Month: November 2012

Avoiding Bad Debt: Tips to Help You Get Paid

The easiest, and cheapest, way to collect on a bad debt is to avoid it in the first place. There’s no foolproof way to avoid bad debts, but you can limit them.

  1. Talk to an attorney before you do sales on credit. An experienced attorney can tell you what rights you have if a customer fails to pay and help you draft a sales contract that states your business’s policy on payment (including incentives for early payment), interest calculation, personal guarantees, and recovery of attorneys’ fees for collection. They can also tell you what you can’t do to collect what you’re owed.
  2. Most clients show red flags before they default, like repeated late payments or asking for extensions. Make sure you have a system to spot those flags and address them early.
  3. Contact the customer immediately if their payment is late and stay in contact until you get paid. Be clear with the customer what will happen if they continue to not pay and document any conversations you have, especially the reasons for being late and any payment plan you work out.
  4. Send out invoices promptly and regularly. The longer you give the customer to pay, the more likely it is that they won’t.
  5. Follow through and be consistent. Follow your policies in every case. Stick to the deadlines you set for payment, especially if you negotiate a payment plan with a customer. Even if one client absolutely refuses to pay, future clients will see that you take collections seriously and think twice before failing to pay their bill.

Some customers, unfortunately, can’t or won’t pay their bills. But preventing most of your accounts from becoming problems in the first place will keep you and your business in the black.

Good Employees Gone Bad: What Your Disciplinary Policy Should Do

In an ideal world, you’d never have to discipline an employee. In the real world, though, it’s important to have a disciplinary policy that’s both clear and consistently enforced. A good disciplinary policy can help protect you and your business, especially if discipline results in terminating an employee. When creating a policy, there are several things to keep in mind:

  1. Put it in writing! Your policy should always be written down so that you can refer to it when needed, but also so that employees can read it and have a clear understanding of how it works. Equally important is to show the policy to your employees so they have a chance to read and understand it. That way you can avoid problems that happen just because an employee didn’t know your expectations.
  2. Write your policy with a view towards the process, such as how many warnings you’ll give, who should give them, and how to give them. Don’t try to address specific violations, because you can’t anticipate all of them.
  3. Be consistent with enforcement. Enforcing the policy with only some of your employees is unfair to all of them. Also, if you only enforce the policy sometimes, employees may not know when they’ve actually done something wrong.
  4. Document every step in the employee’s personnel file. Write up a summary of any verbal warnings and include a copy of any written ones. This helps you identify if problems continue to occur. It can also serve as evidence to support you if you have to terminate an employee.

A disciplinary policy should give you a road map to addressing employee problems, up to and including termination. But most importantly, a well-written policy will tell your employees what you expect of them and help you avoid problems before they start.

Thoughtful Gifts: Using Beneficiary Planning to Take Care of Loved Ones

Estate planning is about taking care of those you love. So doesn’t it make sense to consider what they might need? That’s the idea behind “beneficiary planning”—an approach to estate planning that considers the individual needs and situation of each beneficiary.

Beneficiary planning helps you create an estate plan that addresses the real needs and concerns of your loved ones. Your family members aren’t identical. Some beneficiaries might have more expenses, such as long-term healthcare costs or higher education costs. Others might have independent sources of income and need less financial help.

In addition to just considering the relative health, education and other sources of wealth each of your beneficiaries has, here’s a list of things to consider before you start planning:

  • Do any of your beneficiaries need protection from creditors and how much protection do they need?
  • What might happen if any of your children get married, divorced or remarried? Along those same lines, what might happen if your spouse remarries and/or gets divorced?
  • What are your children’s individual educational needs or plans?
  • How well do your beneficiaries handle money matters? Do some of them spend more than they should?
  • Do your children have or plan to have children of their own who will need support?

Just as a “one size fits all” approach to estate planning can’t really address your personal goals and concerns, a “one size fits all” approach to providing for your beneficiaries can’t really address their needs. Beneficiary planning can help you make the most of estate planning by providing for your loved ones the way they need.

Being Reasonable: The Key to an Enforceable Non-Compete Agreement

Many employers now ask employees to sign non-compete agreements as a way to protect business interests. But having a non-compete you can actually enforce is easier said than done.

Wisconsin law requires non-compete restrictions to be “reasonably necessary for the protection of the employer.” It sounds simple, but in practice, courts interpret non-competes in favor of employees.  That means a lot of agreements aren’t enforced because they’re too restrictive.

There’s no guarantee your non-compete agreement will be enforced, but there are things you can do to increase your chances:

  1. Decide ahead of time what the business reasons are for having a non-compete (protecting a customer base or confidential information, for example). You’ll need those reasons if the agreement is challenged, but thinking about them first can also help you tailor the agreement to protect them better.
  2. Limit restrictions to a definite time period. What’s “reasonable” will depend on your situation, but usually it’s no more than 2 years.
  3. Limit restrictions to a definite geographical area. Again, this depends on the situation, but the area should be related to your business presence, like the area you advertise in and draw most of your customers from.
  4. Use non-competes as part of a policy, not based on individual employees. If you ask one person in a position to sign one, ask everyone in that position to sign one.

