How tax reform affects bad debts, cash flow

Article Abstract:

Business cash flow managers such as treasurers and entrepreneurs need to be aware of the changes enacted by the Tax Reform Act of 1986 (TRA) and of planning strategies which can have an impact on cash flow. One important TRA feature revokes use of the reserve method for most taxpayers, decreeing that the specific charge-off method must be used to account for bad debts. The specific charge-off method only allows a deduction for a fully worthless debt in a year in which the debt specifically becomes worthless. The worthless portion of a business debt that is only partly recoverable may be deducted in the year in which the taxpayer charges it off. Users of the accrual accounting method are not required to accrue taxable income for amounts gained for service performance, if the taxpayer knows, based on past experience, that the amounts will never be collected.

Analysis, Taxation, Tax reform, Cash management, Cash flow, Bad debts

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Insulated Controlled Disbursing: A Way to Win the War on Fed Float

Article Abstract:

Procedures are outlined for meeting the Federal Reserve check presentment noon deadline without losing control of the cash flow. A protected, regulated payment system is described. It utilizes banks that can offer next day funding, overnight investment accounts, and overnight loans. Charts illustrate how this system handles overdrafts and excess balances. Transfer of funds between accounts is done completely by computer.

Computers, Laws, regulations and rules, Finance, Digital computers, Prices and rates, Foreign exchange, Foreign exchange rates, Check collection systems

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