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Amy Langfelder

CPA | CK Principal

As a business owner, the first quarter of each year can be a blur. You work to finalize the prior year’s operating results and complete tax reporting in a timely manner so you can focus on the current year’s operations. As changes occur in tax legislation, this becomes increasingly difficult as different information is being requested from the outside accounting firm and more time is needed to comply. You feel the impact of staff shortages in your company, and you hear murmurs of this occurring at your accounting firm too. Before you know it, you are having a conversation about tax extensions. Which only means more uncertainty in the weeks ahead as you continue to wind down operating results from the prior year and continue to stay afloat in the current year. If this sounds familiar to you, read on. We will offer some considerations to make year-end more manageable and simultaneously allow you to have control of your financial reporting all year long.

Implementing the following tips throughout 2024 will help streamline your financial reporting, plan for tax obligations and bring a sense of “certainty” in uncertain times.

As we embark on the second quarter of 2024, we have plenty of time to make some tweaks so that the year-end scramble is more manageable and will allow you to be confident as you approach 2025. Contact Cray Kaiser at 630-953-4900 to help you understand how you can implement some of these tips today.

Karen Hoban

CPA | Senior of Accounting Services

What is outsourced accounting? It is generally defined as an option for a business to hire an outside third party to complete accounting and finance functions for the organization. This can include but is not limited to bookkeeping, accounting and compliance work. It typically can encompass accounts payable and receivable and payroll as well as month-end closing tasks such as reconciliations and bookkeeping and tax and compliance preparation. Increasingly common are other engagements such as financial reporting, budgeting, financial planning as well as ad hoc projects, advisory and consulting services. Business owners seeking more time to focus on their core business are increasingly turning to firms such as Cray Kaiser that can do everything from performing the bookkeeping and accounting tasks to providing CFO-level financial analysis and advice.

In the past, accounting and finance was a function that was required to be in-house for access to records and other company resources and employees. Outsourcing is losing its stigma. The negative connotations associated with hiring out tasks are fading as the pace of life accelerates, work-life balance priorities shift, entrepreneurship expands, and business challenges grow increasingly complex. With the availability of cloud-based software and advances in technology, outsourced accounting has become easy to implement and is a proven time and cost savings for many businesses. Our firm can be on the same system and remotely share files and documents, allowing for real-time conversations. Owners of small businesses gain valuable time to focus on growing their business instead of managing and running the accounting functions. Businesses benefit from cost savings and efficiency by considering outsourcing many of the accounting functions to a team of specialists that offer expertise and flexibility to meet business needs as they change.

Some thoughts about the positive impact of outsourced accounting so you can grow your business not your management of accounting functions:

Important considerations when reviewing outsourcing options and engaging a firm:

Cray Kaiser can help – let’s start a conversation as to how best to help your business grow and gain efficiencies in order for you to reach the ultimate goal of focusing on your core business and areas of growth. If you feel now is the best time to learn more about outsourcing your accounting department give us a call at (630) 953-4900 to discuss options and opportunities offered in our Accounting Services Division.

Starting January 1, 2024, a significant number of businesses were required to comply with the Corporate Transparency Act (“CTA”). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The BOI reporting requirement intends to help U.S. law enforcement combat money laundering, the financing of terrorism and other illicit activity.

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel and/or another retained professional adviser.

What entities are required to comply with the CTA’s BOI reporting requirement?
Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

Are there any exemptions from the filing requirements?
There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:

  1. Employ more than 20 people in the U.S.;
  2. Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and
  3. Be physically present in the U.S.

Who is a beneficial owner?
Any individual who, directly or indirectly, either:

-Exercises “substantial control” over a reporting company, or
-Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.

The detailed CTA regulations define the terms “substantial control” and “ownership interest” further.

When must companies file?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.

What sort of information is required to be reported?
Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).

Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.

Risk of non-compliance
Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. For more information about the CTA, visit

If you have any questions about how the CTA affects you and your business, please contact the experts at CK by calling 630-953-4900.

