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The Ultimate Guide to Cost Segregation (2025 Edition): Bigger First-Year Deductions, New Federal Rules, and State Traps

Cost segregation remains one of the fastest ways to increase after-tax cash flow for property owners. In 2025, it’s even stronger: federal law restores 100% bonus depreciation for newly acquired, qualifying assets (with important acquisition and placed-in-service timing rules), while many states still decouple and make you add back that bonus on your state return.

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What a Cost Segregation Study Actually Does

A cost segregation study is an engineering-driven analysis that breaks a building into shorter-life components so you can depreciate large portions much faster than 39 years (or 27.5 years for residential rental):

• 39-Year (real property): shell, structure, foundation, roof, exterior walls/windows.

• 15-Year (land improvements): paving, curbs, landscaping, fencing, storm drainage.

• 7- / 5-Year (personal property): decorative lighting, specialty electrical/plumbing, millwork/cabinetry, dedicated process/mechanical components, furniture and equipment.

• Qualified Improvement Property (QIP): interior, non-structural improvements to nonresidential buildings—15-year life and bonus-eligible.

High-quality studies map every component to a tax class, tie it to invoices and plans, and produce audit-ready workpapers and photos.

Start Saving – Get a Free Preliminary Assessment! Your Name (required) Your Email (required) Your Phone (required) Notes (Optional: But a little information about your property will be helpful) Please prove you are human by selecting the key.

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Bonus Depreciation in 2025: The New Federal Rules (and the Date You Can’t Miss)

• 100% bonus is available for qualified property that is both acquired and placed in service after January 19/20, 2025 (treat January 20, 2025 as the practical cutoff).

• Property placed in service January 1–19, 2025 generally falls under the old phase-down (40%) unless a special transition applies.

• A transitional election can allow 40%/60% treatment in specific cases even after the cutoff (useful for income smoothing).

• Under current law, 100% bonus is permanent going forward for qualifying property.

• Section 179 expensing is separate from bonus and, beginning in 2025 tax years, the limit is $2.5 million with a $4 million phase-out threshold (indexed after 2025). Use §179 where you want asset-by-asset control or where bonus doesn’t fit your plan.

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Updated Example (2025 Timing)

• Facts: You purchase a nonresidential building for $5,000,000 (excluding land) and place it in service February 1, 2025. The study supports:

  • 20% as 5-year property ($1,000,000)

  • 5% as 15-year property ($250,000)

• Result: Because the asset was acquired and placed in service after the cutoff, the 5-/7-/15-year items qualify for 100% bonus in Year 1.

• Year 1 deduction: $1,250,000 (bonus on 5/15-year) + regular MACRS on the remaining $3,750,000 ≈ >$1.34M total.

• Cash impact: At a 37% marginal rate, that’s roughly $440,000 in first-year federal tax saved (state treatment may differ—see next section).

Key documentation to keep: binding purchase agreement, acquisition date support, placed-in-service logs, fixed-asset ledger tie-outs, photos.

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State Conformity: Where You Can Get Burned

Most states do not automatically follow federal bonus depreciation. Many require you to add back the federal bonus on your state return and then recover it over time using state-specific depreciation.

• California: Decouples from federal bonus; expect add-backs and separate state depreciation schedules.

• New York: Disallows federal bonus for most filers; NY income often runs higher than federal in the first year after a big bonus claim.

• New Jersey: Corporate and other taxpayers generally uncouple and maintain separate state depreciation.

• Pennsylvania: No federal bonus for corporate net income tax; special state schedules apply.

• Colorado: Often conforms quickly, but lawmakers can selectively decouple—verify each year.

Bottom line: Build a federal-to-state depreciation bridge before filing. It’s common to show a large federal loss while your state return shows positive income because of add-backs.

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Who Should Consider a Study (and When)

• New construction or major renovations—especially interior QIP work (nonresidential, non-structural).

