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Summer Hiring Rules

20 May 2008

Thursday, May 15, 2008
Summer Hiring Rules

With the coming of summer, many small to mid sized businesses are faced with what to do for summer hires. Here are some suggestions from The American Institute of Professional Bookkeeper's May 2008 newsletter.

Withhold FICA on all summer workers, even high school students, unless under 18 working for parent/sole owners. Have all summer employees submit a W-4—even students working part-time—and withhold FIT unless someone claims exempt or has more than 10 exemptions.

Health care, other benefits and pensions. Giving benefits to temporary and part-time employees is optional, but if you do not give them, this policy should be written in a plan document.

Vacation and holidays. Federal and state laws do not require paying summer or part-time help for vacation or holiday pay any time of year. But if you give vacation pay, some state laws may apply.

Overtime pay: federal law. Pay overtime for all hours physically worked over 40 hours in a workweek. You are not required to include paid time off—e.g., vacation days. Do not substitute paid non-work hours for work hours to make all hours straight time to avoid paying some hours at straight time and some at overtime.

Family-owned firms employing the owners’ children. If the parent(s) own 100% of the business as sole proprietor(s), partner(s) or stockholder(s), their children can work for them regardless of age, hours or time of day. But if the owners regularly employ other than immediate family, they must pay their children the federal minimum wage. Their children under 16 generally may do clerical but not “hazardous” work, such as operating lawn mowers, sewing machines, etc., or working where food is cooked or near flammable or hazardous material.

If you have questions about your situation. Please consult your accountant, attorney, local, state or federal agencies that specialize in labor / employment.

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Budgets: Part 4 - Cash Flow

29 Apr 2008

Since our recent posts on budgets we have had many interesting questions presented to us. One frequent question is: How can you budget cash flow? We all know that cash flow is the blood of every business. Without adequate cash flow life can be the pits.

A quick recap on the definition of cash flow is the following: Money coming in from any source matched to money going out of a business. Do you have enough cash to pay your bills or are you short?

For over 30 years we have worked with many types of businesses. We have learned both valuable and painful lessons. One of which is the importance of: Developing a cash flow plan (budget) for your business. Then, at least on a monthly basis(for the current year) figure out what money is coming in and going out, account by account. Project your money collections and what money is being paid out to operate your business. Do they match? Are you short of money or have a surplus?

If you are a cash basis business, it's simple. Your money coming in should at least match the money going out. Is it enough to pay current bills or do you need to delay payment or borrow operating money?

If you are an accrual business and are having great sales that may not be enough to keep your business afloat. The fly in the ointment is... are you collecting your accounts receivable at least at a rate that you need to pay your bills which are your accounts payable?

A cash flow budget is a plan to collect money from sales which is then used to pay the expenses incurred while generating those sales. If you have a surplus of cash during business operations invest it. Eventually you will be able to draw on these funds during periods when cash collections do not cover your bill payments. Should your sales and collections of receivables not cover your bills to stay in business you will need to borrow funds. Most businesses need to do this from time to time.

Your life will have less stress if you have a cash flow budget. Your backers or banker will be happier to know that you have an understanding of when you will be short of cash, and when you will have a surplus. Figure it out and plan it out.

If you need help with budgeting cash flow, send us an email at either cdi@srv.net or snap@srv.net and we will send you some links, suggestions and possible solutions.

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