Your accounting system seems to be working. Your team has developed workarounds for its limitations, and you’ve grown accustomed to the manual processes that fill in the gaps. The software was paid for years ago, so why invest in something new? 

Here’s what many growing businesses don’t realize: the current “working” system is sapping up your resources in ways that don’t show up on any invoice. The hidden costs of outgrowing your accounting software compound over time, creating a financial burden far exceeding the investment required to upgrade. By the time these costs become obvious, you’ve already left substantial money and opportunities on the table. 

Time is your most expensive resource 

When your accounting system isn’t keeping pace with your business complexity, your team compensates by working harder, not smarter. Your finance staff spends hours manually entering data across multiple systems, reconciling discrepancies, and creating workarounds for basic functionality that modern solutions handle automatically. 

Calculate the real cost: if three employees spend just two hours daily on manual data entry and reconciliation at an average fully loaded cost of $50 per hour, you’re spending over $78,000 annually on tasks that could be automated. That’s just the direct labor cost. The hidden cost? These same employees could be analyzing financial trends, improving cash flow management, or identifying cost-saving opportunities instead of pushing data through outdated systems. 

The ripple effect across your organization 

The inefficiency goes beyond your finance team. When accounting software isn’t integrated with other business functions, everyone pays a price: 

• Operations teams manually update inventory counts because your system can’t track in real-time 
• Sales representatives delay quotes while waiting for pricing updates that should be automatic 
• Management makes decisions based on week-old data instead of current financial insights 
• Your IT department patches together fragmented systems that were never designed to work together 

Each disconnected process multiplies the time investment and increases the likelihood of errors that create even more work downstream. Modern cloud ERP systems like NetSuite combine financial management, inventory control, order management, and business intelligence in a unified cloud platform.  

Learn more about our NetSuite services

Bad data creates costly mistakes 

Outgrown and outdated accounting systems generate increasingly unreliable information. When your software struggles to handle transaction volumes, data integrity suffers. Manual entry increases human error. Multiple systems create version control issues. Before long, you’re making strategic decisions based on incomplete or inaccurate financial data. 

That can lead you to: 

• Overstock inventory based on flawed demand forecasts, tying up cash in products that sit unsold 
• Underprice services because your cost tracking doesn’t capture the full picture 
• Miss early warning signs of cash flow problems until they become critical 
• Invest in the wrong growth initiatives because your reporting can’t show true profitability by product line or customer segment 

One poor strategic decision based on bad data can cost far more than a modern accounting system. 

Missing the strategic forest for the tactical trees 

When your team spends all their time managing your accounting system’s limitations, they have no bandwidth for strategic financial planning. Your CFO or controller should be a strategic partner to your leadership team, but instead, they’re troubleshooting software issues and managing manual processes. This opportunity cost is rarely quantified but represents one of the most significant hidden expenses of inadequate accounting technology. 

Growth shouldn’t require heroic effort 

Your business is growing, which should be celebrated. But if that growth means doubling your accounting staff just to keep up with transaction volumes, something is broken. Legacy accounting software has hard limits on users, transaction volumes, and data storage. Once you hit these ceilings, your options are limited and expensive. 

Some companies try to stretch their existing systems by: 

• Deleting historical data to free up storage space (destroying valuable trend analysis in the process) 
• Implementing complex workarounds that create technical debt 
• Adding supplementary software that doesn’t integrate, creating information silos 
• Simply accepting slower processing times and delayed financial close cycles 

Each of these approaches carries hidden costs in lost insights, increased risk, and operational inefficiency. Systems like NetSuite are customizable and be built specifically to scale with growing businesses, eliminating these artificial constraints and supporting expansion without the need for painful system replacements down the road. 

Cybersecurity vulnerabilities in legacy systems 

Desktop accounting applications built a decade ago weren’t designed for today’s threat landscape. If your financial system lacks modern security features like multi-factor authentication, encryption, and role-based permissions, you’re sitting on a security vulnerability. A data breach doesn’t just cost money to remediate; it damages customer trust and can expose you to legal liability. 

Many legacy systems also create security risks through their workarounds. When employees email financial files, store data in personal cloud accounts, or share login credentials because the system can’t accommodate enough users, you’ve created multiple points of exposure. 

Regulatory risk grows with your business 

As your company expands, so does your regulatory complexity. Whether it’s industry-specific requirements, multi-state tax obligations, or evolving labor regulations, staying compliant requires current data and robust reporting capabilities. Outdated accounting software puts you at risk in multiple ways: 

• Tax calculations based on old rules can trigger penalties and audits 
• Inadequate audit trails make it difficult to demonstrate compliance 
• Manual compliance processes increase the likelihood of errors 
• Lacking role-based access controls creates internal control weaknesses 

The cost of a compliance failure (penalties, legal fees, reputational damage) can be devastating. Yet many businesses overlook this risk until they face it. 

The human cost of inefficient systems 

Another hidden cost that rarely gets connected to outdated technology: employee retention. Your finance team didn’t pursue careers in accounting to spend their days copying data between spreadsheets and fighting with software limitations. Talented professionals want to work with modern tools that let them add value, not waste time on administrative drudgery. 

When you lose a skilled financial analyst or accountant because they’re frustrated with your systems, you face: 

• Recruitment costs averaging 20-30% of the position’s annual salary 
• Productivity loss during the vacancy period 
• Onboarding time for the replacement 
• Risk that the replacement will leave for the same reasons 

Creating a technology environment that empowers your team to do their best work creates a culture that attracts and retains top talent. 

Take the next step with NetSuite 

If you recognize your business in these scenarios, it’s time for a candid assessment of what your current accounting system is really costing you. At BPM, we work with growing businesses to identify these hidden costs and develop strategies for financial system optimization that drive measurable results. As a NetSuite solution provider, we help organizations evaluate whether this cloud-based ERP platform aligns with their growth trajectory and operational needs 

Contact BPM today to discuss how the right accounting technology can transform your financial operations from a cost center into a competitive advantage. 

Every day in America, nearly 10,000 baby boomers turn 65. By 2031, nearly one in four workers will be 55 or older. At the same time, younger employees are burning out at unprecedented rates, searching for better work-life balance and career flexibility. 

The collision of these two workforce realities is creating a talent crisis. Companies are watching their most experienced employees approach retirement (and taking decades of institutional knowledge with them) while simultaneously struggling to retain younger talent. Traditional HR strategies aren’t designed for this moment. 

Enter the Chief Longevity Officer. 

The Role That’s Redefining How We Think About Work 

A Chief Longevity Officer (CLO) is an executive-level position focused on making workforce longevity a competitive advantage. This role brings together responsibility for workforce management, employee health, workplace equity, and market opportunity into a single strategic function, transforming longevity from an abstract goal into a measurable business strategy. 

The CLO designation is still emerging. While it hasn’t yet appeared in Fortune 500 companies, it’s been adopted by biotech startups, venture capital firms, and forward-thinking organizations in sectors like hospitality. But you’re already seeing variations of this role embedded within existing C-suite positions like Chief Human Resources Officer, Chief Strategy Officer, and Chief Wellness Officer. 

What makes a CLO different? They’re not just managing benefits or wellness programs. They’re redesigning career paths, benefit structures, and workplace culture for employees whose work lives may span 60 years or more. 

Why Companies Need This Role Now 

The workforce is undergoing a seismic shift. Workers 75 and older are the fastest-growing segment of the labor force. Individual careers can now span six or more decades, meaning companies must support four to five generations of workers at any given time. 

This isn’t just about accommodating older workers. Many employees want to work beyond traditional retirement age and not just for financial reasons. They find their work provides purpose, social connection, and a sense of accomplishment. Meanwhile, the competition for talent has never been fiercer. 

Research suggests there’s enormous potential economic output from effectively employing older workers. Companies that figure out how to harness this opportunity while still supporting younger employees will have a significant competitive edge. 

What Does a Chief Longevity Officer Actually Do? 