And most importantly:

5. Talk to a lawyer at the beginning. The law on non-competes is constantly changing. A lawyer will tell you where the law stands and how to write the agreement so it’s most likely to be upheld.

A non-compete agreement is useful only if it’s enforceable.  Take the time to plan your agreement so that you have the best chance of success.

Job Descriptions

When talking with our business clients in Northeast Wisconsin, we generally hear that creating and updating job descriptions for employees is a huge waste of time. Nothing could be further from the truth.

Well-written job descriptions can help you run your business, save time down the road and avoid costly employment litigation. The trick is creating job descriptions that are useful.

What does a useful job description have?

Job descriptions will vary. However, whether your business is located in Appleton, Oshkosh, Green Bay or Neenah, there are some common things all job descriptions should have.

  • Details.  It’s tempting to leave a job description vague (e.g. Sales Representative for Outagamie and Brown County). But a vague job description won’t give your employee any guidance on what you expect of them. It also won’t help you figure out if your employees are meeting those expectations (e.g. I AM a sales representative in Outagamie and Brown County even though I haven’t sold anything!). Always err on the side of adding details.
  • Job duties and qualifications.  A job description should always include the job title, basic responsibilities and the title of the position’s immediate supervisor. The job should report to a particular position (for example, an Appleton customer representative reports to the Appleton customer service manager), rather than an individual person. It’s also a good idea to add specific qualifications/requirements the position requires (e.g.  familiarity with NEW North family businesses).  Specific requirements are often the key to defending employment litigation.
  • Monitoring policies.  The job description should also lay out how and when you’re going to evaluate whether expectations are met. The job description should provide a benchmark for evaluating an employee. An annual performance review is a good start. Most expectations, though, should be addressed more often so that you can prevent minor issues from becoming problems or, worse yet, a lawsuit.

Why do job descriptions matter?

Job descriptions are certainly important for avoiding employment litigation. For example if an employee has a disability, you can look to the job description to see what kinds of reasonable accommodations you legally need to make. Additionally, If an employee sues for discrimination, the job description can often come to your defense.

But job descriptions are equally important for “business” reasons.  Job descriptions tell your employees what’s expected of them, how they will be measured and who will measure them. This inevitably eliminates costly employment litigation, but also enhances employee productivity by ensuring everyone knows what they need to do.

Wanted – Personal Representative: Why You Need to Choose the Right Person for the Job

Your personal representative forgets to pay taxes on your estate and, as a result, most of your property ends up going to the IRS rather than your loved ones. It sounds far fetched, but it has happened. The truth is that a personal representative has a lot of obligations and it can quickly become a full-time job. That’s why it’s important to choose the right representative and avoid problems like the one above.

Every estate is different, but generally a personal representative needs to:

  • Manage and possibly sell estate property: managing might include repairs, collecting rent or investing property and definitely includes maintaining insurance on it
  • Pay taxes and bills on time
  • Notify and handle the claims of creditors and beneficiaries, many of whom want to get paid as soon as possible
  • File all appropriate court forms and meet court deadlines
  • Distribute estate property and close the estate

Not only does the personal representative need to do all of the above, but he or she can be held personally liable for failing to do them, even if the mistake was unintentional. They can also be removed by the court, resulting in delays and extra costs.

There are no guarantees, but the best way to avoid problems is to choose a personal representative who has some familiarity with managing and selling property. A good personal representative should also be well-organized and good at communicating with people. Finally, your representative should have an idea of the overall process and what’s expected of them.

Your personal representative is responsible for making sure your wishes are carried out. For that reason, it’s important to choose someone you trust who’s willing and able to do the job right.

Not Your Average Estate Plan: Additional Challenges for Business Owners

You already know that owning a business is both rewarding and challenging. But owning your own business also presents unique challenges when it comes to estate planning. It’s important to keep that in mind so that you can create a plan that protects both your loved ones and your business. Below are four things every business owner should consider when creating their estate plan.

  1. 1.What do you want to happen to the business? Your estate plan is going to look very different if you want to pass the business on to your children than if you want to sell it and leave them the proceeds.
  2. 2.What exactly are your business interests? How those interests are classified (for example, “business property” for a sole proprietorship or “corporate stock” for a corporation) makes a big difference. You’ll have different estate planning options for different types of interests.
  3. 3.Is your estate plan consistent with your business plan? There can be major problems if the two plans don’t match. Take an example: you won’t be able to leave your stock to your children if a buy-sell agreement gives other shareholders the right to buy your shares.
  4. 4.Do you have life insurance? Many business assets aren’t liquid (i.e., easily converted to cash). A life insurance policy that names the business as beneficiary can provide much needed capital to keep the business going or allow other partners to buy out your share.

Just like your family and friends, your business is important to you. Ultimately, that’s what estate planning is about—protecting what matters most to you. Make sure your estate plan protects both your loved ones and your business.