President’s Message – March 3rd, 2015

Do you agree with the following statement? “You don’t know what you don’t know – and that can bite you very hard.” Worse is when you think you know and you’re wrong. Have you ever been in that situation? I’ve gathered a file of situations like that and plan to share them with you over the next several months. My intention is to insure that you know that as members of CFBC you have the most amazing resources at your service: CFBC Strategic Partners. Their mission is to help you. They’ll ask what’s your situation with your will or how about the details of your pension plan. They’ll inquire about what you’re doing about your employee health insurance setup, about your company’s digital systems, about your social media and much, much more. Then – and this is the good part – they’ll help you to know what might be about to BITE you and how to avoid it. That’s a mighty great tool.

The easiest way to use them is simply to invite them to your forum meeting. Ask your Forum chair to invite them one hour before the formal start of your Forum meeting. You just won’t believe how much of what you don’t know really could bite you. But they do know. And they can help you and your Forum members avoid those costly “didn’t knows” that can quickly turn into nightmares.

Please send me your own nightmares and I’ll share them too.

If you want to go fast, go alone. If you want to go far, go together. CFBC, 20 Years Deep.

Bob Carmody President Signature 2014

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To Capitalize or Expense…That is the Question

Cray Kaiser

Businesses buy supplies, materials and equipment constantly.  Repairs and maintenance on existing assets also recur frequently.  How does your accounting department handle these outlays?

The Internal Revenue Service (IRS) finalized regulations in September 2013 regarding whether expenditures were considered immediate tax deductions or should be capitalized.  The regulations are applicable to tax years beginning after 2013; so calendar year businesses are now on task with applying these new rules on their 2014 income tax returns.

The regulations are vast as you would expect with a complicated set of questions.  Additionally, the rules are fluid; new Revenue Procedures continue to be issued in order to clarify certain aspects of the regulations.  The key takeaway for closely held businesses is that with this guidance, businesses should be reviewing not only their current capitalization policy but also looking at their depreciation schedules to see if there is an opportunity to write-off old assets under the regulations.

SMALL BUSINESS RELIEF – Before recent relief was provided, every business wishing to make an accounting method change was required to formally request the change with the IRS.  The form to request the change (Form 3115) is complex and time-consuming for the preparer.  Under new guidance, qualifying small taxpayers are no longer required to complete Form 3115 in order to request certain accounting method changes.  Small taxpayers are defined as businesses having (for each separate trade or business) assets totaling less than $10,000,000 or average annual gross receipts of $10,000,000 or less.

MATERIALS AND SUPPLIES – The regulations establish that purchases falling into this category include item purchases costing $200 or less and have an economic useful life of less than 12 months.  The cost of materials and supplies can be expensed in the year they are first used or consumed.

DE MINIMIS SAFE HARBOR – An annual election is available to taxpayers that do not have an “Applicable Financial Statement” to immediately expense a unit of property that costs less than $500 per invoice (or $500 per item if substantiated on the invoice) if such a policy exists at the beginning of the tax year.  For taxpayers with an “Applicable Financial Statement” (generally an Audited Financial Statement), the threshold is $5,000 per invoice (or $5,000 per item if substantiated on the invoice).  The capitalization policy must be in writing for those taxpayers with an “Applicable Financial Statement”.  The De Minimis Safe Harbor is available without an accounting method change.

REPAIRS – The regulations are helpful in describing what a repair is not.  Any amount that is a restoration, adaptation or improvement must be capitalized.

ROUTINE MAINTENANCE SAFE HARBOR – The regulations provide that amounts paid for routine and recurring amounts paid to keep a unit of property in working condition may be treated as repair costs.  Under the routine maintenance safe harbor, the business needs to segregate amounts paid for real estate and other property.  If the amount is paid to maintain real estate, the amount can be expensed if the business expects to perform the repair more than once during a ten-year period.  If the amount is paid to maintain other property, the amount can be expensed if the expense is expected to recur more than once during the property’s class life.

REAL ESTATE SMALL TAXPAYER SAFE HARBOR – For those real estate businesses with average annual gross receipts of less than $10,000,000 and real estate with an undepreciated cost basis of less than $1,000,000, a small taxpayer safe harbor is available.  Under this safe harbor, an annual election can be used to immediately expense the total amount paid for repairs, maintenance and improvements up to the lesser of $10,000 or 2% of the basis of the real estate.

The regulations provide for additional guidance on acquisition and facilitative costs, complete or partial dispositions of property, spare parts, and defining units of property.