• Recent acquisitions—complete the study within the first year to fully capture the 100% bonus.

• Older properties (“look-back” studies): Claim missed depreciation via Form 3115 (change in accounting method). No need to amend prior returns.

• Tenant improvements: Many interior build-outs qualify; separate structural from non-structural work.

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Cost, Quality, and Audit Durability

• Typical fee: about $3,000–$15,000, scaling with size/complexity—often a fraction of the first-year tax savings.

• Audit-ready studies include stamped engineering workpapers, asset maps, photo logs, acquisition and placed-in-service evidence, and a clear reconciliation to your fixed-asset ledger.

• Align the deliverable to the IRS’s expectations for methodology and documentation.

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Coordinating §179, Bonus, Interest Limits, and Recapture

• §179 vs. Bonus: §179 gives surgical control and works well when you want to target specific assets/classes or manage taxable income. Bonus applies by class unless you elect out.

• Interest limitation (§163(j)): Heavier first-year deductions can interact with interest-limitation rules. Model both together.

• Recapture: Sale or change of use of 5-/7-/15-year assets can trigger §1245 recapture. Plan exits before you front-load deductions.

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State-by-State Quick Notes (Selected)

• CA: Bonus add-back; separate state depreciation.

• NY: Bonus add-back common; watch city surtaxes where applicable.

• NJ: Maintain uncoupled state depreciation; compliance tracking is critical.

• PA: Corporate taxpayers use special schedules; no federal bonus for CNIT.

• CO: Often conforms, but verify annually for targeted decoupling.

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Action Checklist (2025)

1. Lock down dates: Prove acquisition and placed-in-service after January 19/20, 2025 to secure 100% bonus.

2. Commission an engineering-grade study and ensure it’s fully tied to invoices, plans, and the fixed-asset ledger.

3. Build a federal-vs-state bridge (CA/NY/NJ/PA especially) and forecast cash-tax impact before you file.

4. Coordinate §179 + bonus + interest limits with your CPA to match your income profile.

5. Segment QIP cleanly from structural work to preserve 15-year life and bonus eligibility.

6. Use Form 3115 for look-backs when prior depreciation was missed.

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Plain-English Takeaway

Do the study. Prove your dates. Watch your states. In 2025, the federal rules can be wildly favorable—but state add-backs can surprise you without planning.

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Disclaimer: This guide is informational only and not tax or legal advice. Work with a qualified CPA and a reputable cost-segregation provider to model your facts and keep current with law and state guidance.

One of the indicators of a business’ financial health is its working capital. Having no working capital means you may not be able to pay your bills on time, which, in turn, may incur interest or penalties.  In the long-term, insufficient working capital can harm business relationships and gradually run the company into the ground.

Working capital is not just cash, which may be easily and quickly used for investments, but rather a more complex web of cash, receivables, inventory and accounts payable that measure a company’s short-term, net financial health and performance.

There are many reasons why a company might have a low level of working capital, but those can all be reduced to the four components mentioned above.

Consider a scenario where a company is low on cash and accounts payable show an uptick; in that case, the company would quickly turn to its receivables and attempts to recover money from its debtors. With a somewhat liberal credit policy toward its customers that offers long payment terms, a company may find itself low on liquidity. When there are too many high-amount, past-due receivables, a company might have to make a choice between staying solvent and facing a downward-spiraling situation. Check out one of our past articles on accounts receivable for a more in-depth view of how to Prevent Non-Payment of Bills for B2B Transactions.

Inventory management is another essential part of controlling the company’s working capital. Reconciling the need to maintain an inventory with an efficient, customer-oriented production process flow takes not only a comprehensive set of steps and product stock analysis but also a deeper understanding of how overstocking and understocking impact the company’s operating liquidity.

Next, we’ll take a closer look at several specific behaviors that may threaten the working capital of a business and at alternative choices that can lead to a better outcome.