The CLO’s mandate is surprisingly broad. They work to eliminate age-related barriers and create programs that leverage the strengths of each generation. Here’s what that looks like in practice: 

• Breaking down age silos. A CLO designs programs that blend fresh perspectives from younger employees with the deep experience of seasoned professionals. This might mean implementing reverse mentorship programs where a 25-year-old digital native teaches a veteran marketing director about TikTok, while that director shares decades of strategic brand-building wisdom. 
• Creating flexible career paths. Rather than the traditional straight-line career trajectory, a CLO helps employees envision “second acts” within the same company—like a marketing manager taking a sabbatical to earn a data science certificate, then leading a new analytics team. 
• Rethinking benefits and wellness. The CLO ensures benefits packages address the full spectrum of employee needs—from student loan assistance for younger workers to elder care support for those in their 50s and 60s. They design wellness initiatives that promote healthy aging across all life stages. 
• Preserving institutional knowledge. Before experienced employees retire, a CLO implements knowledge transfer programs, mentorship structures, and succession planning that prevent brain drain. 
• Fostering lifelong learning. Some organizations, like L’Oreal, are training internal “longevity coaches” to bring practical knowledge about career development and skill-building to employees at all levels. 
• Addressing the business opportunity. CLOs recognize that individuals 50 and older fuel a multi-trillion-dollar longevity economy, and an age-diverse workforce provides companies with deeper insight into this vast consumer segment. 

Learn more about our Human Resources Services

The Business Case Is Compelling 

When you dig into the numbers, the value of workforce longevity becomes clear: 

Workers age 55 to 64 stay with employers for a median of 9.6 years, compared to just 2.7 years for those aged 25 to 34. That kind of retention reduces recruiting costs and preserves organizational knowledge. 

Employees ages 50 and older are considered the most engaged of any age group, which directly correlates to higher organizational productivity. 

Work teams comprising multiple generations perform better than those that don’t. The combination of innovation from younger workers and wisdom from experienced professionals creates stronger outcomes. 

Skills evolve rapidly—the half-life of a technical skill is now just 2.5 years. Training investments in older workers often deliver equal or better returns than training younger employees, especially given their higher retention rates. 

How to Implement This in Your Organization 

You don’t necessarily need to create a standalone CLO position to benefit from longevity-focused strategies. Some companies embed longevity within the Chief Human Resources Officer portfolio by appointing a vice president of longevity and multigenerational workforce. Others expand the scope of a Chief Health and Wellbeing Officer to include healthspan and equity, or form cross-functional longevity councils that connect HR, benefits, learning and development, diversity initiatives, and product strategy. 

The structure matters less than the commitment. What’s non-negotiable is that longevity must be owned, measured, and resourced. 

Key strategies include: 

1. Flexible work arrangements 

Seventy-eight percent of workers over 50 want more flexible hours. Options like phased retirement, reduced schedules, or hybrid work models help retain experienced talent while respecting their changing needs. 

2. Age-inclusive policies 

Review your entire employee experience—from job applications to promotion criteria—for subtle age bias. Make sure benefits, health programs, and professional development opportunities serve employees at all career stages. 

3. Intergenerational collaboration 

Create formal mentorship programs that go both ways. Pair employees from different generations on projects. Build teams that intentionally mix age groups. 

4. Continuous learning culture 

Only 54% of employers place significant emphasis on professional growth among employees of all ages, including those 50 and older. Invest in training and development that helps all employees stay relevant as skills and technologies evolve. 

5. Proactive succession planning 

Don’t wait until someone announces retirement. Build leadership pipelines that prepare the next generation while keeping experienced employees engaged in meaningful work. 

Where Outsourced HR Comes In 

Many organizations recognize the importance of longevity strategies but lack the internal bandwidth or know-how to implement them effectively. This is where outsourced HR providers can step in as strategic partners.  

An experienced HR services firm can: 

• Assess your current workforce demographics and identify age-related risks and opportunities 
• Design and implement age-inclusive policies and programs 
• Create flexible work arrangements and phased retirement options 
• Build mentorship and knowledge transfer programs 
• Develop training initiatives that serve multigenerational teams 
• Monitor compliance with age discrimination laws 
• Provide the ongoing support and measurement that longevity strategies require 

The Bottom Line 

The workforce is changing in ways we haven’t seen before. People are living longer, working longer, and expecting more from their careers. Companies that view this as a problem will struggle. Companies that see it as an opportunity will thrive. 

Whether you call it a Chief Longevity Officer, embed these responsibilities within your existing HR structure, or partner with an outsourced HR provider, the goal is the same: create a workplace where employees of all ages can contribute, grow, and find purpose. 

The organizations that get this right won’t just solve a demographic challenge. They’ll build a more innovative, more stable, and ultimately more successful business. 

Ready to Explore What This Could Mean for Your Organization? 

The conversation around workforce longevity is evolving quickly, and the organizations that act now will be positioned for long-term success. If you’re interested in discussing how age-inclusive strategies could strengthen your talent management approach, we’re here to help. 

Contact BPM to learn more about our outsourced HR services and how we can support your workforce strategy. 

If you’re a government contractor, you already know that revenue recognition isn’t straightforward. Between multi-element deliverables, variable fees, and the maze of FAR and DFARS regulations, applying ASC 606 (Revenue from Contracts with Customers) requires careful attention to detail. 

Whether you’re working on U.S. federal contracts, Direct Commercial Sales (DCS), or Foreign Military Sales (FMS), understanding how ASC 606 applies to your specific situation can prevent costly missteps. Here’s what you need to know to get it right. 

Why government contracts make revenue recognition complicated 

Government contracts rarely fit into neat boxes. You’re often dealing with bundled products and services, option years, contract modifications, and funding that arrives in phases. Each of these elements affects how and when you recognize revenue under ASC 606’s five-step model. 

The stakes are high. Misidentifying a performance obligation or incorrectly estimating variable consideration can lead to misstated financials, audit findings, and compliance issues. Let’s break down the key complexities you’ll face. 

Bundled deliverables require careful analysis 

Consider a defense contract that provides for the delivery of an aircraft, along with the initial setup efforts and training activities. Is this one combined performance obligation or three separate ones? The answer depends on whether these components are “distinct within the context of the contract”—a critical ASC 606 criterion. 

If the customer could benefit from the training services on their own, especially when those services could be provided by another 3^rd party provider, you may have separate obligations. If the components are highly interrelated and integrated (e.g. this is training provided for the initial operation of the aircraft), they may constitute a single obligation. Getting this determination wrong leads to revenue misallocation across your contract timeline. 

Customer options can create hidden performance obligations 

Government contracts frequently include option years or follow-on purchase rights for additional units or services. Under ASC 606, if an option provides a material right—such as a significant discount the customer wouldn’t receive without the original contract—you must treat it as a separate performance obligation. 

This effectively creates a deferred revenue component that you’ll recognize when the customer exercises the option. Contract modifications add another layer of complexity. Each change order or supplemental agreement requires analysis to determine whether it: 

• Adds new performance obligations 
• Alters the existing contract scope 
• Changes the transaction price 

How you account for the modification (as a separate contract, cumulative catch-up adjustment, or prospective change) depends on this assessment. Auditors regularly flag inconsistent handling of similar contracts as a red flag. 

Learn more about our Technical Accounting services

Variable consideration is the rule, not the exception 

If your contracts include award fees, incentive fees, penalties, cost reimbursements, or funding contingencies, you’re dealing with variable consideration. ASC 606 requires you to estimate these amounts, but with an important constraint: only include amounts when it’s probable that recognizing them won’t result in a significant revenue reversal later. 

Award and incentive fees demand careful estimation 

Department of Defense programs often tie award fees or bonus incentives to performance metrics like quality, delivery timing, or cost savings. A contract might offer up to 5% additional fee for meeting specific targets, or impose liquidated damages if you fall short. 

These are textbook examples of variable consideration. You need to estimate the amount you’ll earn and assess whether it’s probable you won’t have to reverse that revenue when the uncertainty resolves. This requires judgment based on your historical performance, current project status, and contract-specific factors. 

Cost reimbursement structures introduce transaction price uncertainty 

In cost-type contracts, your revenue equals allowable costs incurred plus a fee. While the fee may be fixed, the costs themselves are variable. Some contracts include incentive fees that share cost underruns or overruns, or impose caps on reimbursements. 

Even fixed-price contracts can have escalation clauses or economic price adjustments tied to published indices. All of these elements must factor into your transaction price estimate, and you’ll need to update that estimate as circumstances change. 

Unfunded contract portions create unique challenges 

U.S. federal contracts often come partially funded at inception. You might sign a multi-year agreement, but Congress appropriates funds annually. The unfunded portion lacks guaranteed funding, which raises a fundamental question: Does it meet ASC 606’s definition of a contract? 

