpayer had full control of it.

The cash basis taxpayer reports income received even if the taxpayer didn’t completely earn it yet. For example, suppose you are working on a construction project, and are almost finished at the end of the year. You plan to come back for one day in January to finish. The homeowner happens to see you, and hands you a check for the final payment on December 31. That check should be reported as income, even though you still have some more work to do in January to fully earn it.

Deposits

There is an exception to reporting income for certain payments, such as a security deposit. Suppose a tenant gives you a security deposit. According to the contract you signed with the tenant, you will hold that deposit in an escrow account and return it to them at the end of the lease. In that situation, a cash basis taxpayer would not need to recognize the deposit as income.

Expenses

Taxpayers generally deduct expenses when paid under the cash method. Assume a taxpayer receives a bill in the mail for utilities in December, but doesn’t pay it until January. The taxpayer takes the deduction in January.

If a taxpayer uses debt, such as a line of credit or bank credit card to pay an expense, the expense is deductible when paid, not when the debt is repaid. For example, suppose a taxpayer uses a bank credit card to pay the utilities bill in December. The taxpayer then pays off the credit card in January. The utilities would be deductible in December when they were paid with the credit card.

Can a taxpayer prepay 5 years of expenses in one year, and deduct them immediately? No, the IRS has a 12-month rule that limits a deduction to amounts “that do not extend beyond the earlier of the following.

• 12 months after the right or benefit begins, or
• The end of the tax year after the tax year in which payment is made.”

Another notable exception is inventoriable products. Some expenditures are inventoriable, and cannot be deducted until the year sold, even if they are purchased in the year before sale. Inventoriable items are items that will be sold to customers.

The cash basis method is generally simpler than other methods of accounting. As you can see, however, even the cash basis has its quirks and exceptions. Understanding the cash basis helps taxpayers comply with the law while possibly still deferring some income tax.

This article is general in nature, and does not contain legal advice. Please contact your accountant to see what applies in your specific situation.

Trust-Based Selling – An Abbreviated Book Report for At-Work Entrepreneur’s

 Preface: Trust-based selling is far beyond common processes and laws of selling; it is in a fundamental fashion, the human spirit of selling. Trust-based selling is a people process; it’s about living and working [selling] with a set of core beliefs, values, and principles, gilding trusted behavior.

Trust-Based Selling – Segment II

Report Credit: Donald J. Sauder, CPA

Why should buyers easily trust sellers? Sellers objectives have one purpose often — to get a sale. Therefore, sellers most often do not have the buyers interest at heart. Trust-based selling is built on a foundation of true customer focus, collaboration, transparency, and a far sighted perspective. You cannot use trust as selling tactic, solely. Your customers are smart; they can see rather quickly whether sellers are wearing self-centered shades in the conversation, and they know intuitively, even if they can’t point to what’s wrong – that a seller usually cannot be trusted.

Trust is no easy matter because it based on beliefs and principles, not on techniques or processes. Trusted based selling is behavioral selling. Trust-based selling is matter of living your beliefs, values, and principles to behave in trustworthy manner. This requires consistent principled behavior, not a fabricated façade. [The behavioral selling principle rests well with certain groups of sellers, e.g. Amish business owners intuitively approach selling while living their personal beliefs, values and gilding principles – each day  {authors report note}.]

Collaborative approaches to selling are necessary to be successful with trusted based selling. Trusted seller need to pick-up the phone and ask what the buyer wants, and how you can help the buyer. Some sellers fear collaboration, they have too much ego, and can’t share the pie; or they fear lack of knowledge; fear collaboration will help competitors, or result in lower prices. These fears are only in the sellers mind, and not objective marketplace conditions.

A far-sighted perspective makes you willing to make certain investment in relationships, and obtain better data for a higher return on investment. Fear that there will not be an opportunity tomorrow or next year; or that they [the seller] could be taken advantage, i.e. how will I benefit; or fear of not getting the reward right here, right now, because it might not come up again; these are the results of a lack of trust. A lack of trust results in fear.

Transparency builds trust. Secrets breakdown trust. Being transparent and letting buyers into your business, and into your thinking — builds trust. Transparency removes doubt about motives, helps your clients know you’re telling the truth, builds your reputation; and since your flaws and strengths are evident in transparency, people can make sensible judgement about you. Clients reciprocate by being open and above board as you gain credibility.

It is not surprise that not everyone practices transparency. Yet, this is how you build a trusted-based selling relationship. After all, is it prudent to show all your selling cards to those on the other side of the table? Again, this transparency resistance is a result of fear. The courageous seller who doesn’t fear rejection, doesn’t fear losing control of a sale, or doesn’t fear helping competitors, will be perceived as an honest and trustworthy seller – and that my friend, is trust-based selling.

Buyers will trust you not solely on your ability to get things done; because trust-based selling it is not a business process or a business system. It business neutral. Trust-based selling is far beyond common laws of selling, it is essentially the human spirit of selling. Trust-based selling is a people process; it’s about living and working [and selling] with beliefs, values and principles gilding trusted behavior.

Trust-Based Selling – An Abbreviated Book Report for At-Work Entrepreneur’s

Using Customer Focus and Collaboration to Build Long-term Relationships, Charles H. Green, Copyright 2006

Preface: At last, a sales book based on how adult, intelligent people actually buy. An Important contribution that challenges the effectiveness of much of the current sales practice, and shows how to do it better. David Maister, Retired Harvard Business School Professor

Trust-Based Selling – Book Report Segment I

Book Report Credit: Donald J. Sauder, CPA

In order for successful customer relationships to work, sellers have to care – honestly and deeply – about customers. Successful, flourishing salespersons know the trick is easy – you have to care – honestly and deeply. The solution, simple to state, is hard to live.