The Problem: Paying Bills the Moment They Arrive

 When it comes to paying bills, your instinct might be to pay them as soon as they arrive. This avoids costly late fees, bad credit scores, and prevents you from accidentally spending money meant for your accounts payable.

Paying bills the moment they arrive, however, may end up reducing your working capital until you suddenly find yourself with negative liquidity.

The Solution: Create an Invoice Calendar

When you receive an invoice from a supplier, check the due date. Many suppliers give customers 30-60 days to settle their bill.

Create a calendar of your invoice due dates. Be sure to set reminders at least 24 hours and up to a week in advance so that no due dates sneak up on you.

Having this calendar of invoice dates will help you see which invoices have to be paid right away, and which can wait. This allows you to manage your working capital better by spending only the money you need to pay out right now and saving the rest until you gain more income.

The Problem: Delaying Customer Payments

As a business owner, you might allow your customers to delay payment or pay in installments. This is not only an attractive option for your customer base, but it can also make you more competitive with similar businesses.

If you delay customer payments for too long, this could have a negative impact on your working capital. If your income is still pending while you have bills coming due, you could suddenly find yourself without capital with which to pay the ever-mounting debts.

 The Solution: Collect Deposits

To avoid this scenario, require deposits upfront. The deposit should be somewhere between 10-50% of the selling price.

When calculating the percentage to ask for, make sure you will generate enough income to cover your bills.

Create a customer payment plan that is less than the time you have left to settle your own payables (for example, if a retailer gives you 60 days to pay an invoice, you should give your customers 30 days). Our article, How Data Analytics Can Help Your AR, offers some useful information on how to use data analysis to optimize collections.

The Problem: Unforeseen Shutdowns

 Unforeseen circumstances can cause businesses to shutter operations and lose days, weeks, or months of revenue. These circumstances range from natural disasters to a global pandemic; still, even a family illness can halt all operations or significantly impair them.

If you have poor working capital management, even one day of lost revenue could have long-lasting consequences.

 The Solution: Start a Rainy Day Fund

A Rainy Day fund is a cash reserve set aside in case regular forms of income suddenly stop.

While there are many ways to create your fund, the best way is to open a savings account, preferably one that accrues interest over time. This account should be separate from any business accounts, and few people should have access to it (you don’t want a rogue actor inside your business to wipe it out).

The amount of your Rainy Day fund is up to you, but after seeing the longevity of the effects of COVID-19, having a reserve of at least one month of expenses is wise (meaning you have enough cash to pay your bills and your employees without any revenue).

Add to this fund every month or quarter, to ensure its growth and provide yourself with a greater financial cushion should the worst happen.

The Problem: Ageing inventory

In instances where companies overstock because of an upward trend in the market, faulty analysis or out of sheer optimism, there are several downsides that should make any business owner and inventory manager pause: the costs of storage, inventory tracking, long-term maintenance, increasing irrelevance of the current stock to the market, inability to bring new inventory that meets the demand of the moment, and stagnant customer engagement.

The Solution: Inventory Segmentation and Customer Re-engagement

An inventory is only as good as its shelf-life, and that means that the sooner it is loaded onto a pallet and leaves the warehouse, the better off the company is.

Supply and demand are two simple words given to what are actually complex market forces. Inside that market of constant exchanges, estimating and controlling inventories efficiently are vital to survival.

There are various ways to segment products based on a business’ profile and organization: obsolete, updated/refurbished or totally new; slow, moderate, or fast-moving; high- or low-priced items, or by level of cost per unit, etc.

For an aging inventory, the best way to segment is by product life cycle: obsolete vs. in-demand products.

One strategy to use obsolete products so they’re not a total loss is to repurpose or upcycle them. Another is finding niche customers or organizations that cling to an outdated way of doing things and who might still be in need of the product. A third one is renewing relationships with customers who bought the product in the past and assess their current need for your inventory.