The standard requires enforceable rights and obligations with collectible consideration. Until you receive or have reasonable assurance of funding, the unfunded portion may not qualify for revenue recognition. If it is determined that both the funded and unfunded portions meet the contract existence criteria, the unfunded portion becomes variable consideration, and the contractor would then need to evaluate whether any variable consideration is constrained.  

The practical implication: Significant judgment is necessary in evaluating contracts with these characteristics, and the probability of receipt of payment for the unfunded portion will drive the contract existence determination. Continuous reassessment is necessary unless or until funding is appropriated. 

Recognizing revenue over time versus at a point in time 

Most U.S. government contracts qualify for over-time revenue recognition, typically using the cost-to-cost method. This makes sense because you’re usually creating custom products or services specifically for the government’s needs. 

When over-time recognition applies 

ASC 606 allows over-time recognition when your performance creates an asset with no alternative use to you, and you have an enforceable right to payment for work completed to date (Representing the third of three criteria which, individually, allow for over-time revenue recognition under ASC 606-10-25-27). Government contracts typically meet these criteria through termination-for-convenience clauses (like FAR 52.249) that require payment for work performed even if the contract terminates early. 

For cost-reimbursable contracts that allow billing as costs are incurred, ASC 606 offers a practical expedient. If your invoices correspond directly to value delivered, you can recognize revenue in the amount you have the right to invoice. This invoice-based method is common for straightforward cost-plus contracts, essentially matching revenue to billable amounts each period. 

The cost-to-cost method requires robust forecasting 

If you’re using the cost-to-cost method to measure progress, your forecasting capabilities become critical. Unexpected cost growth may distort your percentage complete and can trigger loss provisions under ASC 606’s requirement to record the full amount of an anticipated loss when you identify it. 

You need robust processes to update total cost estimates frequently and flag situations where estimated costs exceed contracted consideration—a common scenario in fixed-price development projects. 

Some contracts require point-in-time recognition 

Not every government contract qualifies for over-time treatment. Short-term product sales (like off-the-shelf items) or certain foreign contracts without strong termination clauses may require point-in-time recognition upon delivery or acceptance. 

For example, a DCS transaction with a foreign government might be structured so title transfers only on final delivery. If you don’t have a guaranteed right to payment until that point, you recognize revenue at delivery based on when control passes to the customer. 

Understanding FMS versus DCS transactions 

The distinction between Foreign Military Sales and Direct Commercial Sales significantly impacts how you apply ASC 606. While both use the same accounting framework, the contract structures and risks differ substantially. 

FMS: The U.S. government as intermediary 

In FMS transactions, the U.S. Department of Defense acts as an intermediary. The DoD (through agencies like DSCA) contracts with you, then sells or transfers the product to the foreign government under a government-to-government agreement. 

From your perspective, your customer is the U.S. government. This means: 

• U.S. FAR and DFARS requirements apply 
• DCAA audits and FAR/CAS compliance are required 
• Payments flow through the U.S. government to the contractor  
• Credit risk is expected to be minimal, given U.S. government is the counterparty 
• Foreign exchange risk is minimal 
• Revenue timing typically follows over-time recognition patterns (assuming applicable FAR clauses) 

DCS: Direct engagement with foreign customers 

In DCS arrangements, you contract directly with the foreign government or its agencies, without U.S. government intermediation beyond export licensing requirements. 

This creates a different risk and accounting profile: 

• Foreign customer’s contract terms govern (FAR clauses don’t apply) 
• Payments made directly by foreign government(s) to the contractor 
• Foreign audit standards may apply instead of DCAA 
• Credit risk is likely a greater factor given direct remittance by the foreign government(s) 
• Foreign exchange risk becomes significant 
• Revenue timing depends entirely on your specific contract terms 

The accounting model remains consistent, but FMS arrangements behave more like standard U.S. government contracts with predictable terms and protections. DCS arrangements require case-by-case contract analysis. You should maintain separate procedures for FMS versus DCS to capture these important distinctions. 

Key risks and how to mitigate them 

Government contractors face several recurring challenges when applying ASC 606. Understanding these risks helps you build stronger processes and controls. 

Performance obligation identification errors 

The risk: Failing to identify all distinct performance obligations (like embedded training, warranties, or offset obligations) or incorrectly combining separate obligations into one. 

Mitigation approach: Develop a standardized checklist for contract review that covers common government contract features. Include cross-functional review involving contracts, engineering, and accounting teams before finalizing your revenue recognition position on significant new awards. 

Variable consideration estimation issues 

The risk: Being too aggressive in estimating award or incentive fees, leading to revenue reversals when actual results differ from estimates. 

Mitigation approach: Build historical data on your actual award fee realization rates by contract type and customer. Apply the constraint principle conservatively—only include variable amounts when reversal is improbable. Document your estimation methodology and update it quarterly based on current performance indicators. 

Unfunded contract treatment 

The risk: Recognizing revenue on unfunded contract portions before funding is probable, creating receivables that may never materialize. 

Mitigation approach: Establish clear policies defining when unfunded portions enter your contract scope for ASC 606 purposes. Track funding status separately and create controls to prevent revenue recognition on work performed against unfunded contract line items unless specific criteria are met. 

Inadequate cost forecasting 

The risk: Poor cost estimates may distort your percentage of completion under cost-to-cost methods, causing revenue swings and potentially triggering loss recognition requirements. 

Mitigation approach: Implement formal Estimate at Completion (EAC) processes with monthly or quarterly updates. Require program managers to document assumptions and risks. Create escalation procedures for contracts approaching or exceeding budget, and consider independent cost reviews on high-risk fixed-price development contracts. 

Contract modification accounting inconsistency 

The risk: Applying different accounting treatments to similar contract modifications, creating comparability issues and potential audit findings. 

Mitigation approach: Create decision trees or flowcharts for common modification types based on ASC 606’s guidance. Document the rationale for your treatment of significant modifications, including why you classified them as separate contracts, cumulative catch-ups, or prospective adjustments. 

FMS versus DCS confusion 

The risk: Applying U.S. government contract assumptions to DCS arrangements that have different terms, or vice versa. 

Mitigation approach: Maintain separate revenue recognition policies and templates for FMS and DCS contracts. Train your accounting team on the distinctions and require explicit identification of contract type during the setup process. 

Building a sustainable ASC 606 compliance framework 

Getting ASC 606 right isn’t a one-time exercise. You need ongoing processes that keep pace with your contract portfolio’s complexity and evolution. 

Start by documenting your significant judgments and estimates. When auditors or stakeholders question your revenue recognition positions, you’ll need clear documentation showing how you arrived at your conclusions. This includes your performance obligation assessments, variable consideration estimates, cost forecasts, and contract modification analyses. 

Invest in cross-functional collaboration. Revenue recognition decisions for government contracts require input from contracts administrators, program managers, engineers, and accountants. Create regular touchpoints where these groups review new awards, modifications, and performance issues together. 

Monitor your key estimates quarterly at minimum. Your award fee assumptions, cost forecasts, and funding probability assessments should reflect current information. Building this into your close process prevents surprises and ensures your financial statements reflect your best current knowledge. 

Finally, stay current with evolving guidance. The AICPA’s Aerospace and Defense Contractors guide, FASB updates, and industry practice developments all affect how you should apply ASC 606. Your contract structures evolve, and your accounting positions should evolve with them. 

Get your government contract revenue recognition right 

ASC 606 creates real challenges for government contractors, but it also provides a consistent framework for addressing those challenges. The key is applying the framework thoughtfully to your specific contract terms and risk profile. 

Your contracts are unique. Your customer relationships, performance obligations, variable consideration structures, and risk allocations all require careful analysis under ASC 606’s principles. Generic approaches lead to errors that can affect your financial reporting, audit results, and stakeholder confidence. 

BPM’s accounting and advisory professionals work with government contractors to navigate ASC 606’s complexities. We can help you assess your current revenue recognition policies, address specific contract accounting questions, and build sustainable processes that scale with your business. Contact your BPM advisor or visit bpm.com to discuss how we can support your revenue recognition requirements. 

Missing a quarterly estimated tax payment can trigger a cascade of financial consequences that catch many business owners off guard. While the immediate impact might seem manageable, the long-term costs of penalties, interest, and compliance issues can significantly affect your bottom line. 

