[IMGCAP(1)]A couple once requested that I calculate the cost/benefit of getting married. That was an interesting task, given that I was a CPA recovering from a recent and bitter divorce.
Although the client was looking for a simple Married Filing Joint versus Single tax analysis, I found it impossible to resist creating an elaborate spreadsheet detailing countless what-if scenarios in the event of a breakup. This sprawling Excel template included my slightly biased opinions on lavish legal fees, arduous alimony, painful penalties, and laughable losses on a home sale. Can you say scope overrun?
Many hours later, and the Mona Lisa of spreadsheets was ready. However, the very-much-in-love couple didn't share in my twisted enthusiasm and ran out of the office as quickly as possible. My nerdy tax accountant's version of a masterpiece was in vain, and worse, a big write-off.
Time is at a premium for financial advisors. We are often asked to help solve problems that run the gamut from calculating breakeven analysis to breaking away from antiquated accounting systems. Like the "honey to-do list," we are requested to do many different things that we may not be the most efficient at and more likely to mess up.
Suppose, for example, that a client wants to buy a business car and asks you for a lease-versus-buy computation to determine which option is the most economical. You open a blank worksheet and go to your handy-dandy reference book and begin plugging in numbers. After an hour of pounding away, you get an answer and e-mail the client.
Later that night while in bed, it hits you like a ton of bricks: "Crap, I forgot the lease inclusion amount in the tax section." Luckily, they get your revised e-mail before pulling the trigger on the new car. Their reply is only mildly insulting ... something about needing to sharpen pencils and having your visor on too tight.
Everyone makes mistakes and occasionally forgets something in the process. The real mistake is when the advisor could have easily found a template instead of reinventing the wheel. The benefits of using a tool or template as a starting point for our calculations are obvious: It saves time, simplifies computations, improves quality, etc. It's similar to buying your spouse a new dresser from Ikea and likely assembling everything backwards, versus just getting it already built from Target. It seems that if our expensive software can't solve the problems that our clients pose, we gravitate toward spending more time building something from scratch. This can be shortsighted, especially when all types of free financial tools are available.
WHERE CAN I FIND TOOLS?
Most firms have some sort of "knowledge library" or archive of tools and templates. The difficulty is that they are often not well organized and may be hard to find.
Preparing an index and encouraging staff to not only save special prepared tools in their client folder, but also in the knowledge library, is good chalk talk.
Outside of the firm, Microsoft and Google are effective places to start. Microsoft has a ton of free templates, even a fancy lease-vs.-buy calculator. Some of my favorites include the Business Structure Selector, the Home Office Benefit Comparison, and the lease-vs.-buy calculator, which you can download by going to this link and searching by title: http://office.microsoft.com/en-us/templates/.
Google docs also has a large library of public templates (you may have to set up an account first). I like the Breakeven Analysis template: https://docs.google.com/templates.
Just about every accounting and tax tool that you can imagine has at least a base model already created. If you go hunting via Internet searches, be careful of unknown sources. Many templates will be outdated, and a large percentage are just bad, just like marriages (not that I am resentful).
A while ago I found one that computed the tax savings of an S Corp vs. a Schedule C. The template was beautiful, with a full-color report and graph. On the surface, nothing to be concerned about. I was salivating at the idea of showing clients all the money that I was saving them. When I tested it, I found out the calculator was flat wrong. It didn't cap the Social Security tax at the wage limit. You could have put in a million dollars of wages, and it would have calculated the 12.4 percent on all of it. The moral of the story here is to test, test and retest, and in the case of marriage, a blind wife and a deaf husband still make the best couple.
I made a tool for figuring out the tax savings of an S corp vs. Schedule C. Not as pretty as the one that I found with the Internet search, but at least it has Social Security limits built in. You can find a copy on our Web site, www.reasonablecompensation.com/blog/.
If you can't find what you need, you can always build it yourself. If you take the time to build a template, put in the extra effort to make it re-usable. If it is an Excel calculator, add the formulas instead of hard codes, use vlookups, data validation, etc. If you're filling out a client checklist, consider saving it as an Adobe file and replace the hard-coded answers with open fields that can be edited. YouTube is an excellent resource for getting help in very specific areas of Excel, Word and Acrobat, and it has a limitless supply of heartbreaking ballads to give you motivation.
While the secret of a happy marriage still remains a secret, no one can refute the effectiveness of finding and building tools. We have been doing this since before the institution of marriage itself.
So, next time you open a spreadsheet to do some calculating, pause and consider looking for a good template first. Save yourself a lot of time, mistakes and heartache.
Dave Nagy, CPA, is the founder of ReasonableCompensation.com (the trade name of CPA Opinion Partners LLC). Previously, he founded Nagy & Associates PA.
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