Working capital doesn’t have to be a complicated part of doing business. With accurate data entry and just a few calculations programmed into a spreadsheet or software program, a company can be proactive and efficient at managing its capital. As long as it doesn’t spend too much of that capital to manage it!

Credit Unions must (seriously) reinvent their brand for millennials to compete for account deposits and financial services

Millennials are such a vital generation for financial service providers to address, not only because many of them are now coming into sizable personal income and surpluses through jobs and inheritance, but millennials are distinctive in their fluent use of technology and their outlook on finances, economy, family life and careers.

This is the start-up generation that is making a living out of entrepreneurship that can be deeply- personal, ventures such as ad- and donation-funded YouTube video channels, blogging, ‘Instagramming’, creating and playing computer games, inventing new drinks in a makeshift home brewery or using urban art for social and political activism.

Credit Unions have been traditionally less-visible and less-known than big national banks, not because they offer less-advantageous banking services but mostly because they are limited by their membership (members of a community or employees of the same company) and by their low marketing budget.

Quite often you drive on the highway and see billboards displaying a variety of ads, including some for services of commercial banks. It may be no surprise, then, that when you want to open an account, you immediately think of these banks. While older generations might be more aware of smaller financial institutions, younger people seem to prefer convenient and ostentatious banks. Or do they?

Are they making an informed personal choice or one that stems from innocent ignorance of available options? Do credit unions really not have what young people want, or are they just not focusing their sales and marketing on what is actually a very natural fit?

Examining the values of younger generations, including millennials uncovers several shortcomings inherent to credit unions, but also reveals solutions for attracting new deposits and business.

Each generation is not always easy to understand by those outside it, but they have some defining characteristics. Millennials are considered to be individuals born between roughly 1980 and 1997.

Some general observations on their behavior and values were synthesized into 10 characteristics by this Indeed article. By considering those, we can clearly see where credit unions need to step it up, if they are going to attract the attention of the millennial generation which is already making bold financial decisions and lifestyle choices that lock in their commitments, personal connections, and their growing balances with financial service providers.

They value meaningful motivation, are free-thinking and creative.

This generation is greatly inspired by personal success stories. While seeking career advancement and ways to be recognized in the workplace, millennials are also interested in the personal touch. They value ideas of substance, personal growth, and non-traditional out-of-the-box achievements. They’d most likely be attracted to a credit union with an interesting history or one which shows unique initiatives that surprise but offer a meaningful connection with its members and the community.

Millennials challenge the hierarchy status-quo while placing importance on relationships with superiors and valuing social interactions in the workplace.

They are more interested in having fruitful and productive relationships even if it means breaking the norm rather than abiding by established rules which are safe but hinder their development and progress. Their attitude stems from confidence, ample education and a disillusionment with the society their parents helped create. They will not overhaul something just for the sake of it but will seek constructive means to make things better in a way that includes their own mentality.

Since they seem to be openly receptive to feedback and recognition, they will appreciate a supportive team-like environment, whether it’s at work or in the businesses they collaborate with.

Any policies, financial services or customer relationship strategies are worth exploring that can tackle these aspects of their behavior by tapping into the need for connection but also a rebellious streak that is still “chill” and kind. Credit unions need to come up with measures that change things that are not working and that adopt innovative techniques to deal with different financial problems and sore spots such as loans for housing, transportation, start-ups, and even offering financial education to protect millennials and their families from bad decisions.

With an intuitive knowledge of technology and constant exposure to rapidly evolving software and apps, millennials are open and adaptive to change.

They will seek out and adopt the services and products that fulfill their needs. There is an opportunity here for credit unions to figure out what needs these are and adjust their range of services. The first step, however, is to truly step into the 21^st century in terms of technology. It may not be possible for credit unions to have ATMs everywhere, but given the digital behavior of this generation, having easy-to-use, highly-performing apps can offset this disadvantage.  Many prefer to manage their investments, checking and savings accounts, all through mobile apps. Millennials want secure banking on-the-go in an attractive and easy user experience with motivating messages and indicators that nudge their personal finances in the right direction.

