Monthly Archives: May 2017

Get Paid Sooner

One of the nice things about being a contractor to big business or government agencies is that you can assume that you will get paid and the check won’t bounce as long as you perform the work according to contract specifications.

What you can’t be so sure of is when you’ll get paid. Red tape and minor glitches can cause delays of six months or more between the time an invoice is supposed to get paid and when the check actually arrives.

Although there are some delays you have no control over, others can be prevented. Take these steps to minimize the chance for error so you get paid sooner:

 

  1. Make sure your bill includes necessary details, such as the purchase order or contract number, the name of the project, your company name, your employer ID (or social security number), your address and telephone number, a detailed list of products of services delivered (and the item numbers if appropriate), and the invoice price. Double check the purchase order to be sure that each item on your invoice matches what was specified.
  2. Get your contact to sign off that you have delivered the work as specified.Include that note with your billing. It’s also a good idea to include a copy of the purchase order with your invoice.
  3. Make any discount for early payment (say a 2 percent discount for payment in 10 days) prominently visible on your invoice. Big businesses may act sooner on such invoices to keep costs down.
  4. Submit the invoice exactly as your contract specifies. If the contract says to submit the bill to account payables, don’t send it to your contact. It might sit for weeks on his desk before he forwards it to the right department.
  5. Be sure your customers have a current W9 for your company. If you’re working with a business for the first time, ask them if their accounting department will need a W9 – or just send it automatically with your first invoice.

 

  1. Be willing to accept payment using whatever system your client prefers. For big corporations, that may mean you have to sign up on a platform like Paymode-x.
  2. If you are billilng a federal agency for work, be sure you know and exactly follow their instructions for submitting invoices. These instructions can be very specific and detailed (see the EPA’s instructions for submitting invoices, for example.) If you don’t follow the instructions exactly your invoice may be rejected.
  3. Be willing to accept direct ACH payments from larger customers. Yes, you’ll  have to provide the customer with your banking information, but you should be able to set things up with your bank so they can only transfer money in, not out. You could also set up a separate business account just for receiving ACH transfers, and then move the money out as soon as it’s received. That would keep your main operating account unaccessible to companies transferring money to you.
  4. Be willing to accept credit card payments and PayPal payments from your customers. Any processing fee you’ll need to pay may cut into your profits slightly, but chances are you’ll get paid sooner than if your customer has to send a check.  Some customers may not purchase from you at all if you only accept cash and checks.

Some Questions You’ve Wanted to Ask About Investing

As the saying goes, there’s no such thing as a dumb question—and that’s especially true when it comes to investing.

After all, putting your hard-earned dollars into an investment account isn’t the same as simply stashing it away in a checking or savings account.

You’ve got decisions to think about: What will I invest in? How do I manage my investments? What do I do if the financial news gives me the jitters?

Well, we’re glad you asked because a good way to learn about your finances is to fearlessly ask all of the things that make you scratch your head when you’re just learning to build a portfolio.

That’s why we’ve compiled ten of the most common questions we’ve heard about beginning investing, and then asked a few financial professionals to weigh in with some answers to help you boost your investing smarts.

1. Investing seems complicated. How do I get started?

The first step is to determine what you want to achieve with your investing, whether it’s in the short-term or long-term, says Hans-Christian Winkler, a CFP® with Seattle-based independent advisory firm ClaraPHI. Are you primarily saving for retirement, which means you may not access that money for decades? Or is there some other major goal, like an expensive dream trip, that you’d like to take in a few years?

Next, you should think about how hands-on you want to be with your investing, says David Blaylock, CFP® with LearnVest Planning Services. “And there’s no wrong answer to this,” he adds. “Ask yourself, ‘Do I want to get into the nitty-gritty, evaluating multiple investments, and agree to do that regularly? Or would I rather set it and forget it?’ ”

If you’re saving for retirement, for instance, you may choose to invest in a target-date fund, a type of mutual fund that automatically adjusts your investment mix based on your age and how soon you’d like to retire. If you want to be more hands-on, then you’d probably have to do more research on the types of investments that make sense for your timeline and risk tolerance, and consider rebalancing your portfolio as time goes by.

One thing you should keep in mind, however, says Blaylock, is that money in an investment account is typically better earmarked for a goal that’s at least five years away because you’re probably subjecting your money to some level of risk. Any shorter time frame than that, he adds, “and I would consider steering back toward safer investments, like a CD, savings account or bonds.”

Wealth Transfer Could Be Costly Blunder for Beneficiaries

Anyone who just inherited a deceased parent’s IRA or 401(k) could be about to commit a costly blunder.

You can take the money from that retirement account in one big lump sum, no matter how young you are, but that will trigger a tax bill – probably a hefty one.

“It’s tempting to take the lump sum, especially if it represents a huge windfall of cash for you,” says wealth management advisor Rebecca Walser of Walser Wealth (www.walserwealth.com). “But you should be aware it’s also a windfall for the IRS.”

Walser, a successful tax attorney and certified financial planner who specializes in working with high net worth clients, says this issue will become an even more common one in the coming years as the aging Baby Boomers die off, transferring their wealth to their Generation X and Millennial offspring.

Some have called it the greatest wealth transfer in history, as over the next few decades the Boomers are expected to leave about $30 trillion in assets to their children and grandchildren.

Part of that money is in tax-deferred retirement plans such as a traditional IRA or an employee-sponsored 401(k) that Baby Boomers have been contributing to for decades.

They didn’t have to pay taxes on the money they contributed to those plans until they started withdrawing the money in retirement. But just to ensure those taxes aren’t deferred forever, the government requires a minimum withdrawal each year once the account holder reaches age 70½.

The IRS also isn’t picky about who does the paying, Walser says. It’s fine with collecting the taxes from heirs if the retiree dies before spending all the money.

A spouse who inherits such an account falls under different rules, but Walser has advice for anyone else who finds themselves in this situation:
  • Consider a tax strategy. If you inherit an IRA, think about your need for these gifted funds. If there is no need for the funds for at least five years, consider repositioning them into a tax-advantaged vehicle over the next five years and save yourself thousands of dollars in taxes over your lifetime. “We always prepare an RMD analysis and find that paying the tax man over the next five years, while we still have the second lowest tax base in U.S. history, is much more appealing than deferring the tax and then being trapped into paying them in a rising tax rate climate,” Walser says. Taxes must inevitably go up in the future, she says, because of our current federal debt of $20 Trillion combined with the concurrent retirement of the Boomers in mass.
  • Understand what kind of account you inherited. The rules for a Roth IRA are different from the rules for a traditional IRA. Taxes were already paid on the money that was contributed to a Roth. If the Roth was funded more than five years before the person died, you won’t need to pay taxes when you take distributions.
  • Don’t rush into a bad decision. You will face deadlines for when you have to make decisions (the IRS won’t remain patient forever), but there’s no need to be hasty and do something you’ll regret later, Walser says. If you don’t have a financial advisor, she says, it would be wise to find one who can help you figure out what the best tax strategy will be for your situation.

“Maybe you really do need the money, so taking the lump sum makes sense,” Walser says. “But I think most people who do that are going to regret it later, especially if they just blow all the money right away and don’t have anything to show for their inheritance.”