The Blog Of TL Wall Accounting

Tweet about this on TwitterShare on LinkedIn

Archive for May, 2012

Legal Fees Could Kill Your Business

In the summer of 2009, the Valley Swim Club of Philadelphia created a major controversy when it suddenly kicked out a group of black children from its facility, returning monies that had been paid to them, and sent them packing. The dispute was blamed on a miscommunication on who was coming and when they’d be coming.

Of course, no one bought that, and the swim club faced all sorts of bad publicity and protests. Finally it has faced a major lawsuit brought by the Pennsylvania Human Rights Commission, stating that “it had found probable cause to conclude that the campers were asked not to return because of the “racial animus” expressed by one member and “racially coded comments” by other members.”

The Valley Swim Club ended up deciding to file for bankruptcy, with the intention of closing the club and selling off all its properties to pay its bills, including any settlements or court decisions as a result of these lawsuits. An email sent out by the club president, John Duesler, stated that though the lawsuits hurt, the club had been barely staying out of the red for the past decade and already owed more than $100,000 in other expenses.

Lawsuits can cost a lot of money. Filing a lawsuit costs money; how much depends on the type of lawsuit being filed and where it’s being filed, as every state has different filing rates. If you have to hire a lawyer, that’s expensive, as most lawyers start at least at $200 an hour. If you’re a small business, you not only have to now deal with finding a way to pay a lawyer, but you’re going to miss time from work, which means you’re not making any new money to replace the money you’re spending.

There’s also the bad publicity part if you’re hoping to stay in business once things have been settled. Even if you win, your reputation could take a major hit. Something that major companies are starting to realize more often is just how bad it looks when they have 10 lawyers sitting at the table when someone who’s suing them only has one lawyer, who has yet to be paid because his pay is dependent upon the outcome of their lawsuit. Juries are like everyone else; they hate the impression of someone being bullied.

In our previous post we talked about financial planning for the future, and thinking about legal representation for things you might have to deal with is definitely a large financial consideration. You may not always be able to talk your way out of a situation, and for some businesses, liability insurance isn’t easy to find. Legal fees takes away from everything and everybody; at the very least one would hope your company is incorporated, which removes personal liability from any decision. This is something someone like us can talk to you about when we work with you through our accounting services.

If you’re looking to keep your business out of expensive lawsuits, cleaning up your business practices and training your personnel on good customer service practices might be a good place to start. If you can’t take care of that, you might be the next business that’s closing its doors and filing bankruptcy.

The Need For Financial Planning

We, T.L. Wall Accounting, are not financial planners in the normal sense. We don’t help you put money away for the future. With that said, when we help with budgeting issues, business or personal, what we’re in essence trying to do is to get people thinking about their long term goals, whether long term means for the year or into retirement years.

For instance, we help businesses budget their money so they can first get all their bills paid, then be able to buy new supplies and pay employees. Once the really important stuff has been taken care of we talk to them about what they feel is important to them long term. We might recommend monthly stipends of a sort. We might recommend putting some money in a savings account or CDs, or something like that. We might recommend putting money into the stock market or having a real financial planner that’s looking to their future.

Short term budgeting is for things you may need fairly soon. Putting money away in case your car breaks down when your warranty has expired makes sense, as well as putting money away for a new car. Thinking about potential health care expenses makes sense also. And of course putting money away to replace or repair business equipment is essential; no one ever knows when their equipment is going to fail.

Long term budgeting is another animal entirely. How well do you want to live when you want to retire? Have you paid for a catastrophic insurance plan, or a plan that will help with possible nursing home expenses? Have you thought about a supplemental health insurance plan? What happens if you’re an independent business and you’re suddenly laid up and can’t work?

This is why financial planning becomes so important to do. It’s great living in the moment, but you never know when the next catastrophe might hit. Being prepared to at least deflect some of those things eliminates a lot of worry when they appear. It’s a smart thing to do, and accountants like us can offer assistance in helping you to figure these things out in advance.