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The Unemployment Crisis is Several Layers Deep

1/21/2021

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There are roughly 26.8 million Americans who are either fully unemployed or experiencing cuts to hours and pay, with no easy answers on how to fix it.
https://www.statista.com/chart/23900/unemployment-united-states/
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According to December survey data collected by the Bureau of Labor Statistics,

​Roughly 26.8 million Americans are either unemployed, experiencing reduced pay and work hours or have left the labor market entirely.
  • Of the 26.8 million:
    • 10.7 million are officially unemployed,
    • 7.5 million are experiencing cuts to pay and hours,
    • 4.9 million have dropped out of the labor force and
    • 3.7 million are currently misclassified as employed when they’re either unemployed or absent from the labor force.
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Will Increases in Unemployment Taxes Derail Small Business Recovery?

12/17/2020

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​As many employers look to closeout and forget 2020, Maryland employers face yet another challenge as a sizeable hike in unemployment tax rates is coming in 2021.
https://ramlcpa.link/da6ef
The Maryland unemployment tax rate is set
to increase from $25.50 to $187 per employee
​for 2021, an almost 7.5 times increase*.
​For a business with 50 employees, this means an extra $8,075 ​will have to be paid in for 2021.
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It's important to note that Governor Hogan signed an executive order (copy below, FAQs) that excludes 2020 employer data from the formula used to determine the 2021 unemployment rate. If the Governor had not done this, all employers would have had an even higher tax rate for 2021.
For employers with zero claims over the prior three (3) years (the measurement period will remain 2017, 2018, and 2019, for 2021) the per annual amount due per employee will increase from $25.50 to $187 per employee for 2021, which is almost 7.5 times the 2020 experience rate.
​While obviously not good news, at first glace it might not sound all that punitive at first glance. However, imagine you have 50 employees, all of which require an unemployment contribution. That comes out to an extra $8,075 that employers will have to pay in for 2021. In higher turnover businesses such as retail and hospitality, it's very possible to have on average 10 to 15 employees per year, but because of attrition this equals 50 or more total employees per year, all of which require their own unemployment contribution.

While unemployment rates will reduce over time as we saw a similar situation occur during and after the financial crisis (great recession). Unfortunately, in the short term, this is one more hit businesses are going to have to contend with.
Consider these tips to help offset these costs:
​

1) Have a plan for 2021, as no plan almost always means no success, and those who are successful are just incredibly lucky.
2) Investigate ways to streamline operations & improve efficiency in the short and medium term. No is not the time for long term decision making if possible, as there is still much uncertainty.
3) Review and make cash savings measures (both for the business, and personally), and do the easiest ones immediately. This doesn't mean slash essential services, but it means giving up the luxuries.


Contact us if you need help with these or similar small business savings strategies.

Small Business Finances

Unemployment Benefits

Unemployment Insurance

Unemployment Taxes

Maryland Unemployment

Employer Benefits
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Better Peace of Mind in Six Steps

12/4/2020

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https://ramlcpa.link/oue​
Six Ways to Increase Your Financial “Pillow Factor” | Michael Kay
4. Knowing your numbers. While dealing with budgets and financial issues might put you to sleep, nothing adds to greater restfulness than having at least a decent working knowledge of what’s coming in, what’s going out and how you’re moving towards your big goals ...
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It's a fallacy to think that you achieve absolute security and complete peace of mind, especially with your finances. You can prepare and save huge sums of money only to find out it was enough to cover situation X, but situation Y, the one you hadn't considered, not even close. If the pandemic taught us anything, it's that no industry, business, or our economy is immune from significant disruption given the right circumstances. 

That said, there are steps we can take to better address the inherent risk we face in and our lives and especially with our finances,  The below list comes from an article by Michael Kay and while I've used these points when providing professional advice, the way they're stated here is unlike how they're normally presented by an accountant or financial planner. I especially appreciate items #2, #4.and #6 as they don't require a degree in accounting or finance to see their importance.
  1. Having a suitable cushion of liquid savings for emergencies and unanticipated life events, such as job loss, significant cost for a home or car repair, uncovered medical expenses or the ability to help someone in your family who suffers an unexpected loss.
  2. Having your big risks covered. Nothing is more destabilizing to a family than the sudden death or disability of a significant earner. Where and how will the income be replaced when it is suddenly removed from the family’s cash flow?
  3. Keeping your debt in check. Nothing spells insecurity more than facing revolving credit card bills month and after month and never seeing an end in sight.
  4. Knowing your numbers. While dealing with budgets and financial issues might put you to sleep, nothing adds to greater restfulness than having at least a decent working knowledge of what’s coming in, what’s going out and how you’re moving towards your big goals; think retirement security, college for the kids or other meaningful pursuits.
  5. Putting your estate in order. Whether you have big bucks or just getting started, there are really good reasons for having a Will, Powers of Attorney and an Advanced Healthcare Directive. Put a big exclamation point on it if you have children. Making sure you’ve addressed issues like Guardians and Trustees, while it might never be necessary, reaches the highest magnitude of importance if it comes to that.
  6. Being able to talk to your spouse/partner/significant other about money. Let’s face it, we grow up with different understanding and experiences concerning money. Some face poverty and others are raised in wealth; some see flagrant spending, while others see penny-pinching as normal. We all grow into adulthood with a different set of money messages. Having a money conversation that doesn’t cause arguments, discomfort, accusations or frustration is an art, not a science. It requires the willingness and ability to listen and understand another’s point of view without judgement. Once you master the ability to talk about goals, fears, spending, savings and other related money conversations, life becomes easier.