The IRS operates on a “pay-as-you-go” system, meaning they expect tax payments throughout the year as you earn income. When you miss these deadlines, you’re not just dealing with a simple late fee—you’re facing a structured penalty system designed to encourage timely compliance. 

Understanding quarterly estimated tax deadlines and requirements 

Business owners must navigate four quarterly payment deadlines for 2026: April 15, June 15, and September 15 in 2026, with the final payment due January 15, 2027. These dates don’t align with calendar quarters and may shift if they fall on weekends or holidays. 

Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated tax payments if they expect to owe $1,000 or more when filing their return. Corporations face a lower threshold at $500 or more in expected tax liability. 

The safe harbor rules provide some protection against penalties. Most taxpayers avoid penalties if they pay at least 90% of the current year’s tax or 100% of the prior year’s tax, whichever is smaller. However, high-income taxpayers face stricter requirements—those with adjusted gross income exceeding $150,000 must pay 110% of their prior year’s tax to qualify for safe harbor protection. 

Many business owners underestimate their quarterly obligations, particularly during profitable periods or when receiving irregular income from contracts, investments, or seasonal business fluctuations. The key is consistent monitoring and adjustment of payments based on actual income patterns rather than outdated projections. 

How fiscal year differences and business structures affect payment schedules 

Your business structure and fiscal year significantly impact when and how you make estimated payments. Calendar year businesses follow the standard quarterly schedule, but fiscal year businesses must adjust their payment dates accordingly. 

Partnerships and S corporations using fiscal years calculate their deadlines based on the 15th day of the 4th, 6th, 9th, and 12th months of their fiscal year. For example, a business with a July 1 to June 30 fiscal year would make payments on October 15, December 15, March 15, and June 15. 

Farmers and fishermen receive special treatment, with calendar year farmers having only one payment deadline of January 15 for the entire year, provided at least two-thirds of their gross income comes from farming or fishing. This recognition of seasonal income patterns shows how the IRS adapts requirements to different business realities. 

For businesses like BPM’s real estate, venture capital, and private equity clients, seasonal income variations can make quarterly estimates challenging. Real estate professionals often see commission income clustered around certain periods, while VC and PE partners experience income shifting each quarter based on transactions, making annualized income installment calculations potentially beneficial for managing cash flow and penalty avoidance. 

Federal penalties and interest rates for missing estimated tax payments 

The financial consequences of missing quarterly payments extend beyond simple late fees. For 2025, the IRS charges 7% annual interest on underpayments, compounded daily, meaning every day of delay increases your total obligation. 

The underpayment penalty applies even if you’re due a refund when you file your annual return. This catches many business owners by surprise who assume their withholdings or overpayments from other sources will eliminate penalty exposure. 

The penalty calculation considers both the amount of underpayment and the duration of the shortfall. The IRS calculates penalties based on the difference between what you paid and what you should have paid, applied to each quarterly period separately. This means partial payments don’t fully protect you—each quarter stands alone for penalty purposes. 

Beyond estimated tax penalties, businesses, individuals, and trusts face additional consequences for broader non-compliance. The failure-to-pay penalty starts at 0.5% per month of unpaid taxes, increasing to 1% if taxes remain unpaid after the IRS issues a notice of intent to levy. 

Interest compounds daily on the total amount owed, including penalties. This exponential growth means small initial underpayments can become substantial obligations over time, particularly for businesses with irregular cash flow that might delay payments further. 

State-specific requirements that add complexity to compliance 

State estimated tax requirements often differ from federal rules, creating additional compliance layers for business owners. California requires estimated payments if you expect to owe at least $500, with high-income taxpayers facing stricter safe harbor requirements similar to federal rules. 

California’s penalty structure mirrors federal calculations but operates independently. California taxpayers with AGI exceeding $1 million must pay 90% of the current year’s tax to avoid penalties, eliminating the prior year safe harbor option. This creates challenges for businesses experiencing significant growth or volatile income. 

California imposes additional penalties for electronic payment failures, charging 1% of amounts not electronically paid when required. This administrative penalty stacks on top of underpayment penalties, creating multiple compliance requirements. 

States without income taxes like Texas, Florida, and Nevada eliminate this complexity for residents, but multi-state businesses must navigate varying requirements across jurisdictions. This becomes particularly relevant for businesses with diverse service offerings that operate across state lines or serve clients in multiple states. 

Some states offer more generous safe harbor provisions than federal rules, while others impose stricter requirements. Understanding your specific state’s rules prevents costly surprises and helps optimize your payment strategy across all jurisdictions. 

Immediate steps to take if you miss a quarterly deadline 

When you discover a missed quarterly payment, immediate action minimizes financial damage and demonstrates good faith compliance efforts. The first priority is calculating and paying the missed amount as quickly as possible to stop interest accumulation. 

Make the quarterly payment to the IRS as soon as possible. The 0.5% monthly penalty applies only when taxpayers fail to pay the full amount due by the extension deadline, not for missed quarterly estimated payments. 

Contact your tax professional immediately to assess the full scope of your obligation. They can help determine whether annualized income installment calculations might reduce penalties, particularly if your income varies significantly throughout the year. 

Consider adjusting your remaining quarterly payments upward to compensate for the shortfall. While this doesn’t eliminate penalties on the missed payment, it prevents compounding issues and demonstrates compliance intent for future periods. 

Document the circumstances surrounding the missed payment. The IRS may waive penalties for reasonable cause, such as casualty events, disasters, or unusual circumstances beyond your control. While these waivers are limited, proper documentation supports any reasonable cause claims. 

Review your withholdings and payment methods. If you receive W-2 income alongside business income, increasing withholdings can help cover estimated tax obligations and reduce future quarterly payment requirements. 

Planning strategies to avoid future payment issues 

Successful quarterly payment management requires systematic planning and regular monitoring of your tax obligations. Establish a dedicated business account for tax payments, automatically transferring a percentage of revenue to help ensure funds availability when deadlines arrive. 

Use technology to your advantage. Set up calendar reminders for quarterly deadlines and consider making monthly payments to smooth cash flow impacts. Many business owners find making smaller monthly payments easier than large quarterly installments. 

Monitor your income patterns throughout the year and adjust payment amounts accordingly. If business accelerates beyond projections, increase subsequent payments rather than waiting until year-end. This proactive approach prevents large underpayment penalties and improves cash flow predictability. 

Consider the annualized income installment method if your business has seasonal or irregular income patterns. This approach matches payments to actual income timing rather than assuming even quarterly distributions, potentially reducing penalties during slower periods. 

Work with experienced tax professionals who understand your industry’s specific challenges and opportunities. They can help optimize your payment strategy, identify beneficial elections, and support compliance across all jurisdictions where you operate. 

Partner with professionals to simplify your tax compliance 

Managing quarterly estimated tax payments requires ongoing attention and experience that many business owners struggle to maintain alongside their primary business responsibilities. Missing payments creates financial stress and compliance risks that can impact your business’s long-term success. 

Professional guidance helps you navigate complex requirements, optimize payment strategies, and avoid costly mistakes. Tax professionals understand the nuances of different business structures, industry-specific considerations, and changing regulations that affect your obligations. 

Looking to streamline your quarterly tax planning and avoid costly penalties? Contact BPM to explore comprehensive tax strategies tailored to your business structure and industry requirements. 

Growing a SaaS company comes with unique financial challenges that most business owners aren’t prepared to handle alone. You’re juggling subscription models, managing churn rates, and trying to make sense of metrics like CAC and LTV while keeping your business profitable. A fractional CFO brings the financial experience you need for ongoing part-time CFO leadership or just to get you through an immediate hurdle – without the six-figure salary commitment of a full-time hire.  

5 reasons to engage a fractional CFO for your SaaS company 

This article explores five compelling reasons why bringing a fractional CFO onto your team could be the smartest move for your SaaS business.  

1. They understand the SaaS business model inside and out 

Your SaaS company operates differently than traditional businesses. You deal with deferred revenue, monthly and annual recurring revenue, and complex customer lifetime calculations. A fractional CFO who specializes in SaaS knows exactly how to navigate these waters and set you up for success. 

They can help you track the metrics that actually matter for your business. Customer acquisition cost, lifetime value ratios, and churn rates become more than just numbers on a spreadsheet. They transform into actionable insights that drive your decision-making. 

Revenue recognition alone can become a compliance nightmare if you don’t have someone who understands GAAP requirements. A fractional CFO ensures your financial statements accurately reflect your business performance while keeping you compliant with accounting standards. 

