Your Guide to Understanding Cybersecurity Terms

As with any industry, accountants have their own jargon, but a general understanding about some of it is not beyond comprehension for the ordinary entrepreneur and can be quite useful as well as occasionally crucial to sound decision-making. One such area is summarized by the term “discounted cash flow.” This encompasses vital methods for identifying if a major business purchase makes sense.

Determine When the Benefit Arrives

A large amount of spending for your business could be for new equipment or a new product line or an expanded location. But it might simply entail soft costs for an advertising campaign or revamped website. The aim for any of these investments is increasing revenue. The problem is that you spend the money upfront and then wait for the cash to flow in later. Hence, the reference to “discounted cash flow” takes into consideration this time value of money. It recognizes that cash today is more valuable than the same amount of money in the future.

In fact, the expectation of receiving a certain amount of cash next year is more valuable than receiving that same quantity of cash in 10 years. The longer the length of time you expect before generating higher business revenue, the more you have to discount its value.

Present Value of Future Benefits

Identifying the present value of an amount in the future is the whole point of most discounted cash flow determinations. All the future cash flows are discounted by some specified rate. The selected rate, therefore, depends on the length of time before your large expenditure is expected to deliver results.

In the simplest case, you might use a rate you have to pay for borrowing the money to spend. For example, if you borrow money at a 5% interest rate for one year, you want to spend it on something that will generate revenue over the next year that is at least 5% more than the amount you’re spending. Most discounted cash flow calculations are, of course, more complicated than this. They typically require assistance from an accounting professional.

Calculating present value necessitates estimating the revenue expected from making a major purchase. This normally entails gradual revenue increases, which may continue for an extended period but escalate less over time. A discounted cash flow model to determine net present value applies the discount rate to each of the periods over which revenue rises.

Rate of Return

Not all discounted cash flow calculations are made using net present value. That’s because an expenditure can be quite profitable but still have a slightly negative net present value because it returns less than the discount rate.

To correct for this deficiency, accountants deploy another discounted cash flow technique known as the “internal rate of return.” This method identifies the rate that results in a net present value of zero. All the present values of future revenue will equal the money spent at the beginning. This tool is useful when the expenditure occurs over time along with the future incoming cash flow. The internal rate of return also tells you how much is an acceptable interest rate for borrowing the capital needed for a major purchase.

Does Your Business Depend on a Supply Chain?

Supply chains are a vital part of many businesses that operate. Whether its sourcing parts and materials or reselling goods made in other countries, supply chains make the world go around.

But what happens when that supply chain is interrupted by a natural disaster or other unforeseen event that throws your business into chaos? Pointing fingers, blaming suppliers or transporters, or even trying to make alternate arrangements can cost lost credibility, time, money, and, most importantly, clients. Companies need protection against broken links in their supply chains. The right insurance can’t stop the chain from breaking, but it can stop the business from falling apart if it does.

There are two main coverage options: contingent business interruption insurance and supply chain insurance.

A contingent business interruption insurance policy reimburses lost profits and extra expenses caused by the interruption of someone else’s business. If you rely on one supplier to get you your materials, depend on one manufacturer for most of your merchandise or purchase the bulk of your products from one business, this may be the way to go. The policy is limited, though, in that it only provides coverage if your supply chain is interrupted due to physical property damage at a supplier’s business.

Broader coverage is offered by supply chain insurance. It too covers supply chain disruptions caused by property damage to your supplier’s business, but it can also cover road closures, political upheaval, regulatory action, financial issues, public health emergencies, natural disasters, industrial accidents, riots and labor issues.

If you have any confusion about these policies, please call or email us today. We will look at your options and guide you to the best policy for you based on the supply chain that serves you. We’re always here to help and make sure you have the coverage that’s right for you.

Does Homeowners Insurance Cover Landscaping Mishaps?

It was a bright, sunny, peaceful day. The birds were chirping and minding their own business when Tim, the neighbor’s son and a nervous new driver, drove smack-dab through the middle of your front lawn during his driving lesson. Is this unfortunate mishap covered by homeowners insurance?

Generally, yes, a standard homeowners insurance policy will cover another person’s vehicle driving into your landscaping. However, you shouldn’t expect your entire landscaping costs to be reimbursed by your insurance company. Usually, you will first have to meet your deductible. You probably can’t expect the full amount of damage to be paid to you. Additionally, there are sometimes limits on how much an insurance policy will pay per tree or shrub or limits are placed on recovery from landscaping as a percentage of the total protection on your dwelling.