We hope this information is helpful.  If you are interested in speaking with us about how the above regulations affect you and your business, we’d be happy to discuss. Please contact Karen Snodgrass or Deanna Salo from Cray, Kaiser Ltd. (630-953-4900), a strategic partner with the Chicago Family Business Council.


Karen Snodgrass CPA                                       Deanna L. Salo CPA
Cray, Kaiser Ltd.                                                Cray, Kaiser Ltd.

1901 S. Meyers Road                                        1901 S. Meyers Road
Suite 230                                                            Suite 230
Oakbrook Terrace, IL 60181                           Oakbrook Terrace, IL 60181
Phone: (630) 953-4900 x248                         Phone: (630) 953-4900 x210
Fax: (630) 953-4905                                        Fax: (630) 953-4905                                             Email:    Email:

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Cray Kaiser Testimonial by Ken Pavett

It was the summer of 2010. Flexografix was still recovering after the losses we experienced during the 4th quarter of 2008, which extended to the company’s poor financial performance in 2009 and into 2010.

When I first joined the CFBC, Judy discussed the CFBC Partners and I asked her for an accounting firm recommendation.  My previous accountant was okay, but I realized I had more to learn after our downturn.  I needed better resources to learn from and to advise me.  Within a short period of time, Deanna Salo and Roger Reitz with Cray Kaiser were in my office.  I responded immediately to Deanna’s combination of knowledge, experience, confidence, positive energy and sincere interest in helping me.  It was a good first meeting.  We established a plan, and I quickly felt comfortable engaging with Cray Kaiser as a client.

Deanna and Amy Langfelder made the conversion reasonably easy and instantly became my go-to team, extending to all financial areas of my life.  Since that first meeting, my company has expanded in the areas of our manufacturing capabilities, capacity and technical value to our customers.  Each time, before I made a major investment decision, I met with Deanna first and we strategized together.  I want to have the benefit of her experience, review the expected impact in a financial planning model together, and have another viewpoint to consider before moving forward.

In one example, thanks in great part to Deanna’s involvement, Flexografix invested in advanced manufacturing equipment with the support of significant income tax savings to offset the costs.  Then, two years ago, we were approached by a $4B prospective customer to produce printing plates for a completely new product; a product no one in the world had much experience manufacturing for this application.

It required research and benchmark testing leading to the purchase of new, unfamiliar equipment and establishing a relationship with a new raw materials supplier.  Then came the manufacturing fire drill.  The equipment was literally hooked up on a Thursday and orders started pouring in the following Monday.  We learned how to both control and tune the manufacturing process of that new product, while filling orders on the fly.

The value of the pricing model Deanna had previously built for me was measured by the attractive profits that new product added to our Net Income in 2014.  And when my initial time studies proved to be inaccurate to our early production experience, Deanna cleared time in her schedule to quickly help me revise the original predictive model.  During that meeting she offered me input and confidence, which resulted in a successful price increase to our customer – to offset our additional manufacturing costs.

More recently, Deanna built a planning model so I could estimate both the business and personal financial impact of the new building my company is purchasing – before I made the decision to purchase it.  We also just completed a compensation impact model for our new Director of Sales, who started his career with Flexografix on February 16th.

Since working with Deanna and the Cray Kaiser team, I am better informed and make better business investment decisions.  I have made more money and have retained more of the Net Income my company has generated – making my business more valuable.  I want to point out that the fees my company has paid for the services I have received from Cray Kaiser are insignificant compared to the value this knowledge has provided to me and my business.

-Ken Pavett, Flexografix

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President’s Message – February 3rd, 2015

At CFBC, we’re all about shared experiences, right?  This month I’m sharing one of my personal experiences, the prayers that I keep with me all the time. I wish that I knew who wrote it first, but I don’t know who to credit. I do know that for me, it is good medicine.

People are often unreasonable, irrational and self-centered. Forgive them anyway.
If you are kind and forgive people, some may accuse you of selfish ulterior motives. Be kind anyway.
If you are successful, you will win some unfaithful friends and some genuine enemies. Succeed anyway.
If you are honest and sincere, people may deceive you. Be honest and sincere anyway.
What you spend years creating others can destroy overnight. Create anyway.
If you find serenity and happiness, some may be jealous. Be happy anyway.
The good you do today will often be forgotten. Do good anyway.
Give the best you have and it will never be enough. Give your best anyway.
In the final analysis, it is between you and your God. It was never between you and them anyway.

“If you want to go fast, go alone. If you want to go far, go together. CFBC, 20 Years Deep.”