2. You get high-level financial leadership at a fraction of the cost 

Hiring a full-time CFO typically costs $300,000 or more annually when you factor in salary, benefits, and equity. Most early-stage and growth-stage SaaS companies simply can’t justify that expense. A fractional CFO gives you access to the same caliber of financial leadership for significantly less and can flex their time up and down to meet your needs. 

This cost efficiency doesn’t mean you’re getting a watered-down service. You’re working with seasoned financial professionals who have helped multiple SaaS companies navigate growth, fundraising, and scaling challenges. They bring battle-tested strategies that come from years of experience. 

The money you save can be reinvested into product development, marketing, or sales. You’re making your dollars work harder for your business while still getting the financial guidance you need to make smart decisions.  

3. They provide flexibility that matches your growth stage 

Your needs today won’t be the same as your needs six months from now. A fractional CFO adapts their involvement based on what your business requires at any given moment. 

Maybe you need intensive support during a fundraising round. Once that closes, you might only need quarterly financial planning sessions. This flexible arrangement means you’re not paying for full-time help when you don’t need it. 

As your company scales, your fractional CFO can help you determine when it’s time to bring on additional finance team members. They can assist with recruiting and structuring your finance function so you’re building the right team for your growth trajectory.  

4. They accelerate your fundraising efforts 

Preparing for a funding round requires more than a compelling pitch. Investors want to see detailed financial models, realistic projections, and clean financial statements. A fractional CFO knows exactly what investors are looking for because they’ve been through the process before. 

They’ll build financial models that showcase your unit economics and growth potential. They’ll prepare you for due diligence questions before investors even ask them. This preparation makes you look polished and professional, which builds investor confidence. 

The stress of fundraising falls heavily on founders who are already stretched thin. Having a fractional CFO manage the financial side of your raise lets you focus on telling your company’s story and building relationships with potential investors. 

5. They create financial systems that scale with your business 

Many SaaS founders start out managing finances with basic spreadsheets and simple accounting software. That approach works until it doesn’t. A fractional CFO implements the financial infrastructure you need before you run into problems. 

They’ll help you select and implement the right financial tools for your stage and size. These systems provide visibility into your cash flow, runway, and key performance metrics in real-time. You can make informed decisions quickly instead of waiting for month-end reports. 

Good financial systems also make your life easier when it’s time to raise capital or consider an exit. Clean, organized financial data accelerates due diligence and can positively impact your valuation. You’re building value into your business from the ground up. 

Work with financial professionals who understand SaaS 

At BPM, we work with SaaS companies at every stage of growth. Our fractional CFO services are designed to give you the financial leadership you need when you need it. We understand the unique challenges of subscription-based businesses and the metrics that drive your success. 

Whether you’re preparing for your first funding round, scaling your operations, or planning an exit, we can help you build the financial foundation your business needs. To discuss how a fractional CFO can support your company’s growth and success, contact us.  

When planning for the future, trusts offer a powerful way to manage and distribute assets according to your wishes. But trusts come in many forms, each with different strategic tax and financial considerations.  

Generally, trusts fall into two camps: revocable and irrevocable. Understanding the differences between revocable and irrevocable trusts is crucial for making informed decisions about your estate.  

These two trust types serve different purposes – one offering flexibility and control, the other providing tax advantages and asset protection. The choice between them depends on your specific goals, financial situation, and long-term estate planning objectives for your family and assets. 

What is a revocable trust? 

A revocable trust, also known as a “living trust,” is a legal arrangement where you (the grantor) transfer assets to a trust while maintaining complete control during your lifetime. 

As the grantor, you typically name yourself as the trustee (though you can name whomever you’d like), which means you continue to manage any assets formally transferred into the trust. The trust technically owns these assets, but you maintain full authority over them. 

If you, as the grantor/trustee, become incapacitated or pass away, control of the trust transfers to your designated successor trustee. This person/entity then manages or distributes the trust assets according to your instructions in the trust document. 

Breaking down the benefits of a revocable trust 

Revocable living trusts are famous for their control and flexibility.  

With this type of trust, you retain complete control over your assets. This means you can continue using and managing trust assets as before, add or remove assets from the trust at any time, change beneficiaries or distribution terms whenever you wish, and serve as your own trustee while you’re able. 

Additionally, as the name suggests, a revocable trust can be altered, amended, or completely revoked during your lifetime. You can change the trust as many times as needed as your circumstances evolve. This flexibility allows you to adapt your estate plan to changing family situations, financial conditions, or personal preferences. 

The primary benefits of a revocable trust include 

• Avoiding probate, where assets pass directly to beneficiaries without court involvement 
• Privacy protection, as trust documents remain private and aren’t part of the public record
• Continuous management, where your successor trustee can manage your financial affairs if you become incapacitated 
• Smooth transfer, as assets transfer quickly to beneficiaries after your death. 

For instance, if your financial situation changes significantly, you might adjust your trust to reflect new assets or remove those you’ve sold.  

If family dynamics shift—perhaps through marriages, births, or changing relationships—you can modify beneficiary designations accordingly. This adaptability helps to ensure your estate plan remains aligned with your current wishes rather than becoming outdated as life changes occur. 

Tax implications of revocable trusts 

During your lifetime, a revocable trust is considered a “disregarded entity” for tax purposes—the IRS acts as if the trust doesn’t exist. All income generated by trust assets is reported on your personal tax return using your Social Security number. 

After your death, the trust becomes irrevocable. The successor trustee must obtain a tax identification number, and the trust becomes a separate entity for tax purposes.  

While revocable trusts don’t provide income tax advantages, they also don’t shield assets from estate taxes—all revocable trust assets are included in your taxable estate. 

What does that mean for you? When you pass, although the trust structure changes (becoming irrevocable and requiring its own tax ID), it doesn’t provide any estate tax benefits. All assets in your revocable trust are still counted as part of your taxable estate. 

The federal 2025 estate tax exemption sits at $13.99 million per person ($27.98 million for married couples). The federal estate tax exemption will increase to $15 million per person in 2026, For married couples, the combined exemption will be $30 million.  So if your estate exceeds these thresholds, the assets in your revocable trust will be taxed at rates up to 40%. Keep in mind that some states have their own estate tax exemptions that you’ll need to factor into your planning.  

While revocable trusts offer many benefits (probate avoidance, privacy, incapacity planning), tax advantages aren’t among them. For estate tax reduction, other planning tools like irrevocable trusts might be more appropriate. 

Limitations of revocable trusts 

We mentioned that revocable trusts aren’t known for their tax benefits. There are some other important limitations to be aware of.  

Despite their popularity, they don’t shield assets from creditors, lawsuits, or legal judgments. This is because you maintain control over the assets, so legally they’re still considered part of your estate for creditor purposes.  

Revocable trusts also don’t reduce income or estate taxes since the IRS views the assets as still belonging to you. Creating and maintaining a revocable trust involves legal fees and administrative work that some may find burdensome.  

Additionally, most people still need a “pour-over will” to handle assets not transferred to the trust and to name guardians for minor children, as trusts cannot designate guardianship. 

What is an irrevocable trust? 

An irrevocable trust is a legal arrangement where the grantor permanently transfers assets to a trust, relinquishing control and ownership.  

Once established, the terms of an irrevocable trust generally cannot be altered or revoked without the beneficiaries’ approval or a court order. 

How irrevocable trusts work 

When creating an irrevocable trust, the grantor transfers assets to the trust, which are then managed by a separate trustee for the benefit of named beneficiaries. The trustee has a fiduciary duty to manage the trust assets according to the trust document’s instructions. 

There are several types of irrevocable trusts, each serving specific purposes: 

• Irrevocable Life Insurance Trust (ILIT) 
• Grantor-Retained Annuity Trust (GRAT)
• Charitable Trusts 
• Special Needs Trusts 
• Asset Protection Trusts 

An estate planning professional can help you consider the most appropriate trusts for your financial and personal goals.  

Benefits of irrevocable trusts 

When you think of irrevocable trusts, their powerful asset protection and tax advantages stand out.  

Since you permanently transfer ownership of your assets to the trust (meaning you no longer personally own these assets), there is a legal separation between you and the property. This separation forms the foundation for the trust’s benefits, like asset protection from creditors and lawsuits and a potential reduction in estate taxes.  