This generation places importance on tasks rather than time.

This may be true in the work environment but as far as their financial behavior, millennials are always looking for quick answers and solutions to their questions and problems. That is not to say that they’re superficial. They have a passion for learning and are definitely more inclined to be financially savvy than the previous generation. They are more informed about and more concerned with saving money, debts of any kind, budgeting and overspending, investments and money-making side-hustles.

A financial institution that doesn’t just treat them as a number in a ledger but makes them feel trust in their capacity to offer solutions and honest advice will likely earn not just their business but their loyalty, too.

A few other things that credit unions can do is look at this generation’s lifestyle choices and find a niche to expand their offerings of financial services. Since millennials are postponing the start of their family but are eager to adopt pets, can a credit union offer a package that includes pet insurance? Are there any rewards for the customer if they visit a doctor that the credit union recommended from its community, even from its pool of members? Are there opportunities for investment and retirement accounts? What kind of marketing campaign can a credit union develop to take advantage of geographical and economic diversification? Is there a way to acknowledge some of the behaviors and beliefs many millennials have exhibited such as anti-corporatism, joining cooperatives like urban gardens in their neighborhoods, shopping at farmers markets and supporting small producers’ associations, boutique grocery stores and eco-living communities?

Becoming millennial-friendly doesn’t necessarily mean completely-overhauling the way credit unions do their core business but rather adapting to the needs of potential customers by rethinking the outward-facing layers that customers experience directly to better market and facilitate what credit unions already do best. As not-for-profit financial institutions, credit unions benefit from a good reputation supported by their resilience through economic crises, but the old-fashioned, traditional way of doing business is a detriment to further development and survival.  Still, retro is cool, so old-fashioned can also be hip.

By starting to understand and service the millennial customers of today, credit unions can stay relevant, show their value, and broaden their reach to new customers now and into the coming future.

 

In a previous article, we discussed the importance of a SWOT analysis. One of the main functions of the SWOT analysis is to help formulate strategies to keep the business running and help it grow. Here, we will look at the most common reasons why some strategies have been successful while others have failed.

‘Strategy’ is a magic word that can have different meanings in different industries. Some businesses mention management and operations, others expanding their market share, while others focus on maintaining their customer base or constantly innovating.

Generally speaking, it is a set of principles used to achieve the company’s goals; and for that reason, it tends to be business-specific. Its success or failure also tends to be business- and industry-specific. There is no infallible strategy that can be applied to any and all businesses, in any field or economic cycle. It’s the result of a convergence of favorable factors with sound decisions, clear goals and dedicated involvement of all stakeholders.

Some of the best advice about business comes from those in business. If you have no seasoned tradesman to help devise a strategy, you can find many resources online. The three basic business strategies, according to Porter are: cost differentiation strategy, product differentiation strategy and growth strategy. These broad approaches have been analyzed extensively by economists, business owners and politicians alike, and to prevent redundant work, we will concentrate on actionable, specific strategies, stemming from these three.

We will analyze each and offer tips in each category so you can see how the advantages and the risks apply to you. The strategies often go hand-in-hand, where you can design a marketing plan combined with product placement.

Cost-cutting and optimization – do’s and don’ts

What do most companies begin with? They look at pricing. It makes immediate sense – I set prices based on costs plus a reasonable margin; I cover my costs, and make a profit. But the flaw in this strategy is that customers don’t think about business’ costs – their main consideration is value, i.e. what they think the product is worth. You can’t put out a product or service that costs the company $10 when the consumer thinks it’s not worth more than $8.

Another strategy widely used is setting prices to meet the market – either you make a profit when your product or service’s perceived value surpasses the costs or you are intentionally lowering your costs to compete with other players already established in the market. The risk here is that customer and competitor behaviors can be unpredictable. Your competitor may lower prices even more while you’ve been selling at a loss all along.

