#1. Periodically solicit new price quotes from other vendors. In competitive times, you often can find other suppliers who will give you better service, lower prices, higher quality, or all three. That’s particularly true for items such as printing, delivery services, office supplies, etc. But be reasonable; soliciting bids on every item can be time consuming. Concentrate your efforts on frequently ordered or big-dollar items.

#2. Avoid inventory overbuying. Excess inventory not only ties up your cash but the holding charges (warehouse space, insurance, spoilage, theft, etc.) can easily add up to 20% of the value of the goods.

#3. If the price and quality are comparable, consider purchasing goods and supplies from the fastest supplier or the supplier who is willing to store or warehouse the product for you. That helps reduce on-hand inventory.

#4. Don’t use too many different suppliers for a single item. If you order infrequently, they may not extend credit and the average price per unit may be higher. A supplier who knows he’s getting all or most of your business on a particular product also may be willing to give you a better price and better payment terms.

Relevant Resource:
Resource Report #01: Solving Cash Flow Problems: 50 Strategies That Increase Cash Flow Today with a Case Study on Increasing Sales and Profits.

Casualty and Theft Losses, Coinsurance Clause, Contents, and Umbrella Insurance

#1. Casualty and theft losses. In planning your home insurance coverage, keep in mind that you cannot deduct the first $100 of each casualty and theft loss. In addition, casualty losses equal to the first 10% of your adjusted gross income (AGI) are not tax deductible.

Example: If you have a $10,000 casualty loss and your adjusted gross income is $70,000, you can deduct only $2,900; $7,100 is not tax deductible ($70,000 times10% equals $7,000 plus $100 deductible equals $7,100). If you have multiple losses in any one year, the $100 applies to each loss, but the losses can be combined for the10% of AGI test.

#2. Coinsurance clause. Some homeowner contracts today have coinsurance requirements that provide full loss protection only if the policyholder increases the coverage as the value of the insured property increases. But many homeowners neglect to do this.

What to do: Most companies offer a guaranteed (extended) replacement cost endorsement. This modification of the policy not only eliminates the coinsurance provision, but also guarantees that, even if the cost to rebuild the property is more than your policy limit, the higher amount, usually up to a maximum of 125% of the policy’s limit, will be paid. Talk to your agent about adding this provision to your policy and at what additional cost. Without this provision, your insurance payment to replace your home is limited by the policy’s dollar limit. Any excess replacement cost over that policy limit is your responsibility.

#3. Other protection: Check, add, and update contents insurance for the replacement value of your home furnishings, collectibles, and personal belongings. Also discuss with your insurance broker umbrella insurance to protect you against personal lawsuits and judgments in excess of your existing property and casualty policies.

Relevant Resource:
Resource Report #31: Your Home: Mortgages, Refinancings, Ownership, Sale, Insurance, and Taxation

Fiduciary Obligations, Portability, Disclaimer Option, Contingent Executor, Costs

A person with a simple estate can afford to name an executor or executrix for purely emotional reasons, e.g., a spouse or a friend. But, in today's complex financial environment, it's rare to have a simple estate and so the choice of an executor with good judgment and business acumen and who understands the details of your estate is critical.

Your executor also may have to contend with disputes among your heirs and life insurance beneficiaries, and there is the chance that someone may challenge your will or any trust agreements you signed during your lifetime. Here are some guidelines to consider in selecting an executor.

#1. If your executor doesn't have investment or real estate management expertise, you may wish to specify certain individuals or firms with whom he or she should consult on decisions in those areas.

#2. Don't automatically name your spouse as sole executor. That may be appropriate if your estate will be simple. But if your estate will include such items as a business, or investment income that must be re-invested periodically, you may be better off naming co-executors, e.g., a spouse and a financial institution.

#3. Consult with your lawyer as to whether you can make your recommendations binding on your executor; state law can vary on this issue. Discuss the blank-check or disclaimer option whereby your spouse can change the amount and form in which the assets are received.

#4. Be sure your executor and lawyer understand the Portability Option whereby the surviving spouse can use any part of the $5 million estate tax exemption not used by the decedent’s estate. This option will substantially reduce estate and gift taxes.

#5. Discuss the job with your executor before naming him or her to determine willingness to serve. Be sure he or she understands the commitment being made. Also provide for an alternate or contingent executor just in case your primary executor is unable to perform or becomes sick or disabled before the estate is settled.

#6. Costs also should be considered. If an individual outside your family acts as an executor, he or she may want to be compensated for the services. You can specify the fee. If a financial institution is selected, fees will vary depending on the size of your estate and state law.

The burden of an executor is great. Some complex estates can take a year or two to settle, much longer if disputes arise. In addition, the personal and financial liability of an executor is significant since the responsibilities are fiduciary. So select an individual or firm who is up to the task and one who does not have a conflict of interest.

Relevant Resources:

• Resource Report #27: Your Family’s Role in Business Continuity and Succession Planning with a Review of the Steps, Ownership Options, Estate Considerations, and Valuation
• Resource Report #29: Your Will: Will It Do What You Want It to Do with a Review of the Basics, Distribution Options, Estate Planning, and Family Information Memo