When did you last assess the Capital Efficiency of the Principal Financial Elements in your business?
Addressing just one can immediately increase profits.
The most obvious element to work on is where there is often a disconnect – such as between HR and Accounting.
When you engage New Talent how is their Salary designed?
With no disrespect meant to HR people – their FORTE is in managing human animals and not money. Regrettably there is a divide between Personnel & the Bean Counters. When the bottom line counts the GM or business owners need to be concerned about all financial decision making and assess the efficiency of money being spent in every area of a business.
In many instances not just department managers but also the principals of the business should upgrade their knowledge and skill in financial management, tax, retirement planning, budgetting, finance, purchasing, sales and marketing, and any area where money, costs and profits are focal points for a business.
To highlight a few gapeing financial holes examine salary packages of just a few of the more highly paid workers and see what is left on the floor and also what drains away.
Employee Gross Income:
Ee Federal Income Tax:
Total Payroll Tax:
$15,300.00 *(shared – 7.65% each – worker/employer)
Total Tax Liability
Avg. Effective Tax Rate
Marginal Tax Rate
$19,500 Pre-tax 401(k) Contributions
Tax Liability $26,309.50
401k Matching Employer Contribution
Employee Marginal Tax Rate 29.65%
Employer Income Tax Rate 21%
How many Employees contribute maximum to their 401k
How many use Gearing?
How many have employer matching contributions?
TWO QUESTIONS Might Be:
We have the answers – which are proprietary.
Worker pays Contribution from Wage $19,500
Tax Rebate of $4,000
Shortfall in Disposable Income $16000
Salary Sacrifice of $20,000
Shortfall in Disposable Income $15,200
Employer Contribution $19,500 –
Fully restores After tax Shortfall on Disposable Income PLUS $4,000
401k Fund Balance is $39,000 Picking up Tax Gain of $4,000 on after tax cost of sacrifice
Worker can access $19,500 Plus the $4,000 Tax Rebate = $23,500
Applied to Shortfall 1 there is a Surplus of $7,500
Resultjng in a net deficiency on their Personal Contribution of $12,000
Covered by external Borrowings
Universal Life Plan Investment (Real Estate, Equities or Alternative Investment) $20,000 (year 1 no borrowings from investment) funded by 401k Loan
Effective Cost of $20,000 Investment $16,000 (Year 1 – requires External Borrowings)
Year 2 $20,000 Premium paid by loan from 401k Plan
401k Personal Contribution funded by Loan from Universal Life (commencing in year 2 @ 90% of Balance)