Don’t forget the importance of value in your pricing – if you cut costs to bring your prices to the lowest possible point, you will inevitably be sacrificing your product’s value.

Do place importance on the individual customer’s buying habits – and weigh up the risks of setting your prices solely on your product’s market value.

What must a business remember most of all in pricing? The variables used to calculate the products’ costs (raw material prices, energy costs, import/export and logistics tariffs, interest rates) are ultimately and inevitably uncontrollable and unpredictable.

Given that, it is best to be proactive and open to change, as you periodically examine the rise and fall of these various costs and how they impact your profits and pricing.

Product strategies – do’s and don’ts

Celebrity businessman Dave Ramsey inspired entrepreneurs worldwide with the quote: “A goal without a plan is just a dream.” In order to ensure success for your product, you must make sure that your strategy is solid.

A successful product strategy takes these three areas into careful consideration: business and/or financial goals, market and competition, product features and unique selling proposition. Careful planning and development of each key area will allow you to predict your product’s success and/or identify potential problems before they arise.

Do keep a close eye on your competition while ensuring your product offers value to potential users. Market research is an essential part of your product strategy and should never be neglected. Remember to keep an eye not just on your long-established direct competitors but also on potential talent, those up-and-coming start-ups that could topple the status-quo.

Don’t allow your product to get left behind before it’s even had a chance. Many products fail because businesses are unable to adapt quickly enough to our fast-paced and ever-changing market or the business takes too long to launch the product.

Make sure you launch your product right when you see the opportunity in the market, and don’t forget to stay armed with a good supply of risk and change management strategies.

Rethinking how your existing products are made might lead to ideas for structural changes that could make your business more nimble, so you can ramp production up or down profitably or reconfigure operations more flexibly, which allows you to modify or make new products in response to anticipated markets.  That improves your reaction time in the face of risks or opportunities.

Growth strategy – do’s and don’ts

Like with product strategies, planning is key in ensuring your product can grow and adapt to its market environment. Fail to plan, and you plan to fail.

So, what do you need to carefully consider your product’s market?

Is it an existing market, with a well-established competition? If you find yourself struggling to eke out a niche for your product in a sea of similarity, you need to consider market penetration as your main objective. Market penetration is the hardest growth strategy to tackle, and for good reasons. To increase your market share, you must take the time and resources to carefully evaluate how much your product or service is being used by customers compared to the total estimated market for that product or service. Once you have an idea of how far your foot is in the door, you can plan further strategies more effectively, such as differentiation and innovation.

Let’s consider that you are targeting a new market with an existing product. Market development is key here. You may need to consider targeting new geographic areas and launching your product or service internationally. Business trends point to global perspectives, supply, and sales. As a result, many tools have been developed in recent years to help businesses determine how to enter foreign markets.

But what about when your company already has a good market share in an existing market? You may need to consider introducing new products for expansion and will need a product development strategy. Many companies invest in research and development (R&D) to develop their strategy – Apple, for example, invest heavily in Technology R&D in order to ensure they can launch a new and improved version of the iPhone every few years.

Don’t forget to roadmap your product’s trajectory – take the time to establish where you’ve been, where you are, and where you’re going next.

Anticipating trends in unpredictable markets as well as keeping on top of fluctuating data is a constant challenge, for sure.

Don’t forget to check in regularly with your team and quickly identify any signs that your company could be running into difficulties. Are your stakeholders satisfied, or have they been showing discontent? Have you been missing more and more deadlines and failing to reach deliverables recently? Do you feel that you are switching too erratically from one strategy to another, unable to find one that fits?

Many of these symptoms can be traced back to superficial SWOT analysis and faulty calculations.

Depending on the business owner’s appetite for risk, they can be shapers of their industry or adapters. Some of the most notorious trailblazers we know are Bill Gates and Steve Jobs, while others have chosen to follow their lead and adapt to changing industries across the board. That is not to say that merely adapting to market forces is a bad position to be in. Each entrepreneur chooses their style of doing business and measures success in their own way.

