Regulation B Section 1071: Implementation Best Practices for Financial Institutions

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The financial industry is facing a significant shift with the implementation of Regulation B Section 1071, as mandated by the Dodd-Frank Act. This new rule introduces extensive data collection and reporting requirements for financial institutions making small business loans. Designed to promote fairness and transparency in lending, Regulation B Section 1071 seeks to uncover and address potential discrimination in credit access for small businesses, particularly those owned by women and minorities.

While the regulation represents a step forward for equitable lending practices, it also introduces operational and compliance challenges. For financial institutions, understanding the requirements and developing a strong implementation plan will be critical for navigating these changes.

In this blog, we’ll explore key considerations and best practices for implementing Section 1071 to ensure compliance while maintaining efficiency in your institution’s processes.

Understanding Regulation B Section 1071

Under Section 1071, financial institutions are required to collect and report data on applications for credit from small businesses. This includes gathering information on the race, ethnicity, and gender of the business owner(s), as well as the loan amount, application outcome, and pricing terms. The goal is to promote fair lending and provide policymakers with insight into access to credit across different demographics.

The rule applies to institutions that originated at least 100 small business loans in the previous two calendar years, covering a wide range of credit products such as term loans, lines of credit, and business credit cards. Noncompliance with Section 1071 can result in regulatory scrutiny, fines, and reputational harm.

With the compliance deadline approaching, financial institutions must take proactive steps to prepare for the implementation of this regulation.

Best Practices for Implementing Section 1071

To ensure a smooth transition and ongoing compliance, financial institutions should consider the following best practices:

  1. Conduct a Gap Analysis

Begin by reviewing your current loan application and reporting processes to identify gaps in compliance with Section 1071. Evaluate your institution’s ability to collect the required data points, and assess whether your existing systems and procedures can support the additional reporting requirements.

Key Considerations:

  • Are your loan officers trained to collect demographic information?
  • Do your current systems accurately capture and store the required data?
  • Is your team aware of fair lending rules and how to handle sensitive customer information?
  1. Upgrade Your Technology and Data Management Systems

Effective implementation of Section 1071 requires robust data collection, storage, and reporting capabilities. Financial institutions may need to upgrade their loan origination systems (LOS), customer relationship management (CRM) platforms, and data analytics tools to meet these demands.

Best Practices:

  • Implement systems that can securely capture and store sensitive demographic data.
  • Automate reporting processes to reduce the risk of errors and streamline compliance efforts.
  • Invest in technology solutions that support efficient data analysis for fair lending reviews.
  1. Train Staff on Compliance and Customer Communication

Collecting demographic information requires careful communication with customers to ensure transparency and compliance with fair lending regulations. Loan officers and other front-line staff should receive training on how to explain the purpose of data collection and handle customer concerns.

Training Tips:

  • Develop clear, customer-friendly explanations about why demographic data is being collected.
  • Train staff to address customer questions while remaining compliant with regulatory requirements.
  • Emphasize the importance of unbiased interactions during the loan application process.
  1. Establish Monitoring and Reporting Protocols

Regular monitoring of your institution’s data collection and reporting processes will be critical to ensuring ongoing compliance with Section 1071. Establish clear protocols for reviewing loan data, identifying discrepancies, and addressing potential issues.

Steps to Take:

  • Develop a reporting schedule to ensure timely submission of data to regulators.
  • Use data analytics to identify trends and detect potential fair lending risks.
  • Conduct internal audits to verify the accuracy of collected data and ensure adherence to regulatory requirements.
  1. Collaborate with Industry Peers and Experts

Compliance with Section 1071 is a complex task that benefits from collaboration. Financial institutions can engage with industry groups, consultants, and legal experts to share insights, develop best practices, and navigate challenges.

Benefits of Collaboration:

  • Gain access to industry-specific resources and case studies.
  • Stay informed about regulatory updates and interpretations.
  • Leverage the expertise of third-party consultants to enhance your compliance efforts.

The Path Forward: Building a Culture of Compliance

Implementing Regulation B Section 1071 is about more than meeting regulatory requirements—it’s an opportunity for financial institutions to foster transparency, fairness, and trust with their small business customers. By developing a robust compliance plan, investing in technology and training, and maintaining a proactive approach to risk management, your institution can successfully navigate this new regulatory landscape.

At Brady Martz, we understand the unique challenges financial institutions face in implementing complex regulations like Section 1071. Our team of experts can help you assess your readiness, develop a tailored implementation strategy, and ensure your institution remains compliant while achieving its business goals. Contact us today to learn how we can support your compliance journey.