While most irrevocable trusts can’t be altered once they’re created, they provide stronger legal protections that revocable trusts cannot offer. 

Additional benefits include: 

• Eligibility preservation for government benefits like Medicaid, which have strict asset limits 
• Controlled asset distribution to beneficiaries according to specific terms 
• Protection of complex assets, including business interests or cryptocurrency 

For instance, if you have a family member with special needs who receives government benefits, an irrevocable special needs trust can provide supplemental support without disqualifying them from those benefits.  

Tax implications of irrevocable trusts 

Assets in an irrevocable trust are generally removed from the grantor’s taxable estate, potentially minimizing estate tax liability. However, the tax implications can be complex and may vary depending on the specific type of trust and how it’s structured.  

For the most part, you’ll be dealing with income tax and capital gains tax. 

Income tax  

An irrevocable trust is considered a separate taxpayer with its own tax identification number. The trust must file Form 1041 (U.S. Income Tax Return for Estates and Trusts) annually. 

Income taxation follows two primary paths: 

• Income retained by the trust is taxed to the trust at compressed tax brackets 
• Income distributed to beneficiaries is taxed to those beneficiaries 

The tax brackets for trusts are highly compressed, and these rates reach the highest tax bracket (37%) much faster than individual rates, creating an incentive to distribute income to beneficiaries who may be in lower tax brackets. 

Capital gains tax 

A significant recent change affects the capital gains treatment of irrevocable trusts. Under Revenue Ruling 2023-2 (issued March 2023), assets in irrevocable trusts that are excluded from the grantor’s taxable estate no longer receive a step-up in basis at the grantor’s death. 

This means beneficiaries inherit assets with the grantor’s original purchase price as their cost basis, rather than the fair market value at death. When beneficiaries eventually sell these assets, they may face substantial capital gains taxes on appreciation that occurred during the grantor’s lifetime. 

For 2025, irrevocable trusts are subject to these long-term capital gains rates: 

• 0% on capital gains from $0-$3,250 
• 15% on capital gains from $3,250-$15,900 
• 20% on capital gains over $15,900 

Potential tax deductions 

Irrevocable trusts can deduct certain expenses related to trust administration, including trustee fees and legal fees, which can help reduce the trust’s taxable income. 

The tax implications of irrevocable trusts require careful planning and ongoing management to maximize benefits while minimizing tax burdens for both the trust and its beneficiaries. 

Limitations of irrevocable trusts 

Despite their benefits, irrevocable trusts have significant limitations: 

• Loss of control over assets once transferred to the trust 
• Difficulty in modifying or revoking the trust 
• Complexity and potentially higher costs to establish and maintain 
• Inflexibility in responding to changing circumstances or wishes 

When considering an irrevocable trust, it’s crucial to carefully weigh these advantages and disadvantages and consult with experienced legal and financial professionals to help ensure it aligns with your long-term estate planning goals. 

Revocable vs. irrevocable trusts 

As you can see, fundamental differences exist in the structure and approach between a revocable and irrevocable trust.  

Let’s take a closer look at each.  

Key Factors	Revocable Trust	Irrevocable Trust
Duration/Permanence	Can be canceled at any time, but becomes irrevocable at death	Permanent and last for your lifetime and beyond
Probate Court Avoidance	Allows assets to bypass probate	Allows assets to bypass probate
Control Over Assets	Retain control over assets	Relinquish control over assets
Flexibility to Modify Terms	Highly flexible—can adapt terms, beneficiaries, and assets as needed	Rigid—limited options to make changes without complex court approval
Tax Treatment	No tax advantages; assets included in your taxable estate	Potential tax capital gains tax advantages; not included in your taxable estate
Asset Protection	No protection—all trust assets are recorded on your personal tax return	Strong protection—trust is a separate entity
Privacy Protection	Keeps information out of the public record.	Keeps information out of the public record.
Medicaid Planning	Not suitable	Quite suitable

Practical applications of revocable and irrevocable trusts 

So you understand the differences between these types of trusts, but how does this translate into real life scenarios? Let’s take a look.  

When to choose a revocable trust 

A revocable trust makes the most sense when:  

• You want to maintain control over your assets. This flexibility allows you to continue managing your financial affairs while creating a framework for future asset management. 
• You want to plan for potential incapacity. A revocable trust with a named successor trustee creates a seamless transition of financial management if you become unable to manage your own affairs, without requiring court intervention through guardianship or conservatorship proceedings. 
• You prefer the flexibility to modify your estate plan as circumstances change. Life events such as marriages, divorces, births, or changes in financial situation may require adjustments to your estate plan, which a revocable trust readily accommodates. 

When an irrevocable trust makes more sense 

An irrevocable trust is typically the better choice when: 

• You want to reduce federal estate taxes. If your estate exceeds or may exceed the federal estate tax exemption (currently $13.99 million per person for 2025), an irrevocable trust can help remove assets from your taxable estate. 
• You need asset protection from creditors or lawsuits. Because you’ve permanently transferred ownership of the assets, they’re generally protected from your personal creditors. 
• You’re planning for long-term care or Medicaid eligibility. Properly structured irrevocable trusts can help protect assets while potentially qualifying for government benefits that have strict asset limits. 
• You want to provide for beneficiaries with special needs. A special needs trust can provide supplemental support without disqualifying the beneficiary from essential government benefits. 
• You own substantial life insurance policies. An irrevocable life insurance trust (ILIT) can remove the death benefit from your taxable estate while providing liquidity for your heirs. 
• You’re concerned about protecting assets for future generations. Irrevocable trusts can include provisions that protect inherited assets from a beneficiary’s creditors, divorce proceedings, or poor financial decisions. 

The choice between the two trusts isn’t always an either/or decision. Many comprehensive estate plans include both types of trusts to address different assets and objectives. 

Revocable vs irrevocable trusts: Learn what’s right for you 

Revocable and irrevocable trusts serve different purposes, with revocable trusts offering flexibility and control, while irrevocable trusts provide tax advantages and asset protection. The choice depends on your specific goals and financial situation. Personalized planning is crucial to help ensure your estate plan aligns with your objectives.  

Consult with an experienced estate planning attorney to determine the best trust options for your unique circumstances. Contact BPM’s estate planning team today. 

If you’re a California employer who uses independent contractors, you’re likely facing more scrutiny than ever before. In 2025, there’s been a noticeable uptick in enforcement actions by the California Employment Development Department (EDD), particularly around worker classification. The timing isn’t coincidental—this rise in audits could be partially driven by the state’s ongoing budget shortfalls, as California seeks to recover unpaid payroll taxes to help close the gap. 

Whether you employ five contractors or fifty, now is the time to take a hard look at how you’re classifying those individuals. Here’s what you need to know about this enforcement surge and how to protect your business. 

The audit landscape has changed 

EDD audits in 2025 are primarily focused on misclassification of workers, with companies in industries like hospitality, logistics, tech, and gig work now finding themselves under review. If you’ve historically classified certain roles as independent contractors, your business may be on the radar. 

These audits can result in large assessments for unpaid unemployment insurance, disability insurance, and other payroll taxes. But the financial impact doesn’t stop there. When worker misclassification is identified, it often triggers a domino effect of liability. 

Understanding your risk exposure: multiple layers of liability 

The consequences of misclassification extend far beyond EDD penalties. In addition to EDD assessments for unpaid unemployment insurance, disability insurance, and other payroll taxes, misclassified workers may pursue private claims for unpaid overtime, missed breaks, unreimbursed expenses under Labor Code section 2802, and even PAGA penalties. The financial exposure can be significant—especially when claims reach back four years and include attorneys’ fees and interest. 

Consider these potential costs: 

• State-imposed fines ranging from $5,000 to $15,000 per violation 
• Increased penalties of $10,000 to $25,000 for patterns of misclassification 
• Back pay for overtime, meal and rest breaks 
• Reimbursements for business expenses 
• Interest and attorneys’ fees 

The total liability can quickly reach six figures or more, making prevention far more cost-effective than remediation. 

Two tests you need to master: EDD and DLSE use different standards 

Here’s where classification becomes complex: the EDD and the Division of Labor Standards Enforcement (DLSE) use different tests, and you need to know both. California primarily applies the ABC Test under AB 5, which presumes a worker is an employee unless all three parts of the test are met. Under this test, you must prove that the worker: 

• Is free from your control and direction in performing the work 
• Performs work outside the usual course of your business 
• Is customarily engaged in an independently established trade or business 

But there’s a catch. The economic realities test—still used in some cases—evaluates factors like the level of control, whether the work is part of the employer’s regular business, and who provides tools and equipment. Different agencies may apply different standards. 