Do carefully evaluate your business strategy and make sure that it is working for you and your product or service. It may seem like a challenge, but it could just be your company’s biggest opportunity yet!

Risk is an unavoidable part of life. Uncertainty shrouds every action, threatening even the best-laid plans. Risk management practices help businesses predict and quantify dangers as precisely as possible to avoid them or minimize their impact.

Every organization should have a risk management plan in place, offering guidance to employees and executives on the proper procedures for qualifying and mitigating hazards at critical business touchpoints.

Below you’ll find strategies for formulating and improving your plan. If you haven’t given risk management a thought before, we hope this article opens your eyes to the value.

It Starts With Your Company Culture

Risk management is only useful if everyone in the company is committed to rooting out dangers wherever they’re hidden. If people fear they will be negatively-judged, or worse, blamed for revealing endemic threats, they’re likely to let them fester until it’s too late to avoid the worst effects.

To create a constructive culture that values risk management, make it clear that employee feedback about potential issues is welcomed and rewarded. Encouraging employees to take ownership of their projects will increase the chances that they’re analyzed for potential hazards. Couple ownership with unambiguous management processes and your culture will grow to embrace risk management as second nature.

Reward Prudent Behavior

“Nothing ventured, nothing gained” can be understood to mean that taking risks is always preferable to inaction. This leads organizations to reward those that take bold action, even if it puts the group at undue risk.

Responsible risk assessments must balance possible gains with potential losses. When a proper analysis is conducted, the conclusion may be that possible bad outcomes overshadow potential benefits. In this case, prudent behavior should be rewarded. The risk for its own sake should never be valued above measured consideration of every possible outcome.

Keep Company Goals in Mind When Assessing Risks

As stated earlier, every action contains an inherent risk. Many times, opportunities for growth are also risky endeavors. When performing a risk assessment, it’s essential to keep the organization overarching goals in mind.

Managers and employees should ask themselves how likely it is that a given action will benefit the company, and to what extent potential risks are trumped by greater upside potential. This can help prevent overzealous risk restrictions that deter employees from engaging risks that may help the company reach its objectives.

Identify Risks as Early as Possible and Monitor for Changes

Risk management is an attempt to foresee future events and prepare for them to mitigate bad outcomes. The sooner your staff engages in this process, the more time they’ll have to alter plans and timelines.

The irony is that the earlier this process is engaged, the less accurate it will be, simply because the events its predicting are further out in the future. More can change between prediction and resolution. Therefore it’s critical that risks are monitored and reevaluated periodically as situations unfold.

If a customer is delinquent on a bill for more than 90 days even after repeated follow-ups by your staff, transfer this account to a collection agency. The older an account gets, the harder it becomes to recover money from it. Too many accounts receivable is a red flag for any organization that can restrict the cash flow.

Expect Full Transparency About Risks From Every Level of the Company

Senior management may sometimes feel it’s prudent to withhold knowledge of potential risks in order to prevent panic. However, in the long run, this harms positive risk management cultures, because middle management and their direct reports will model behaviors exhibited by company leadership. Instead, engaging full transparency regarding risks at all levels helps promote that behavior company-wide.

Secondarily, when risks are withheld, employees are operating with incomplete information. They may take actions that they wouldn’t otherwise if they knew the true position of the company. As a result, cloaked risks breed other risks, a situation that must be avoided.

Risk management is only as strong as its weakest link. Effective policies require full compliance, from every participant, at all times. If you create a culture that values this basic premise, you’ll be well on your way to effective risk management.

ADP Workforce and Square Payroll are both HR management tools that wrap several functions into a single software package. Both are highly-rated with large, established userbases, and they do more or less the same thing.