Eva Koziel

Manager of Accounting Services

As small business owners continue to look for ways to cut costs in response to pressures from economic uncertainty such as rising interest rates, employee retention and inflation, one solution may be Accounts Payable (AP) automation. AP automation once reserved for larger companies has now found its home in many medium to small sized companies.  

Is your company still manually recording vendor invoices, printing, and mailing checks?  You will want to read our case study below to see how AP automation helped one of our clients. It may be a good fit for you too. 

Small to mid-size businesses are now able to automate AP through apps such as which also integrates with leading accounting software solutions such as QuickBooks, Sage Intacct, Xero and Netsuite.

We recently assisted a midsized client who had a dedicated employee that spent 30 hours a week manually recording vendor invoices, printing out checks, stapling checks to invoices, handing them over to owners to review and sign, mailing payments and then dealing with all the paper documents. If this does not sound exhausting enough, to add to the complexity some vendors were set up on auto pay, which required the employee to take additional steps to manage cash flow. Sound familiar? 

When we first proposed to our client, they expressed valid concerns such as security issues with electronic payments, how would handle vendors who only accept paper checks, subscription costs, etc. We scheduled a meeting with both our client and a representative where the client was able to not only view a demo, but also address their concerns and questions. Needless to say, the client was on board and eager to begin.

From there, we provided our client with a detailed timeline of events which included steps they needed to take to prepare for setup within their QBO file such as vendor cleanup, determination of approval levels, etc, scheduled integration and implementation training. This process took two weeks. has transformed the way our client processes invoices. All vendor invoices are sent to the company’s centralized inbox in, so that it goes through the automated approval process. The owner who lives out of state approves bills that are to be paid, using his mobile app!! automatically sends the team email reminders about upcoming or overdue bills and lets them pull up payment statuses and view invoices in just a few clicks. No more frantically tracking down invoices.’s two-way sync with QuickBooks Online provides a seamless integration which minimizes the need for double data entry in both systems and the risk of error that could occur. The AP employee now only spends about 2-3 hours weekly with AP, or 30 minutes a day. Allowing our client to better utilize the employee’s time on other projects. The integration took less than 1 month from the initial call to full implementation. 

If you are interested in learning more about AP automation for your company, please contact the experts at Cray Kaiser at (630) 953-4900 to schedule a consultation.

Damian Contreras

In-Charge Tax Accountant

When I was beginning my journey to become an accountant, I had the opportunity to intern at Cray Kaiser and KPMG. These internship experiences allowed me multiple opportunities when deciding on my post-graduation employment. In the first semester of my senior year, I signed and accepted an offer to join the CK team where I  currently work full-time. It is essential to take the initiative to take as many internships as possible. Taking a proactive approach allows you ample time to secure a spot, as many firms tend to fill up a year in advance.  

Working full-time at Cray Kaiser was a smooth transition. I was getting exposed to so much as an intern that I felt prepared to advance into the next step.  What was an adjustment for me was not going to school while working. Now with my extra time, I use it to focus on my career goals. One career goal for me is studying for the CPA exam.

Preparation Made Easy

If you plan to pursue the CPA exam, I recommend the Becker program. The software is easy to use, provides printed material, and is always on sale (there is usually a better sale around the holidays). They also have a fantastic planning system. You enter when you want to take the exam, and it will tell you how many hours you need to study, or you can tell Becker how many hours you can study, and it will give you a custom plan for what days to study, what to study, etc. The program makes you feel less overwhelmed when you are deciding when, what, and how long you should study.

Audit or Tax?

In any career, I think it’s important to make sure you enjoy what you are doing. In the accounting profession, everyone always asks if you are interested in audit or tax. Without experience in both fields, how does one know? Two solutions I found to this are to have internships in both areas or work at a smaller firm where you can assist in both areas.

I love working on complex tax returns and was thrilled to join the tax department. However, I still am allotted the opportunity to work with the assurance team and build on those skills too.  