Three pillar questions in great sales are 1. What do buyers really want? 2. Why don’t they say so? 3. Why, if selling expertise isn’t the best approach, is it the dominant one? Customers and clients make decisions based upon trust. The best businesses gain sales from the trust they develop with customers. What buyers really want is to buy from someone they trust. Trust is developed with understanding the customer needs, asking the right questions, and demonstrating expertise – rather than talking about it.

An appreciation for what is best for the client or customer, and putting their needs first, always leads to more benefit to you and your business than putting your needs or your business needs first, e.g. Is your solution the ultimate for the need of the customer, or simply your month’s sales quota?

Studies show that to achieve duplicative sales successes you do not even have to deliver on all the wants and aspirations; after all, customers don’t expect you to perform miracles. Yet, you must understand and appreciate them for who they are. You need to connect, understand and care. Customer care is the key phrase. Care includes paying attention, showing interest, exhibiting curiosity about things important to the customers, e.g. seat warmers for car shoppers, complaining about cold winter temperature.

Trusted based selling is about doing business in such a way that you’re worthy of the customer’s trust. You must be personable, and genuine; and let the customer experience or sample what it’s like to buy your goods or services.

What buyers really want – even when they don’t say so – is a seller they can trust.

Trust based selling require solid competence, credibility, and reliability; and most important a sense that the seller cares about what is best for the buyer. Trust based selling is built on helping the buyer make the best decision or the purchase.

Buyers are people. They have fears of missing something, fears of being ignorant, fears of making a bad decision, fears of being taken advantage of. Trust based selling, eliminates fear, and replaces it with the confidence; the confidence of having made a good decision, long after the decision occurs.

Here the benefits of building trust:

1. Reduces challenges to competitor purchases
2. Minimized challenges on pricing
3. Minimized being second guessed, or double checking of facts
4. Increases customer willingness to listen
5. Helps customers share information that is useful to the seller
6. Improves chances your phone calls will be answered
7. More forgiving attitude when mistakes are made
8. Customers will seek you out take your advice when buying
9. Help with exceptions to the rule as appropriate
10. Give you preferential status

Trust is no longer a commodity in business. Trust is becoming an invaluable resource.

Pressures from a competitive, seller centric marketplace, with a greater gain attitude, and the risks incorporated when working to build trust, all hinder successful sales.

Good salespeople overcome these obstacles and the reap benefits for their customers, and ultimately themselves too.

Trusted salespeople have always been valuable, and will become more valuable in the future.

Preface: Optimal levels of equity in business, are the result of fiscal discipline. High debt to equity ratio enterprises are subject the to credit risks outlined in the following blog.

Looking Into 2018 — Credit Slopes

Credit: Donald J. Sauder, CPA

Business history data provides a clear cyclical history. That history yet differs in the timeframes of the effective expansion and contractions in the economic forces of supply and demand, fueled with credit driven consumption and credit driven business investments. Looking at the fundamental driver of business strategy, e.g. increased revenue, increased profitability, standard revenue increases are the result of greater assets investment, and greater asset output. While output can increase, e.g. manufacturers produce more skis, the demand for skis must be sufficient to sustain the increase in the levels of production. During business expansion cycles, demand outpaces supply, encouraging the growth of production, i.e. more skis sold, and more income.

The business cycle of skis is a small sub-segment of the greater business environment, but easily comprehensible. For ski manufacturers to succeed, several market catalysts must be in place, 1. Snow 2. Interest in recreational winter activities, 3. Consumer capacity to enjoy. If alpine ski businesses powered the stock market, the higher the lift, the more exciting the black run.

David Stockman, former Reagan White House Budget Director and former Congressman, thinks the current business cycle will experience a fiscal calamity of Biblical proportions, a financial reset in future years. To quote Stockman, “The Central Banks realize they cannot keep printing money at these crazy rates, and by that I mean bond buying. Now they are going to have to normalize and shrink their balance sheet….by the end of 2018 it will $600 billion a year.

In understandable terms the artificial snow creation on at the Federal Reserve’s economic resort cannot last all year. They skiing has been great, and sooner or later, the slopes will vacate for summer. This is to say that the again, a credit driven economy, resulting from Federal Reserve balance sheet expansion, same as artificial snow creation, is perpetually unsustainable in most US States. The Federal Reserve has been printed money and purchasing bonds on an overtime schedule since 2008, thereby financing investments and taking the bond markets up the lift. This market effect is an interest rate to decline upto the present time.

What happens if that trend is sustained? Inflation occurs, and a decline of the currency value from the dilution of the aggregate Federal Reserve notes, causing imported purchase to increase in cost in a global marketplace.

Stockman’s concern is how the US will balance its budget, with a decrease in revenues, e.g. The Tax Cuts and Jobs Act, recently approved by Congress. “Were talking 2019…..You’re facing not in the distance future, and not in the by and by way down the road…in 2019 the next fiscal year….a 1.2 trillion dollar deficit”. Stockman says in the next recession, the US budget deficit will really increase. “The stock market operation on the illusion of permanently low, ultra-low interest rates,” Stockman continues.

When interest rates rise, will the business environment be sustainable, or will stock market and bond markets will collapse with a massive debt reset. Maybe not in 2018, but ski slopes will eventually vacate again with the typical seasonality of the business cycle. Start preparing for a return to business as usual if you’re skiing on credit at the Feds resort. That’s the gist of Stockman’s advice. It will require a longer time than anticipated for most businesses to get to bottom of slopes.

This blog is not to be construed as investment, legal or accounting advice. It is for informational purposes only. Please talk with your trusted advisors before making any decisions.