Bob Carmody President Signature 2014

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Understanding the Impact of the Cash Conversion Cycle

American Chartered Bank

Optimizing the Cash Conversion Cycle (CCC) affects your companies bottom-line, your cash flow and influences the amount of external funds needed to run your business. While many concentrate solely on revenues and expenses to manage cash flow, it’s usually not optimizing of the CCC that often leads to a cash crunch in your business.

The CCC is equal to the time it takes to sell inventory and collect from customers less the time it takes to pay your vendors. Effective CCC management is the result of a company selling what people want to buy, resulting in cash cycling through the business quickly. If too much inventory builds up, cash is tied up in goods that cannot be sold, causing a business to slash prices and reducing profit margins. If there is difficulty in collecting payments, essentially creating a loan to the end customer, cash is not available to re-invest in the business whether in the form of investing or paying down a loan and reducing loan expenses.

Companies also benefit from slowing down the payments to vendors, as it allows them to make use of cash longer. As a business owner this is a Catch 22, slowing down your payables while hoping that others pay you quickly.

To read the full article, please click here: Understanding the Impact of the Cash Conversion Cycle

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Top Three Marketing Trends of 2015

Prism Insights LogoTime for goal-setting, projections, resolutions and the proliferation of Top “Name Your Number” Lists for the coming year. It is a little known fact that we marketers actually take a secret oath to create at least one obligatory Top Prognosis list every January. Don’t fulfill this obligation and one risks being kicked out of the marketing club and sent to the mail room. (Do companies even have mail rooms anymore?)

So it is with glee that the team here at Prism shares our Top Three Marketing Factoids for 2015…and what they mean for your business.

Click here for the full list: Prism Insights: Marketing Trends of 2015

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President’s Message – January 6th, 2015

I’m contemplating forums and how they work over time; specifically the benefits that I get from my CFBC Forum. It’s a huge cornucopia (like that scrabble winner?). It’s more than I could have ever imagined before getting involved with the Chicago Family Business Council. It’s what we talk about when “outsiders” ask what we’re all about. Peer-to-Peer support, person-family-business experienced as one. Could we get more? Could we expect more?

Most of our more established (older) forums seem to be comprised of birds of a feather. Folks in similar situations and positions within their lives and businesses. The commonalities and similarities of our opportunities and problems are comforting, enlightening, and useful. Very cool, but consider this:

Something very different is happening and proving to be even more useful in our newer forums. Diversity. And the results that we’ve seen are surprising and amazing. These people are contributing in their forums the same way we all have learned, the EI way, but from very different backgrounds and points of view. And the insights and experiences shared are broader and more thought provoking. Diversity, it’s very intriguing. I wonder how we can inject some of that into our well-established forums. I wonder if it would be more beneficial than disruptive. I wonder. What do you think?

Bob Carmody President Signature 2014

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President’s Message – December 2nd, 2014

I like writing about the things that I’m thinking about.  I’d truly enjoy hearing back from you on these things or anything else that we should ponder.  I’m seem to be talking over the canyon and have yet to hear an echo!

Emotional Intelligence and CFBC involvement have changed me and my life in unmeasurable ways.  I can’t imagine how I got along before.  But I’ve begun to struggle.  The rest of the world doesn’t know EI!  While we’re all practicing disciples living by example, we’re otherwise without tools to share with the non-initiated.

What happens in forum stays in forum.  How precise is that concept when it comes to sharing the EI philosophy and practice outside of CFBC and our safe haven forums?  Our families could benefit, don’t you agree?  Your brothers and sisters?  How about other friends or workmates?  What have we got for them?  Not enough I think.

Let me know what you have to say about this thought:  As part of the work of CFBC and each one of us, should we develop and implement the EI extension plan (by any name you like) for the outside world?

I’m writing this a few days before Thanksgiving and I’d like to share one of the things that I’m thankful for.  Every experience that I’ve had with each of you in the CFBC. Happy Thanksgiving!

“If you want to go fast, go alone. If you want to go far, go together. CFBC, 20 Years Deep.”

Bob Carmody President Signature 2014

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Hiring Trends To Track In 2015


As I work within the walls of family owned, private and publicly held businesses, I have the advantage to see trends that are evolving in the workplace.  Some trends are a flash in the pan and others are game changers.  I wanted to share with you some hiring trends that I feel will carry forward into 2015.

Recruitment continues to be at the top of everyone’s to-do list.  No matter whether an organization is looking for a Manufacturing Plant Operator or a Vice President, the candidate pool for talented individuals is still extremely thin.  In specific sectors such as engineering, unemployment is at 0% and has been for the last 20 months.