One skill I have built is being a self-advocate and letting management know what areas interest me and where I would like to see my skills grow.  Remember that no one can read your mind. You will need to speak up to management to tell them the areas you find most interesting to work in. My goal is to enjoy what I do and make a difference to the organization I work for and the clients we serve. I have found at Cray Kaiser, we aren’t just tax preparers and auditors we are trusted business advisors who are going to help all the family-owned businesses we serve.

Following the Covid pandemic, the government implemented many programs to provide much needed relief to employers.  One of these included the Employer Retention Credit (ERC). This is a fully refundable tax credit that is available to both small and mid-sized businesses, even if you received the Paycheck Protection Program (PPP) Loan. 

Businesses who are eligible can claim up to $5,000 in fully refundable tax credits for each employee in 2020 and up to a $7,000 credit PER quarter for each employee in 2021. Please note that the ERC is only applicable in quarters 1, 2 and 3 for 2021. 

Can I Still Qualify for ERC?

Although we are in 2023, it’s NOT too late to qualify and claim ERC retroactively! Businesses have up to three years to conduct a lookback to determine if they qualify and if wages paid March 13, 2020 through September 30, 2021 are eligible.

How to Qualify?

For 2020, businesses with 100 or less employees can qualify if they pass one of the two tests below:


For 2021, businesses with 500 or less employees can qualify if they pass one of the two tests below:


Per IRS Aggregation Rules under section 448(c)(2) and 52(a)(b) and provisions of section 2301(d) of the CARES Act, All members of an aggregated group are treated as a single employer. In other words, if multiple businesses are controlled by common ownership, all entities are deemed single employers for ERC eligibility purposes.

How to Calculate ERC?

Once a business determines that they qualify, the next step is to calculate the ERC tax credits.  Find CK’s helpful template to assist you in calculating your credits here.

Businesses that received the PPP, will need to run additional analysis to make sure that they have enough eligible wages to benefit from both the PPP loan forgiveness while maximizing the ERC. Any eligible wages used for PPP cannot be used to calculate ERC. No double dipping!

How to Claim ERC?

To claim the ERC, a business will need to amend its federal payroll tax form 941 for the quarter in which they are looking to claim the refundable credit. The IRS is only accepting paper filings and refunds are taking around 200 days to come in the mail via paper check, as the IRS is not funding any other way. This amendment does not impact previously filed W-2s.

Important to note, unlike PPP, the ERC income is taxable in the year that the credit is claimed and not received. We do highly recommend speaking with your CPA to determine tax implications and net benefits. For any additional information or assistance with ERC, please contact Cray Kaiser, your ERC specialists at (630) 953-4900.

QuickBooks accounting software is used by more than 29 million small businesses in the U.S. If you are one of those users, there is now an easy way to customize your marketing efforts based on actual customer purchase data. 

In 2021 Intuit® QuickBooks® acquired the Mailchimp marketing platform. The integration of the popular marketing tool with QuickBooks Online gives small and mid-size businesses the ability to leverage customer sales data for customized marketing efforts using one platform.

Features of the new integration include:

Prior to this integration data was housed in two different places. Your email list sitting in Mailchimp or another marketing platform – most likely exported from QuickBooks or another CRM. And your customer purchase history and buying behavior data sitting in QuickBooks.

QuickBooks users who are willing to invest a bit of time and resources into this integration can engage in email marketing that has a greater chance of generating revenue.

Instead of blindly sending out a promotional message or monthly newsletter, you can tailor your communications based on a customer’s sales history.

Do you get coupons mailed to you from your grocery store? Not the generic weekly circulars, but self-mailers with coupons included. Those coupons are usually for items you purchase on a regular basis, right? That’s no coincidence. The grocery store is capturing data from your frequent shopper/reward account and customizing your offers based on your purchase history.

The QuickBooks/Mailchimp integration allows you to target your customers in a similar way.

If you are running a special on an Acme Widget, you can alert customers who have purchased the Widget in the past of the sale. Or alert those same customers if there is a new accessory for the Widget.

Or perhaps you want to let customers who purchased a Thingamajig three years ago that it is due for routine maintenance.