Personal Finances

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Plans and Goals
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How you can protect your business if a large client can't pay or goes Under?

9/24/2020

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12 Crucial Actions to Protect Your Business 

How to Move On After Losing a Big Client. The list below comes from Young Entrepreneur Council (YEC) and provides a good reference point in establishing an action plan.

​https://ramlcpa.link/o7i7
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1. Get a Guarantor for the Contracts
2. Ask for Payment Upfront
3. Get a Lawyer
4. Begin Negotiating ASAP
5. Ensure Constant Communication
6. Get a Realistic Projection
7. Offer a Reduced Payment
8. Auto-Charge Credit Cards
9. Restructure Your Payment Terms
​10. Get Trade Credit Insurance
11. Move On and Find New Clients
12. Diversify Your Client Base

#business #businessowner #smallbusiness #clients #COVID-19 #Coronavirus #negotiations #riskmanagement #lossprevention #creditinsurance #tradecredit #insurance #negotiations #restructure #restructuring  ​​
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How The Shaw Festival used some well planned Risk Management and saved 500 performing arts jobs during the Pandemic

8/4/2020

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The stomach bug and understanding of communicable disease helped save the Shaw Festival during the Pandemic | https://ramlcpa.link/cmzz

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How the Shaw Festival kept 500 people employed during COVID — by taking out #pandemic #insurance three years ago.
About three-and-a-half years ago, #CEO of the #ShawFestival in Niagara-on-the-Lake, decided to undertake some risk analysis alongside his #CFO. He looked at potential problem areas .... and came to a shrewd conclusion: .... The festival should take out an #insurancepolicy against the threat of a #pandemic.

The policy covered the interruption of planned performances by communicable disease. As a consequence of that remarkable #foresight, the Shaw Festival has been able to do the basically impossible ....... thanks to the coverage, Shaw’s are among the only #actors, #musicians, and #theatre workers in the #world who still have #jobs.

Jennings says, reflecting on this extraordinary stroke of luck. “It wasn’t actually genius. It wasn’t about this pandemic at all — it was about #communicable #disease.” ..... Shaw employs a rotating repertory ensemble; if one of his actors got the #flu, ten of them could, and that might stall a show. “We took it out for the whole season, thinking that if six actors got ill and we had to shut down for two weeks, we might lose two million bucks,”

#ramlcpa #riskmanagement #businessplanning ​

https://ramlcpa.link/cmzz

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Is Pandemic Insurance Ready to Save Businesses?

7/30/2020

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While some carriers are beginning to offer pandemic insurance, questions and risk remain. 

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Welcome to the Growth, Profits, and Wealth Blog where we'll be featuring this new and yet to named series where we’ll look at the accounting, tax, advisory and business angle of topics such as Risk Management, Restructuring, Distressed Assets, Automation, Best Practices, and Growth Initiatives.  This is our introductory post and cast which is about was delayed close to a month because of the never-ending tax season.

The idea is to touch on a range of matters affected by the Pandemic for just about a minute or two, to get you informed, help you be better prepared as a practitioner or business owner, give you some reference material, and get you back to work.


First topic is Pandemic Insurance of course, and we'll be coming back to this topic in the weeks and months ahead.

The insurance Industry is moving pretty quickly to provide some measure of Pandemic Insurance, now that we're several months into the pandemic, and also because this is what Fintechs, InsurTechs, and specialty insurers are really designed for. What's interesting is seeing the formation of these insurers and the ownership mix of their backers.  May are tied to large insurance companies, private equity, and wealthy individual investors. While these are newer insurers or startups a number of those research have very experienced insurance professionals at every level.

These setups makes a lot of sense as the close ties to large existing insurers gives them access to ReInsurance so the risk can be diversified by other insurers who want to take on some of the risk for a portion of the premiums. On the operations and startup cost side, the ties so private equity and wealthy investors gives them access to capital to create, operate, and administer these policies.