However, while they share much of the same functionality, that doesn’t mean that each is right for every business. Depending on how features are implemented, the size of an organization and its software budget, one package may be a better fit than the other.

This article will compare their relative merits to help you determine which is right for you.

Features

Each package supports many of the same functions, but these are implemented differently to cater to their intended market.

Square Payroll

Square Payroll is designed for small businesses, those with less than 50 employees. As a result, it isn’t quite as robust as Workforce. Implementations are simplified to speed workflows for smaller operations. This can be a boon for small companies that don’t need access to some of Workforce’s extended options.

Users will find all of the functionality they need to run successful HR departments. As the name suggests, Payroll makes payroll easy to process. A streamlined interface makes entering data and updating fields a breeze. Payrolls can be run on desktop machines or mobile devices.

Because the package integrates with every other Square tool, hours can be imported instantly from the Square POS or Team app. QuickBooks Online and other third-party integrations are also available.

Payroll taxes are generated automatically and filed electronically from within the software. The package also allows worker’s comp insurance to be synced with payroll on a pay-as-you-go basis. In fact, most employee benefits, like retirement and healthcare, will sync automatically.

The only real caveat is that large enterprises may find Payroll’s offerings to be a bit meager for their needs. ADP Workforce could be the better choice for them.

ADP Workforce

Workforce is built with larger organizations in mind. It’s built to scale well, providing convenient HR management to companies of any size.

You’ll find all of the core features available in Payroll, including payroll and tax compliance. Both are cloud-based, meaning your data is accessible wherever you are. Workforce also offers automated timekeeping, attendance tracking, and scheduling. Reports are easier to generate within Workforce, and are generally more robust.

The software supports custom workflows and self-service functions that give employees access to critical HR data from a convenient web portal. Square Payroll also allows users to input their information, but Workforce offers speed enhancements that Payroll doesn’t.

The software integrates with a wider set of third-party products and embeds access to ZipRecruiter, making it easier to fill positions quickly. HR professionals can also leverage the software to create pay-for-performance opportunities within the organization and track employee progress toward specific goals.

In general, more options are available within Workforce, and configurations run deeper, allowing a more comprehensive range of businesses to design systems that work for them.

Plans

Workforce offers four packages, scaled to meet the needs of various-sized organizations.

Payroll Essentials is perfect for businesses that only want access to payroll and tax components. The add-ons Workforce Management and HR Assist are also included.

HR Plus adds enhanced HR tools, onboarding functions, and robust digital record keeping options. Two other add-ons, Benefits Administration and Enhanced Analytics are also included.

Hiring Advantage is designed for companies interested in improving their recruitment processes to help attract top talent. Users will have access to ZipRecuiter and thousands of other job boards, along with advanced onboarding tools.

Performance Plus is the most expensive package, intended for enterprise-level organizations that need to manage high-performing teams. A full suite of performance and compensation management tools are added to provide the most powerful solution ADP offers.

Square Payroll’s plans are significantly simpler. They only offer two, and the difference comes down to who you’re looking to pay.

Their standard plan includes all the functionality you’ll need to pay employees and contractors — that is to say, all the functionality the software offers. The second plan strips out features that are specific to employees, and provides a streamlined experience for companies that only need to pay contractors.

Pricing

This is one area where Payroll has a leg up. Square offers a simple, upfront payment scheme that’s consistent from customer to customer.

For their standard plan you’ll pay a $29 monthly fee and an additional $5 per month for every person on your payroll. If you only need contractor support, the monthly fee is removed. You’ll pay $5 per month for each contractor you pay.

There’s no commitment with either plan, and you can cancel at any time.

Pricing for Workforce isn’t standardized, and depends on a number of factors. Companies interested in purchasing one of their four plans must contact the company to get individualized pricing.

So which is right for you? If you’re a small company or work exclusively with contractors, Square Payroll is probably your best option. However, if you need a more full-featured HR tool, or if you’re a large company, Workforce may be the better option.