How to Get Started

  1. If you don’t already have it, get QuickBooks online. There are multiple plans to choose from ranging from Simple to Advanced. Choose a plan that fits your business needs.
  2. Sign up for Mailchimp. You can start with a free plan and upgrade as needed based on the sophistication of your marketing efforts.
  3. Connect QuickBooks to Mailchimp with just a few clicks and sync customer information.

For more information about taking advantage of the QuickBooks/Mailchimp integration, please contact Cray Kaiser today.

As it does every year, the Internal Revenue Service recently announced the inflation-adjusted 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (van, pickup or panel truck) are:

The business standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by Congressional action) and has been 14 cents per mile for over 15 years.

Important Consideration

The 2023 rates are based on 2022 fuel costs. Given the potential for the continuation of substantially higher gas prices, it may be appropriate to consider switching to the actual expense method for 2023, or at least keep track of the actual expenses, including fuel costs, repairs, maintenance, etc., so that the option is available for 2023.  

Taxpayers always have the option of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates. In addition to the possibility of higher fuel prices, the bonus depreciation and increased depreciation limitations for passenger autos that were part of the 2017 Tax Cuts and Jobs Act may make using the actual expense method worthwhile during the first year a vehicle is placed in business service.

However, the standard mileage rates cannot be used if you have used the actual method (using Sec. 179, bonus depreciation and/or MACRS depreciation) in previous years. This rule is applied on a vehicle-by-vehicle basis. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or more than four vehicles simultaneously.  

Employer Reimbursement

When employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of employment-connected business travel.

The Tax Cuts and Jobs Act eliminated employee business expenses as an itemized deduction, from 2018 through 2025. Therefore, employees may not take a deduction on their federal returns for those years for unreimbursed employment-related use of their autos, light trucks or vans. However, those who are self-employed are eligible to claim expenses for their personal vehicles used in their businesses.

Faster Write-offs for Heavy Sport Utility Vehicles (SUVs)

Many of today’s SUVs weigh more than 6,000 pounds and are therefore not subject to the limit rules on luxury auto depreciation. Taxpayers with these vehicles can utilize both the Section 179 expense deduction (up to a maximum of $28,900 in 2023) and the bonus depreciation (the Section 179 deduction must be applied before the bonus depreciation) to produce a sizable first-year tax deduction. However, the vehicle cannot exceed a gross unloaded vehicle weight of 14,000 pounds. Caution: Business autos are 5-year class life property. If the taxpayer subsequently disposes of the vehicle before the end of the 5-year period, as many do, a portion of the Section 179 expense deduction will be recaptured and must be added back to income (SE income for self-employed individuals). The future ramifications of deducting all or a significant portion of the vehicle’s cost using Section 179 should be considered.

Consider Bonus Depreciation

Consider using bonus depreciation as an alternative to the Section 179 deduction. Under this provision, a taxpayer can elect to claim a deduction of 100% of the cost of a new or used vehicle used for business in the first year it is placed into business service. However, the luxury auto rules impose a maximum annual deduction for depreciation, including the bonus depreciation. For example, in 2021, the maximum depreciation deduction for an auto for which bonus depreciation was claimed was $18,200. This compares to a maximum of $10,200 if bonus depreciation isn’t elected. Of course, if the vehicle is used only partly for business, then only the business-use percentage of the cost is eligible to be deducted.

After 2022, the deductible bonus depreciation percentage drops by 20 percentage points a year, until 2027 when, barring an extension by Congress, no bonus depreciation will be allowed.

Whether to claim bonus depreciation, Section 179, regular depreciation, or a combination of these methods for a business vehicle or to use the standard mileage rate instead, can be a complicated decision to make.

If you have questions about the best methods of deducting the business use of your vehicle or the documentation required, please give our office a call at (630) 953-4900.

Is Your QuickBooks company file ready for 2022? Here are three things you can do to put things in order.

The beginning of the year is always transitional. You’re trying to wrap up everything that didn’t get done during a hectic December. At the same time, you have to jump into the new year and start doing your regularly scheduled work. It can be hard to tell sometimes which year you’re working on.