Risk Assessments – Not a One and Done

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In today’s ever-changing business environment, organizations face new challenges daily, from evolving market conditions to emerging cybersecurity threats. As a result, the concept of risk assessment has become more critical than ever. However, many companies make the mistake of viewing risk assessments as a one-time task instead of an ongoing, strategic process.

This mindset can leave organizations vulnerable, as risks evolve alongside changes in technology, industry regulations, and global markets. To truly protect your business and remain resilient, risk assessments must be treated as a continuous process that adapts to the shifting landscape.

What Is a Risk Assessment?

A risk assessment is the process of identifying, analyzing, and prioritizing potential risks that could impact your business. These risks may include operational inefficiencies, financial vulnerabilities, compliance issues, or cybersecurity threats.

A comprehensive risk assessment typically involves:

  • Identifying potential risks or vulnerabilities.
  • Analyzing the likelihood and impact of those risks.
  • Developing mitigation strategies to reduce risk exposure.

While many businesses conduct risk assessments during audits or after a significant event (such as a data breach), a “set it and forget it” approach often leads to gaps that can compromise an organization’s stability and reputation.

Why Risk Assessments Must Be Ongoing

Risks are not static. Here are some key reasons why businesses should adopt an ongoing approach to risk assessments:

  1. Evolving Threats and Trends

Technology is advancing at an unprecedented rate, and so are the threats. For example, as businesses rely more on digital platforms, cybersecurity risks like ransomware, phishing, and insider threats continue to grow. A risk assessment conducted last year may not account for these new vulnerabilities.

  1. Regulatory Changes

Governments and industry regulators frequently update compliance requirements to address emerging risks. Without periodic risk assessments, businesses may inadvertently fall out of compliance, exposing themselves to penalties, fines, or reputational damage.

  1. Internal Changes

Internal changes such as staff turnover, mergers and acquisitions, or the implementation of new technologies can create unforeseen risks. Conducting risk assessments regularly ensures that new processes, people, or systems are incorporated into your risk management strategy.

  1. Market and Economic Shifts

Market volatility and global events, like inflation, supply chain disruptions, or geopolitical tensions, can introduce new financial and operational risks. Ongoing assessments help organizations stay proactive and ready to pivot as conditions change.

Best Practices for Continuous Risk Assessments

To embed risk assessments into your business processes effectively, consider these best practices:

  1. Schedule Regular Risk Reviews

Conduct risk assessments on a scheduled basis, such as quarterly, semi-annually, or annually, depending on your industry and risk exposure.

  1. Involve Cross-Functional Teams

Risk management isn’t just the responsibility of one department. Involve leaders from IT, finance, HR, operations, and other key areas to ensure all perspectives are considered.

  1. Leverage Technology

Use risk management software or tools to automate parts of the process, such as tracking risks, generating reports, or monitoring compliance metrics in real time.

  1. Align with Strategic Goals

Risk assessments should align with your organization’s long-term objectives. This ensures that resources are allocated toward mitigating risks that could derail your key initiatives.

  1. Perform Scenario Planning

In addition to analyzing current risks, consider potential “what-if” scenarios. This proactive approach can help you prepare for unexpected events.

Don’t Treat Risk Assessments as a Checklist

Risk assessments are not a one-and-done task—they are an ongoing commitment to safeguarding your organization from the unexpected. By adopting a continuous approach to risk management, you can stay ahead of potential challenges, protect your business assets, and build long-term resilience.

At Brady Martz, our experienced professionals can guide you through the risk assessment process, helping you identify vulnerabilities, develop mitigation strategies, and create a proactive plan to keep your business secure. Contact us today to learn how we can help you protect your organization and prepare for the future.

Mitigating Cybersecurity Risks in the Financial Sector: Best Practices for 2025

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As financial institutions continue to digitize their services and offer more online solutions to customers, the risk of cyberattacks and data breaches grows exponentially. With sensitive financial data, personal information, and proprietary business intelligence at stake, cybersecurity remains one of the most critical concerns for the financial industry. In 2025, the threat landscape is expected to become even more complex, with cybercriminals employing increasingly sophisticated methods to exploit vulnerabilities.

At Brady Martz, we understand the complexities of cybersecurity in the financial sector. With services like IT audits, we can help financial institutions assess their systems, identify vulnerabilities, and implement stronger safeguards against potential breaches.

In this article, we’ll explore the cybersecurity risks facing financial institutions in 2025 and provide a comprehensive guide to best practices that will help mitigate those risks and safeguard against potential breaches.