This means your worker could pass one test but fail another, leaving you vulnerable to enforcement action depending on which agency comes knocking. 

Your written contract won’t save you 

Many employers believe a signed independent contractor agreement protects them from liability. It doesn’t. Even if both parties agree to an independent contractor arrangement and sign a contract saying so, that agreement doesn’t determine legal status. Enforcement agencies and courts will look at the actual working relationship. 

What matters is the reality of your working relationship: 

• Do you control when, where, and how the work is performed? 
• Is the worker economically dependent on your company? 
• Does the worker provide services that are integral to your business operations? 

If the business controls the work and the worker is economically dependent on the company, classification as an employee may be required under the law. 

Act now before the EDD does: conduct a classification audit now 

Given the rise in enforcement and potential financial exposure, employers should proactively review their worker classifications. Waiting for an audit notice is the worst time to discover you have a misclassification problem.   A proactive review could help avoid audits, assessments, and costly litigation down the road. 

The bottom line 

With California facing a projected budget deficit, state agencies may be ramping up enforcement efforts to increase revenue. This isn’t likely to be a short-term trend. The pressure to generate revenue through enforcement will continue as long as budget challenges persist. 

Whether your business relies heavily on contractors or uses them occasionally, the message is clear: the risk of inaction far outweighs the cost of compliance. A misclassification discovered during an audit becomes exponentially more expensive than one you identify and correct on your own. 

Need help navigating California worker classification? 

BPM’s HR Consulting professionals can help you assess your worker classification practices, identify potential risks, and develop strategies to maintain compliance with California’s complex employment laws. Don’t wait for an audit notice to take action. 

Contact BPM today to discuss how we can help protect your business from costly misclassification penalties. 

Family offices are juggling more moving parts today than ever before. Wealth transfers between generations, new regulations, and day-to-day operational demands create a perfect storm of complexity. Many families discover that the organizational structures and processes that worked well in simpler times feel inadequate for today’s realities. 

Evaluating outsourcing as a strategic solution for family offices 

The evolving nature of family wealth management creates unique challenges that traditional in-house models often struggle to address effectively. As family offices mature, they encounter operational bottlenecks, technology limitations, and talent acquisition difficulties that can hinder their ability to serve multiple generations efficiently.  

This article explores how outsourcing family office operations can address these challenges while maintaining the personalized service families expect. 

Growing complexity drives operational reassessment 

Family offices today manage more than investment portfolios—they coordinate complex webs of entities, trusts, philanthropic initiatives, and next-generation education programs. This expanded scope requires sophisticated operational infrastructure that many family offices find difficult to maintain internally. 

Generational transitions particularly strain existing systems as decision-making structures evolve from single patriarchs or matriarchs to multiple family branches with diverse priorities. Each generation brings different expectations for transparency, reporting frequency, and technology integration, forcing family offices to adapt their operational approaches continuously. 

The talent market compounds these challenges. Family offices compete with investment banks, asset managers, and consulting firms for skilled professionals who understand both traditional wealth management and emerging areas like ESG investing, digital assets, and tax optimization across multiple jurisdictions.   

In addition, family offices must design complex compensation and benefits structures that comply with regulatory requirements while also attracting and retaining top talent in an environment that often offers limited upward mobility. 

Key indicators signal outsourcing opportunities 

Several operational warning signs suggest family offices should consider outsourcing specific functions. Technology fragmentation represents one of the most common issues, with many offices relying on disconnected systems that require manual data reconciliation and create security vulnerabilities. 

Key person dependency poses another significant risk. When critical operations rely on individual employees’ institutional knowledge, departure or retirement can disrupt essential functions. This vulnerability becomes particularly acute in smaller family offices where cross-training opportunities remain limited. 

Administrative burden increasingly consumes time that family office leadership could dedicate to strategic initiatives. Routine tasks like expense processing, vendor management, and compliance reporting often require disproportionate internal resources, limiting capacity for relationship building and strategic planning. 

Reporting demands continue to escalate as family members request more frequent, detailed, and customized information about their wealth positions. Legacy systems often cannot accommodate these evolving requirements without significant manual intervention. 

Outsourcing addresses operational vulnerabilities 

Strategic outsourcing helps family offices address their most pressing operational challenges through three primary mechanisms: enhanced technology integration, improved internal controls, and expanded professional capabilities. 

Technology integration becomes more achievable when outsourcing partners provide established platforms that connect investment management, accounting, reporting, and compliance functions. These integrated systems eliminate data silos and reduce manual reconciliation requirements that plague many family offices. 

Internal control improvements naturally result from outsourcing arrangements that introduce segregation of duties and multilayered approval processes. External providers typically implement robust control frameworks that exceed what smaller family offices can maintain internally, reducing fraud risk and improving compliance posture. 

Professional capability expansion occurs when family offices access specialized knowledge through their outsourcing relationships. Partners often maintain teams focused on specific areas like alternative investment administration, tax optimization, or regulatory compliance that would be cost-prohibitive for individual family offices to employ directly. 

Cost optimization supports strategic focus 

Effective outsourcing enables family offices to optimize their cost structures while maintaining service quality. Rather than simply reducing expenses, strategic outsourcing reallocates resources toward activities that directly support family objectives. 

Fixed-fee arrangements provide cost predictability that helps family offices manage their budgets more effectively than variable internal staffing costs. This predictability becomes particularly valuable during economic uncertainty when families may need to adjust their operational expenses quickly. 

Scalability represents another significant advantage as outsourced services can expand or contract based on changing family needs without the complexities of hiring or downsizing internal teams. This flexibility proves essential when family offices face succession planning, liquidity events, or changes in investment strategy. 

Access to innovation through outsourcing partnerships allows family offices to benefit from cutting-edge technology and processes. Partners who serve multiple family offices often develop best practices that individual offices would struggle to create independently. 

Selecting the right outsourcing approach 

Successful outsourcing requires careful consideration of each family office’s unique culture, values, and operational requirements. The most effective arrangements typically combine outsourced administrative functions with retained strategic and relationship management capabilities. 

Families should evaluate potential partners based on their ability to integrate seamlessly with existing operations, maintain confidentiality standards, and adapt their services to evolving family needs. The best outsourcing relationships function as true partnerships where external providers understand and support long-term family objectives.  

Implementation timing matters significantly, as major transitions like generational succession or leadership changes provide natural opportunities to reassess operational structures and introduce new service models. 

Partner with BPM for operational excellence 

BPM understands the unique operational challenges facing modern family offices and provides tailored outsourcing solutions that preserve family values while enhancing operational efficiency. Our integrated approach combines deep family office experience with cutting-edge technology to deliver seamless operational support that scales with your family’s evolving needs.  

Our team works closely with family office leadership to identify optimization opportunities, implement robust control frameworks, and provide ongoing support that enables your internal team to focus on strategic initiatives and family relationships. We recognize that every family office operates differently and customize our services to align with your specific culture, values, and objectives. To discuss how our tailored solutions can help you achieve operational excellence while maintaining the personalized service your family expects, contact us.  

Your credit union passed its last exam. Your information security program checks all the regulatory boxes. Your policies are documented, your controls are mapped, and your board gets quarterly updates. 

But compliance doesn’t equal security. 

Meeting NCUA, FFIEC, and GLBA requirements establishes a baseline. It shows regulators you understand the fundamentals. But those frameworks weren’t designed to stop every threat your institution faces today. They outline minimum expectations, not maximum protection. The question isn’t whether you’re compliant. It’s whether you’re actually secure.  

This article explores how credit unions and banks can move from checking boxes to building cybersecurity programs that address real-world risks. 

Why minimum standards leave gaps 

Regulatory frameworks focus on what’s measurable and enforceable across thousands of institutions. They address common risks and establish consistency. That’s valuable, but it also means they lag behind emerging threats.  

By the time a cybersecurity control becomes a regulatory requirement, attackers have often moved on to new methods. Ransomware groups don’t wait for guidance updates. Neither do credential thieves or social engineers. 

Your institution operates in a specific environment with unique risks. You serve particular members, use specific vendors, and face threats shaped by your geography, size, and digital footprint. Regulatory standards can’t account for all of that nuance.  