While your homeowners insurance policy is good protection against any sort of freak accident that happens to your landscaping (such as a car plowing into it, fire, lightning or vandals), your policy likely won’t cover more predictable happenings such as typically heavy winds or hail common to your area. Damage caused by weather and pests often isn’t covered by homeowners insurance.

If you’re truly invested in your landscaping, you might want to consider expanding your coverage for peace of mind. Call or email us, and we can review what protection you’re currently offering your plants and, if you’d like more, pair you with the coverage that is the best fit for you. We are always here to help.

I Can See Clearly Now: Choosing a Top Cataract Surgeon

Cataracts are an opaque or cloudy loss of lens transparency in the eyes that we likely will experience as we age. However, cataracts can begin to form as early as age 40. If cataracts begin to affect our night vision while driving or otherwise impair our ability to see, then it’s probably time to consider cataract surgery.

How to Choose the Right Surgeon

Here are a few tips to consider when choosing the right ophthalmologist.

1. Ask your friends. If you live in a retirement community, many of your friends will have undergone cataract surgery. Ask them what provider they used, and then ensure that your insurance covers that physician. If you’re on Medicare, see if your chosen provider accepts Medicare assignment.

2. Ask your optometrist. Optometrists can diagnose and treat eye conditions, but ophthalmologists are the medical professionals that perform cataract surgery. Ask your optometrist to suggest an ophthalmologist, and then choose one that is board certified with a successful surgical track record.

3. Once you have a few names, read their Google reviews. Healthgrades is another review site for doctors. While reviews of doctors can be inconsistent, you’ll still find opinions about how well the office functions.

Ready, Set, Choose

Once you have the names of several eye surgeons with histories of successful cataract surgeries, how do you choose? Call their offices and ask if they offer free consultations. Do they promptly answer the phone? This is one key indicator of how their office treats patients, both before and after surgery.

Definitions in Disability Policies Are Critical – Don’t Shop Alone

One in four American workers aged 20 will become disabled before reaching age 67, according to the Social Security Administration in 2020. Over half of the US workforce (in fact, 67 percent of private-sector employees today) have no long-term disability coverage. This leaves most Americans in a challenging situation if they can no longer work. A short- or long-term disability policy can help prevent financial catastrophe.

Definitions Matter

Definitions in any insurance policy govern how coverage applies. Most disability policies define disability in one of two ways. “Own occupation” and “any occupation” definitions are important distinctions that can help you choose the policy that best fits your circumstances.

“Own occupation” means the policyholder can no longer perform the essential functions of the occupation. So, if you’re a plumber, you can no longer perform the tasks needed to install a water heater, for example.

“Any occupation” means the policy will provide disability benefits only if the policyholder cannot perform any occupation the policyholder could perform by virtue of experience, training, or education. For example, if you’re a surgeon with an any occupation policy, you could find yourself working in another role in a medical facility if you could no longer practice as a surgeon.

Don’t Buy Online-Call for Help

Most of us are comfortable shopping online. That’s great when you’re buying shoes, but it can be a critical mistake when you’re considering something as important as disability insurance. You may want to complete online research to better understand the differences in disability policies and then with us so we can guide you in making the best choice for your budget and your professional demands.

As we age, disability can happen in unexpected ways. New threats, like the recent pandemic, present us with new disability management challenges. Call us today and we will help you navigate your disability coverage options.

Life Insurance Is Affordable, Regardless of Life Stage

Are you avoiding purchasing life insurance because you think it is too expensive? If so, you are not alone. Many people do not think they can afford life insurance, and thus don’t have as much as they need.

According to a study by LIMRA, 59% of US households do not have life insurance, and even those households with life insurance only have enough to replace three years of income. The average life policy need is about $459,000, but the average policy owned is $126,000, according to AccuQuote. That is underinsurance of roughly $300,000.

Although it depends on your individual circumstances, three years of coverage is likely not enough life insurance. That is because life insurance is designed to provide for loved ones who rely on your income. If you pass away, they may not be able to get back on their feet after just three years.

How do you determine how much life insurance you need? You may want to discuss life insurance with your loved ones to determine what their needs are. This may be an uncomfortable conversation because no one likes to imagine his or her own death. But if someone relies on your income, it is important to ensure that he or she will be cared for if something happens to you.

Plus, getting the life insurance coverage you need may be less expensive than you think. There are different types of life insurance, some more affordable than others. Term life insurance, which pays a benefit to your survivors when you die within a specified period of time, is usually the most affordable type. Whole life insurance, which combines investing with term life insurance, is more expensive.

We can help you decide how much life insurance you need; please reach out to us today.