Don’t forget about QuickBooks while you’re wrapping up 2021 and looking ahead to 2022. You probably don’t want to put another item on your to-do list, but any steps you take now to ready the software for the new year will pay off later. Once you start entering transactions, placing orders, and welcoming new customers, it will help tremendously to begin with a clean slate.

Here are some suggestions to help complete the work you started in 2021.

Run four critical reports.

Bills can slip through without being paid in December because there’s so much going on. This applies to both you and your customers. You need to determine what’s owed to you and what you owe. Generate these four reports in QuickBooks:

One collection method you can use in QuickBooks if you don’t want to communicate directly with overdue customers is to send statements.

Create statements for past-due customers.

You’ll have to decide how hard you want to lean on customers who are late paying their bills when it’s so early in the year. Certainly, if customers are more than 60 days late (30 days if they have sizable balances), you may want to make a phone call or at least send a personalized email asking them to fulfill their obligations.

But you can also send statements. These documents provide details of financial activity between you and your customers for a given period. Open the Customers menu and click Create Statements. Look over all the options available (see image above or below)  and select your preferences. If customers don’t respond to your statements within 10 days, then it may be time for a phone call.

Take a hard look at your inventory.

It may have been a while since you’ve done this, but it’s important to regularly check inventory – especially if you had a busy holiday season. The best way to start this is to open the Vendors menu, scroll down and hover over Vendor Activities, and click Inventory Center.

If you don’t have a lot of inventory, you could just highlight each entry under Active Inventory, Assembly on the left. The window that opens on the right side of the screen provides an enormous amount of detail about each item. If you sell a lot of different items, that will take too much time. In that case, the QuickReport can be helpful.

You can get a lot of information about individual items you sell in QuickBooks’ Inventory Center.

Tip: If you need to adjust the quantity you have on hand, click the down arrow next to Manage Transactions in the lower left and select Adjust Quantity/Value on Hand. You might consult with us if you’re running into this problem, and we can go over inventory issues with you.

Set Up Online Financial Connections

January is also a good time to be thinking about how you can better use QuickBooks in 2022. We tend to learn how to use the tools we need and not explore any further when we’re using any kind of software. QuickBooks is a robust program, make sure you are taking full advantage of what it can offer.

For example, there are two tools that can have a tremendous impact on your daily workflow, your ability to get paid faster by customers, and your understanding of where you stand financially every day.

We know you may still be catching up from the holiday break right now. But if you need Cray Kaiser’s help getting your QuickBooks in order, please reach out. We’re always available to set up a consultation.


Owning and operating a small business can be both exciting and stressful.  When it comes to financial statements, there is a lot of information at your disposal, so much so that you can easily suffer from “analysis paralysis” if you don’t understand what your financial metrics are trying to tell you or how they can be used to implement change.  

In today’s fast-paced world, it is incredibly important to not only have timely financial information to make management decisions, but to also have relevant financial information. Knowing which numbers are most important to your business, the financial ratios applicable and beneficial to your business, and how to interpret that data to make well-timed and impactful decisions is vital to your success. Below we detail 10 of the most important financial metrics and how to leverage them.

1. Understand the Industry

Nobody understands your business like you; however, it’s equally important to understand your industry. Are you staying up to date on issues, technology, regulations, etc. that impact your industry? If not, look into industry publications that have this information readily available. There are also numerous online resources for industry financial data and benchmarks, which is valuable in comparing the metrics discussed in this blog to your peers. For example, your business may have a quick ratio (see #6) of 1.00, which is technically considered “acceptable”. However, your peers may have a quick ratio of 1.20 which may be indicative that you have some adjustments to make.

2. Cash Flow

Cash flow is the most telling metric of all since cash is the lifeblood of any company. This financial metric demonstrates your cash inflows and outflows and helps identify any potential issues in your business. If you’re not keeping an eye on your cash flow you could find yourself caught by surprise when it comes to collection issues or making essential payments to vendors or paying off debt.