“Numerous organizations have been compromised via misconfigured devices despite having a sound configuration management policy. As environments become more numerous, changes compound on each other and configuration creep occurs, resulting in vulnerable systems which can serve as footholds for attackers.” – Joshua Schmidt, BPM Cybersecurity Partner 

What gets missed in compliance-focused programs 

Compliance programs often emphasize documentation over outcomes. Institutions spend significant time proving they follow procedures, but less time testing whether those procedures actually work. 

Consider incident response plans. Most institutions have one because regulations require it. But many plans sit in a drawer until an actual incident occurs. Teams discover gaps when they’re already under pressure, trying to contain a breach or restore systems while also figuring out who needs to be notified and when. 

Testing reveals problems that documentation hides. Tabletop exercises show whether your team knows their roles. Simulated phishing campaigns reveal whether staff training actually changed behavior. Penetration testing finds vulnerabilities that policy reviews miss. 

Another common gap involves monitoring. Compliance requires certain logs and controls, but often doesn’t specify how institutions should use that data. Many organizations collect the information but rarely analyze it. They meet the requirement without gaining the insight. 

Building security that works, not just security that passes 

Moving beyond compliance means shifting focus from “did we do this?” to “did this work?” It requires measuring outcomes, not just activities. 

Start by understanding your actual risk profile. Regulatory risk assessments provide structure, but they shouldn’t be your only lens. Look at what’s really happening in your environment. Which systems hold your most sensitive data? Where do breaches typically start in institutions like yours? What would cause the most damage if it failed? 

Next, prioritize based on impact. Not every control deserves equal attention. Some protect critical systems. Others address minor issues. Regulatory checklists treat requirements similarly, but your resources shouldn’t be distributed that way. 

Test everything that matters. Don’t assume controls work because they’re documented. Verify them. Run exercises. Hire people to try breaking in. Review actual logs, not just policies about logs. When tests reveal problems, fix them before the next exam cycle forces you to. 

Making cybersecurity practical 

Better cybersecurity doesn’t always require bigger budgets. It often needs better focus. 

Many institutions spend heavily on tools they barely use. They deploy software because a vendor promised it would solve problems, then struggle with implementation. Meanwhile, basic issues like inconsistent patching or weak password practices persist. 

Focus on fundamentals first. Strong authentication matters more than most advanced tools. Regular patching prevents more breaches than expensive threat intelligence platforms. Clear accountability ensures controls actually get implemented and maintained. 

Automation helps, but only when it’s solving real problems. Automated vulnerability scanning makes sense when you have a process for acting on results. Automated log analysis adds value when someone reviews the alerts. Technology without process just creates noise.  

When compliance and cybersecurity align 

The goal isn’t to ignore regulatory requirements. It’s to build programs where compliance happens naturally because you’re already doing what works. 

When your incident response plan gets tested quarterly, updating it for examiners becomes straightforward. When you’re already monitoring for real threats, producing compliance reports takes less effort. When controls are designed around actual risks, they’re easier to justify and maintain.  

This approach also improves examinations. Regulators respond well when institutions demonstrate they understand their risks and have thoughtful strategies for addressing them. They’re less impressed by perfect documentation that doesn’t reflect reality. 

Working with BPM  

BPM helps financial institutions build cybersecurity programs that work in practice, not just on paper. We understand regulatory requirements, but we focus on what actually protects your institution and your members. 

Our team works with your staff to identify gaps, test controls, and develop practical improvements. We help you move from checkbox compliance to programs that address real risks. Whether you need support with risk assessments, incident response planning, or cybersecurity testing, we bring experience from working with institutions like yours. To discuss how we can help you go beyond basic compliance and build protection that works, contact us.  

When a cyber incident strikes your organization, every minute counts. The decisions you make in those first critical hours can mean the difference between a quick recovery and a significant business disruption. But before you can respond effectively, you need to understand which framework will serve your organization best. 

Many organizations use the terms “business continuity” and “disaster recovery” interchangeably. While they’re closely related, these two approaches serve different purposes in your overall preparedness strategy. This article will explain the key differences between business continuity and disaster recovery planning and help you determine which approach fits your organization’s needs. 

What is business continuity planning? 

Business continuity planning focuses on keeping your organization running during and after a disruptive event. A business continuity plan (BCP) takes a broad view of your operations. It addresses how you’ll maintain critical business functions when disaster strikes. 

Your BCP considers multiple scenarios that could interrupt normal operations. These include cyberattacks, natural disasters, power outages, and supply chain disruptions. The plan outlines specific steps your team will take to keep essential services available to customers and stakeholders.  

“The most common mistake an organization makes when developing a business continuity plan is not taking the time to build the foundational process that the plan describes. It’s tempting to use a template or purchase a tool, but without a firm underlying process for business continuity, a template or tool won’t benefit the organization.”  – Josh Schmidt, BPM Cybersecurity Partner 

Think of business continuity as your operational playbook. It answers questions like: How will employees communicate if email systems go down? Which business functions must continue no matter what? Who makes critical decisions when leadership is unavailable? 

What is disaster recovery planning? 

Disaster recovery planning takes a more focused approach. A disaster recovery plan (DRP) specifically addresses your IT systems and data protection. It details how you’ll restore technology infrastructure after an incident. 

Your DRP identifies every critical system your organization depends on. It establishes recovery time objectives (RTO) for each system. RTO defines how quickly you need to restore a particular system to avoid significant business impact. 

The plan also sets recovery point objectives (RPO). RPO determines how much data you can afford to lose during an incident. Some organizations back up data continuously to remote locations. Others accept a few hours of potential data loss if their systems fail. 

Disaster recovery planning involves detailed technical procedures. Your team needs clear instructions for restoring servers, databases, applications, and network infrastructure. The plan assigns specific responsibilities to IT staff members who will execute the recovery. 

Business continuity vs. disaster recovery: Key differences between the two approaches 

The scope sets is the main differentiator when looking at business continuity vs. disaster recovery. Business continuity planning addresses your entire organization. Disaster recovery planning focuses specifically on technology and data systems. 

Business continuity takes a proactive stance. It helps you maintain operations while a crisis unfolds. Disaster recovery is more reactive. It kicks in after an incident has already disrupted your systems. 

Your business continuity plan involves multiple departments across your organization. Marketing, operations, finance, and human resources all play roles in maintaining business functions. Your disaster recovery plan primarily engages IT staff and technology vendors. 

The timeline differs as well. Business continuity planning prepares you to operate through extended disruptions that could last days or weeks. Disaster recovery focuses on restoring systems as quickly as possible, often within hours. 

Learn more about our Business Continuity and Disaster Recovery Services

Do you need both plans? 

Most organizations benefit from having both frameworks in place. Your business continuity plan ensures critical operations continue serving customers. Your disaster recovery plan gets technology systems back online quickly. 

These plans work together to create comprehensive protection. When a ransomware attack encrypts your files, your disaster recovery plan guides the technical restoration. Meanwhile, your business continuity plan helps other departments continue serving customers using alternative processes.  

Some organizations develop a combined business continuity and disaster recovery (BCDR) strategy. This integrated approach helps leadership coordinate responses across both operational and technical dimensions. The key is ensuring both aspects receive adequate attention and resources. 

Building effective plans for your organization 

• Start by conducting a business impact analysis. This assessment identifies which functions and systems are most critical to your operations. It also estimates the potential cost of downtime for each area. 
• Document your current assets and dependencies. You need to know exactly what technology, facilities, and personnel support each critical function. This inventory becomes the foundation for both planning efforts. 
• Assign clear roles and responsibilities to team members. During a crisis, everyone needs to know their specific duties. Create communication protocols that work even when primary systems fail. 
• Test your plans regularly through tabletop exercises and simulations. These practice sessions reveal gaps in your procedures before a real incident occurs. They also build confidence among team members who will execute the plans under pressure. 

Strengthen your preparedness with BPM  

BPM’s cyber team understands that effective incident response requires both strategic planning and technical readiness. We help organizations develop comprehensive business continuity vs disaster recovery frameworks tailored to your specific risks and requirements. 

Our approach includes scenario-based tabletop exercises that test your response capabilities, business impact analysis to identify critical priorities, and recovery strategy development aligned with your business objectives. We work alongside your team to build practical plans that will actually work when you need them most. To evaluate your current preparedness and develop the capabilities you need to respond effectively when incidents occur, contact us.