The problems, well where to begin:

First, while this sounds all well and good, these initial insurers and policies are here to make money not do the world or economy a favor.  Thus, these policies are going to be some of the most expensive insurance available.  Not only is it a hot topic with limited data, but the spike and second closure in some areas makes this about the worst possible time to buy and likely the policy would not even pay out immediately.

In the U.S. News Article "Pandemic-Proofing..." it mentioned policies that offer up to $1MM in coverage, however that coverage comes with eye popping premiums of $80,000 - $100,000 annually.  Part of the problem here is with very limited data to model (if even possible) most policies at the moment are using all worst case scenarios to make sure if they do find a buyer they're likely to come out break even or better in the short and medium term.  

Perhaps this is why back in May Warren Buffet said he would interested in offering in offering Pandemic coverage, but only at the right price, which is a great leading to something that is overlooked with insurance coverage, which is as one's risk protection is another’s investment. 

In the July 23rd Insurance Journal article the insurer One80 was able to write polices up to $100MM ,  I don't see this as a realistic offering by traditional insurance companies or a solution for small businesses. It's much more likely that these policies fill a niche that needs can actually afford them, perhaps Hollywood, perhaps live entertainment, but will almost certainly have lo effect on the economy. Instead insurers and businesses appear much more likely to wait to see if the Federal Government provides a backstop for insurers or something similar.

Another major issue I see is, if the language and terms are not broad enough these policies could very easily still leaving gaps in coverage, setting things up for this same type of problem in just some other form.  

Lastly, and most importantly in my opinion, while these policies might be associated or have some backing by major insurance brokers and carriers, it's very important for the businesses, advisors, & agents to know who is actually underwriting and backing the policy. 

Insurers and policies have ratings for a reason but the fragmented structure of these new insurance makes them susceptible for abuse.  A little bit of clever or confusing marketing slight of hand is to and the ability to use a large carriers name and ratings to:

  • mask who's the actual underwriter,
  • is the insurer or policy even rated, and
  • what effect does this have on getting paid if you do file a claim.

I'm not accusing anyone, but the opportunity for abuse and risk is real, and insurance that is at high risk for nonpayment might very well be worthless in the end.

We'll call that a wrap for now and let you all get back to work!

That's enough for now, thanks for listening and I'll be back with one or two more casts by this weekend, and then back next week as we'll being our normal schedule.


https://www.usnews.com/news/top-news/articles/2020-07-10/pandemic-proofing-insurance-may-never-be-the-same-again

https://www.insurancejournal.com/news/national/2020/05/07/567764.htm

https://www.insurancejournal.com/news/national/2020/07/23/576695.htm

​https://www.carriermanagement.com/features/2019/11/12/200256.htm


#ramlcpa #riskmanagement #insurance #restructuring #pandemic #covid19 #covid_19 #business #smallbusinesses #businessinterruptioninsurance #coronavirus
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Wimbledon paid pandemic insurance for almost 20 years. Now it’s getting $141 million

4/10/2020

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This should be a case studay in proper planning & risk management : The tournament’s risk and finance subcommittee insisted on a pandemic clause nearly 20 years ago.  | https://ramlcpa.link/inS9e

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​The All England Club reportedly updated its Wimbledon insurance policy years ago to include the infectious disease clause following the worldwide SARS outbreak in 2002. 

The Club’s risk and finance subcommittee is charged with assessing all potential risks to the annual tournament, including global pandemics, terrorist attacks and even the death of a monarch, which would thrust the country into a time of national mourning.
#ramlcpa,#coronavirus,#covid19,#covid_19,#pandemic,#riskmanagement,#businessplanning , #insurance,#planning
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Open enrollment for Maryland Health Connection [REOPENS] now extended until July 15

4/6/2020

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https://ramlcpa.link/5n7 | Great News for #Uninsured Marylanders

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Maryland Health Connection, will allow uninsured Marylanders to enroll in health insurance through July 15. The extended date coincides with the new state income tax filing and payment deadline, which is now July 15, 2020 due to the #Coronavirus [ #COVID-19 ] #pandemic.

#ramlcpa #coronavirus #covid19 #COVID_19
#healthinsurance #maryland #marylandexchange
,#larryhogan

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Business Interruption Insurance to the Rescue....? Did you REALLY think it would be that easy!

3/27/2020

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Policyholders finding out that business interruption insurance doesn't cover coronavirus | The Atlantic

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I was fortunate earlier in my career to work directly with my employer’s risk management department for guidance and feedback as well responsible for most of the insurance accounting for our organization.  Along with previous audit experience of some smaller insurers, I received a world of insight into the world of insurance, including coverage types, specialty insurance, coverage limitations, reinsurance, premium increases (even when costs are flat or going down), and insurance reserves.