Recruitment methods such as CareerBuilder, Monster and Craigslist that have been used regularly as recent as two years ago are bringing very limited results.

85% of the companies I work with from coast-to-coast are turning to executive search firms to help identify talent for all internal positions.  One year ago, only 35% of these companies were using search firms. Keep in mind, these numbers reflect across all business sectors.

In my professional history, I have never seen such a dramatic shift.  This has set off alarm bells for myself and within each HR Department I assist on a weekly basis.

Companies are asking senior and middle managers regularly to shake the trees for referrals.  They are also putting Employee Referral Programs in place and offering $100 to $1000 per employee that is hired.  They are willing to pay up for employees that stay with the company for at least one full year.  In the end, a referral is much more economical than a search fee.

Owners and managers are also leaning on HR Departments to network and look for viable candidates via LinkedIn.  This networking takes time and adds to HR’s current workload.

Given the cost of recruitment and search fees, companies are also having serious discussions about the type of employees they want on the bus.  For example, employers not only want someone who is honest, hardworking and motivated, but are insisting on candidates with high EI along with a curious mind and problem-solving skills.

Many firms believe that individuals with curious minds trump those with high intelligence.  Someone with a curious mind will look at all facets of your business and challenge current processes.  Their well never runs dry because they will always be looking for how to make your company better.  In addition, they will not be fearful to ask questions of their manager or owner.

Lastly, I have seen an uptick in companies developing robust internship programs.  They are going back to the “farm system” mentality.  Employers are conducting on-campus recruitment twice a year, hiring top students and embracing their youthful attitudes so they become an integral part of the team.  If you can provide a growth path for these new grads, this will definitely help ease your hiring needs long-term.

Written by Mary Deibert of Kiara

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U.S. Supreme Court Ruling Finds Inherited IRAs Not Protected In Heir’s Bankruptcy

by Jonathan W Michael and Jeffrey D. Warren

Recently, the U.S. Supreme Court unanimously ruled that the U.S. Bankruptcy Code does not protect funds in an inherited individual retirement account (“inherited IRA”) from a creditor’s claims in the heir’s bankruptcy. The case, Clark v. Rameker, involved petitioners Brandon Clark and Heidi Heffron-Clark who declared bankruptcy in 2010 after their pizza restaurant closed in their hometown of Stoughton, Wisconsin.

In 2000 Ruth Heffron established an IRA naming her daughter, Heidi Heffron-Clark, as the designated beneficiary of her IRA. At Mrs. Heffron’s death in 2001, the IRA had a value of $450,000.

When daughter Heidi filed a Chapter 7 bankruptcy petition in October 2010, the IRA had a value of $300,000. She asserted in her petition that the money in the inherited IRA represented “retirement funds” that were protected from creditor claims. The U.S. Supreme Court rejected her argument and held that assets retained in inherited IRAs are not “retirement funds” within the meaning of the federal bankruptcy laws and therefore are subject to the claims of bankruptcy creditors.

In reaching its conclusion, the Court noted that inherited IRAs are different from traditional IRAs and Roth IRAs because (i) the beneficiary-owner may not contribute additional funds to an inherited IRA, (ii) the assets of the inherited IRA must be withdrawn immediately or over a period years and cannot be retained pending the beneficiary-owner’s future retirement and (iii) unlike a traditional IRA, which imposes a penalty if the owner begins to take withdrawals prior to attaining age 59½, the beneficiary-owner of an inherited IRA may withdraw all or any portion of the assets immediately without penalty.

The Court distinguished a traditional IRA inherited by a spouse from an “inherited IRA.” A surviving spouse can roll the traditional IRA over into a separate IRA in his or her own name. It is not clear how the Court would rule in the event a surviving spouse fails to make such a rollover.

Ruth Heffron probably never gave a second thought to how she should structure her IRA account to protect Heidi in the event of financial problems down the road. Had Ruth designated an irrevocable trust established for Heidi’s benefit as the primary beneficiary of her traditional IRA (instead of designating her daughter individually), Heidi may have been able to protect the inherited IRA funds from her bankruptcy creditors.

At BWM&S we encourage our friends and clients to review their primary estate planning documents, including the beneficiaries of their retirement plan accounts and insurance policies, at least every two years. If you have not had a chance to speak with your attorney about how the Clark v. Rameker case impacts your estate plan, we recommend that you do so.

Please contact Jonathan Michael at or 312/840-7049 and Jeffrey D. Warren at or 312/ 840-7020 with any questions regarding estate and business succession planning, including the implications of Clark v. Rameker.

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