3. Sales to Receivables

This metric is the number of times your receivables have turned over, or collected, for a given period. The higher the number, the more times the receivables have been converted to cash during that period. Conversely, the lower the number, the less frequently accounts receivable is being collected and may suggest collection issues. As many businesses fluctuate during the year due to business seasonality, it is often best to compute this metric using average receivable balances rather than using a “snapshot” balance, which can produce misleading results.

4. Day’s Receivables

Similar to sales to receivables, day’s receivables express the average number of days that receivables are outstanding. The greater the number of days, the greater the probability of delinquencies in accounts receivable as this represents how quickly your sales are converted to cash from the date of the sale to when it hits your bank account.

5. Accounts Receivables Aging Schedule

The aging schedule within your accounting software is a standard report. This information is compiled and calculated based on the dates in which your sales/receivables are entered into the system and lays out the aging of your customer receivables in “buckets”. Typically, these buckets are “Current”, “31-60 days”, “61-90 days” and “90+ days”. This metric helps you identify not only potential collection issues, but the customer or balance that is delinquent. Further, it can also help you determine if there are any errors in your accounts receivable balance. For example, does it make sense that your customer is paying their current receivables but not the balance that is 91+ days outstanding? It might be an invoice that was overlooked or an accounting error.

6. Current Ratio and Quick Ratio

Current ratio and quick ratio are listed together because they both show your business’ ability to service its current obligations. The difference is that the current ratio considers all current assets and the quick ratio only utilizes the business’ most liquid current assets, such as cash and accounts receivable. You want both ratios to be greater than 1.00.

7. Budget Versus Actual

Have you created a budget and then compared it to your actual activity? Budgets should be created based on experiences and trends, as well as any known future occurrences (i.e. planned asset acquisitions or annual pay raises). If you compare what you’ve budgeted to what you’ve actually spent, it will give you a far better sense of whether you’re staying on track and what kind of adjustments you need to make.

8. Fixed Charge Coverage

No matter how well you are doing, there is always a chance that you will encounter an unforeseen circumstance that will drive the need to cut costs. The best way to prepare for this is to take a close look at your fixed charges and compare them to your Earnings Before Interest, Taxes, and Depreciation – known as EBITDA. This ratio shows how many times your company’s earnings can cover its fixed expenses such as leases, rent, debt, etc. This is extremely valuable in assessing whether you may be overextended, or it can help determine if any loan, lease, or contract that you sign may overextend your business. Furthermore, banks will often calculate this ratio when determining whether to lend you money.

9. Debt Service Coverage

This is similar to the fixed charge coverage, with the difference being that debt obligations are assessed with the business’ net operating income rather than EBITDA. If this ratio is greater than 1.00, the business is well equipped with profits to cover debt payments. If the coverage ratio is less than 1.00, the business has not generated sufficient income to cover its debt obligations. This ratio is particularly important because banks will often require this to be at a certain level, which may be greater than 1.00, as a condition of their loan. Expect your lender to monitor this ratio on an ongoing basis during the terms of the loan.

10. Working Capital

It’s important to know and understand your working capital not only from a financial standpoint, but also from a regulatory or compliance standpoint. Working capital assesses your business’ ability to pay its current liabilities with its current assets, which gives you an indication of your business’ short-term health. Depending on your industry, you may be required to keep a minimum working capital amount or follow any covenants outlined in your business’ loan agreement. In addition, it can also help you determine if you have too much cash on hand and/or if you’re not effectively putting your cash to work by re-investing in the business to facilitate growth (i.e. with asset acquisitions, technology upgrades, or other capital expenditures). For example, if you have approximately $1 million in current assets but only $100,000 in short-term liabilities (including short-term debt), you may have approximately $900,000 that you can re-invest in your business.

Each of these financial metrics are extremely beneficial in helping you understand the performance of your business. However, this list is not comprehensive; there are many more metrics that are vital to understand.

All businesses are different and operate in different industries and often have different objectives and external influences. If you would like to discuss these financial metrics or how Cray Kaiser can help you, please contact us today.