If not already obvious, it’s simple to understand that insurance companies are designed to come out on the positive end of premiums received minus claims paid, especially over the mid and long term (reserves help cover acceptable short and long term losses & risks) …..they are in the business of making money.  No, while it's not exactly Vegas, the odds are on the carrier side by using a laundry list of people and means to do so, including: actuaries, risk models, historical experience, premium methodology, client selection process, risk weighting, coverage types provided especially by area & region, coverage limits, and so much more. So, a tremendous amount of information is considered, and we should all get why, as when a carrier fails, everyone seems to lose.

The purchase of this insurance probably starts out something like this with a business owner talking to an agent, "I need to make sure that I have enough coverage for me/my business so if something (catastrophic) major happens and I can't open my doors for more than a couple days, months, or possibly forever, I'll have plenty of protection in place for at least a period of time so I don't lose everything."

The agent’s response, "sure thing, business interruption insurance would be perfect for you. If some major event occurs (excluding those covered by other types of insurance) forcing you to close for several days or weeks, then the policy will provide X dollars a month for X months."

Yes, a bit simplistic but this does occur, and I understand both sides of it, including an agent acting in good faith.  Yet, chances are other than price, the small business owner is hooked, and along with their other coverages think they are fully covered, with the rest being noise and fine print. The carrier knows they've covered a majority, if not near ALL the major risk factors (along with other types of insurance coverage) a business will encounter. However, the carrier ABSOLUTELY KNOWS the owner is nowhere near fully covered, which is the part I really can't stand and needs to change in some meaningful way as this happens all too often.

Now with the entire world being caught in the clutches of the Coronavirus (Covid-19) pandemic we’re hearing the stories once again of insurers denying claims and this time it’s about business interruption insurance, just when businesses need it most.
From the Article in The Advocate https://ramlcpa.link/935ca ...., ​Bill Davis, a regional spokesman for the Insurance Information Institute said:
“They all contain generally the same language, but there’s always the oddball policy,”
.....

“This is a hard thing for underwriters to price coverage,” he said. “We’re plowing new ground here.”
.....
“Things the size of 9/11 or COVID-19, the federal government is the only one with pockets deep enough to handle,” 
This response is telling and shows why the excuses need to stop, while solutions being found.
​
A fact of life is there will always be one off crises & events putting money and lives at risk.  Including man made events there have been at least three (3) major world effecting events in the past 20 years which have changed are lives forever (9/11, the 2008 Financial Crisis, and Covid-19).  If you count more localized disasters and events (Katrina, Fukushima, Thailand to name a few…. its 6+ easy, likely closer to 10) this number gets more unsettling very quickly. 

As bad as that may sound, if we look back through the 20th century (I know, history shows how great we are at looking to the past for insight, as why learn something from our past troubles or mistakes) this shouldn’t be much of a surprise, as its littered with events & crises every decade while wiping away billions of dollars & lives in the process (Vietnam, Korea, WWII, WWI, and the Great Depression to name some of the largest).  The one certainty is uncertainty, which is exactly what insurance is for.

So, while pricing in a specific unknown world or local event may be difficult for the carrier, it makes no difference to a business owner if their doors are shut due to a virus, a tsunami, or war. Yes, property damage does matter but that is the easy part.  While this is not a new problem, it is a lot more fixable especially if measures are setup before the next crisis hits and provide more favorable back stops by the government, especially for things that an insurance policy can't be expected to cover. Thus, they can be structured in far more favorable ways for business owners and everyday taxpayers instead of just another last-minute bailout.
#ramlcpa,#business,#covid_19,#covid19,#covd_19, #insurace, #claims, #businessinsurance, #interruptio, #insurer, #insurancecompany, #businessinterruptioninsurance
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COLUMBIA MD ACCOUNTANT & CPA FIRM SUMMARY
Travis Raml, CPA & Associates, LLC is an accounting firm in Columbia MD which offers, tax services, outsourced CFO, outsourced controller, businesses advisory, and coaching services to businesses and individuals thorough out the Greater Washington, DC and Baltimore, MD area.

​We also provide service in Ellicott City, Columbia, Annapolis, Severn, Odenton, Crofton, Silver Spring, Rockville, Bethesda, Gaithersburg, Potomac, Reston, Tysons Corner, Fairfax, Alexandria, Arlington. We're also a local cpa firm conveniently located in Columbia Maryland directly across from Columbia Mall.
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Travis Raml, CPA has been an accountant since 1998 and a certified public accountant (CPA) since 2003 and prides his firm on delivering high quality small business CPA services. He specializes in Columbia Tax Preparation, and Columbia Maryland Accounting Firm.

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