They bit the dust within two weeks of each other. Exactly the same terminal problem, at least as far as our ownership was concerned. My 1998 BMW with 204,000 miles and her 2000 Beemer, with 176,000. I knew the time had come.
The clutch had blown out on each of them. Yes, Annie and I – purists from a previous generation – both drive standards. It’s the clutch and the gear shift that define the Ultimate Driving Machine for us.
But it’s our Yankee heritage that dictates the high-end rationale: buy them off a three-year lease so that someone else absorbs the initial depreciation hit; acquire them with low mileage (32K for mine; 26K for hers) so there’s a lot of upside; and maintain them impeccably so that they never fail on the road. If you can get 175,000 miles out of them, the base price is less than 15 cents a mile (with 27 mpg).
I had thought that we might squeeze another six months out of at least one of them. Having spent $650 in April to replace the cooling system in hers, we decided that $500 was going to be the single-fix max for either car thereafter. With luck, the end would be definitive – we wouldn’t get nickled and dimed to death at $300-400/mo.
In fact, we’d bought a back-up car of more recent vintage this spring (guess what make?) to replace whichever died first. It was close – Annie’s lasted two weeks longer than mine. But at $1,000 each to replace a clutch, we knew. The call went out to Tyler Burns, Assistant Director of the Larz Anderson Auto Museum in Brookline, who dispatched a tow truck. His volunteers will install new clutches in each, shine them up, and he’ll sell them to maximize the value of our tax-deductible contribution to the Museum.
For many small business owners, assessing accounting and financial operations is like going under the hood of a high-performance automobile. If the belts and hoses are intact and there’s no oil splattered over the crankcase, you’d like to think you’re o.k., but – as my newest client said to me last week – “How do you really know? What are the standards of performance that I should be expecting from my accounting team?”
For a company just over a year old, with a single full-time accounting professional in place using QuickBooks software, he – we said – would know high performance when…
- He received the month-end financial statements (income statement, balance sheet, cash flow statement) no later than the 15th of the following month;
- Revenue and expenses were reported on a full accrual basis (i.e., monthly recorded revenue was matched with the direct expenses which produced that revenue);
- The chart of accounts was summarized and formatted in a logical flow from assets to liabilities to equity to income and expenses;
- The total on the payables and receivables aging statements agreed with the total shown on the balance sheet, with a declining percentage of each being more than 60 days old;
- He was receiving a weekly cash flow report, summarizing receipts and disbursements since the last report, and anticipating cash requirements (including borrowing and repayments) for the next several weeks;
- His team initiated and completed the budget process prior to the start of the fiscal year, analyzed and reported monthly variances, and updated the year-end forecast at least quarterly;
- All required reports to financing sources were being made timely and completely;
- Payroll timesheets were accurate and payroll-related deposits done on time;
- All disbursements were subject to a well-established prior authorization, review, and approval process;
- Outgoing invoices were prepared, recorded, and sent timely while incoming payments were processed and deposited on the day received;
- The difference in value between the book and physical inventory resulted in no significant financial adjustment;
- Preparation for the work of the outside CPA was completed within a month after the year end and resulted in no more than a few adjusting entries; and
- Requests for additional financial analysis were completed within a few hours, not in days or weeks.
So fold this baker’s dozen into your list of criteria for the next review of your senior accounting person. Then you’ll both know what’s expected and, hopefully, delivered on a regular basis – a consistently clutch (sorry, I’m reaching) performance.
“Business spending will get a modest boost from new stimulus legislation. Companies get two breaks in the law…bonus depreciation and higher expensing…but managers should take steps now to maximize the available tax benefits. Most of the relief expires at the end of next year, and Congress won’t renew it.
“Firms can write off 50% of the cost of new assets put into service in 2008. The remaining 50% can be recovered by using regular depreciation rules.
“Among eligible items…ones depreciated over 20 years or less: Machinery, business equipment, land improvements and farm buildings. And leasehold improvements made to the interior of commercial real estate.
“The limit on expensing assets is climbing to $250,000 for 2008, nearly twice the previous ceiling. Note that the full $250,000 can be claimed until $800,000 worth of equipment is put into service this year, up from $510,000. Businesses squeezed by this cap can still use the 50% bonus depreciation.”
– The Kiplinger Letter, June 27, 2008
Draining the Swamp
“The IRS today announced an increase in the optional standard mileage rates for the final six months of 2008. Tax payers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
“The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008 through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008…
“The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.”
Mileage Rate Changes
|Purpose||Rates 1/1 thru 6/30 2008||Rates 7/1 thru 12/31 2008|
– The IRS Newswire,June 23, 2008