  1. The Growing Cybersecurity Threat Landscape

The financial sector has long been a target for cybercriminals due to the valuable data and financial assets it holds. With the rise of digital banking, cloud services, and mobile payments, these threats have become even more prevalent and sophisticated. In 2025, financial institutions can expect to see an increase in:

  • Ransomware Attacks: Cybercriminals continue to use ransomware to target financial institutions, locking them out of critical systems until a ransom is paid.
  • Phishing and Social Engineering: As the sophistication of phishing schemes increases, attackers are likely to target employees, customers, and partners with deceptive emails or phone calls designed to steal sensitive information.
  • Advanced Persistent Threats (APTs): These ongoing, targeted cyberattacks are designed to infiltrate an institution’s network and remain undetected for extended periods.
  • Insider Threats: Employees with access to sensitive data pose an internal threat, either intentionally or accidentally causing harm.

To combat these risks, financial institutions must be proactive in their approach to cybersecurity, employing a multi-layered defense strategy that includes technological, procedural, and educational measures.

  1. Best Practices for Cybersecurity in 2025

In 2025, financial institutions must adopt a comprehensive cybersecurity strategy to protect their digital infrastructure and maintain customer trust. Here are the best practices to mitigate cybersecurity risks effectively:

  1. Strengthening Identity and Access Management (IAM)

One of the key pillars of a secure financial institution is managing who has access to sensitive systems and data. Implementing robust Identity and Access Management (IAM) controls can help ensure that only authorized individuals have access to critical information.

Best practices for IAM include:

  • Multi-factor Authentication (MFA): Requiring two or more forms of verification (e.g., passwords, biometrics, security tokens) adds an extra layer of security to online transactions and internal systems.
  • Role-Based Access Control (RBAC): Limit employee access to systems based on their role within the organization, ensuring that only those who need access to sensitive data can access it.
  • Regular Access Reviews: Conduct periodic audits to review access permissions, removing or adjusting access for employees who no longer require it.
  1. Investing in Advanced Threat Detection and Prevention Tools

Financial institutions must deploy next-generation threat detection systems to identify and respond to cyber threats in real time. Technologies such as AI-powered security systems and behavioral analytics can help detect unusual network activity or unauthorized access attempts before they escalate into serious breaches.

  1. Educating Employees and Customers on Cyber Hygiene

Human error is one of the most common causes of cybersecurity breaches in financial institutions. Financial organizations should invest in ongoing education for both employees and customers about cybersecurity best practices.

  1. The Role of IT Audits in Enhancing Cybersecurity

Regular IT audits play a critical role in identifying potential vulnerabilities and ensuring that financial institutions remain compliant with evolving cybersecurity regulations. An effective IT audit can assess key areas such as access management, incident response readiness, and data encryption protocols, providing actionable insights to strengthen cybersecurity frameworks.

At Brady Martz, we specialize in IT audits tailored to the unique needs of financial institutions, helping them uncover vulnerabilities and implement solutions to mitigate risks proactively.

  1. Staying Ahead of Cybersecurity Trends

As cyber threats evolve, financial institutions must continuously adapt to emerging trends and technologies. In 2025, cybersecurity trends in the financial sector will likely include:

  • AI and Machine Learning in Cybersecurity: Using AI and machine learning to predict and detect cyber threats faster and more accurately.
  • Zero-Trust Security Models: Adopting zero-trust principles where no user or system is trusted by default, regardless of whether they are inside or outside the network.
  • Cloud Security: Ensuring that cloud infrastructure is secure, as more financial institutions shift to cloud-based services.

Mitigating cybersecurity risks in the financial sector is an ongoing, dynamic challenge that requires vigilance, advanced technology, and a commitment to continuous improvement. By implementing these best practices, financial institutions can better protect themselves from cyber threats in 2025 and beyond, ensuring the security and trust of their customers and maintaining a competitive edge in a rapidly evolving digital landscape.

At Brady Martz, we’re here to support your financial institution’s cybersecurity efforts with IT audits that provide the insights you need to strengthen your systems and safeguard sensitive data. Contact us today to learn how we can help your organization stay ahead of the cybersecurity curve in 2025.

Higher Tariffs Are on the Way – Can Your Company Manage the Damage?

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As U.S. tariffs continue to rise, importers face mounting financial pressure. While these increased duties are designed to promote domestic production, companies with complex global supply chains are experiencing significant cost burdens. With duty rates climbing to 25% or more, many businesses are reassessing their pricing strategies to mitigate the financial impact. This surge in tariffs comes on the heels of recent policy changes and negotiations that could further complicate global trade dynamics.

The situation has grown even more complicated with the U.S. implementing tariffs on China, which had been delayed previously. Initially, there was hope that the tariffs would remain on hold amid ongoing trade negotiations. However, as of this week, the tariffs went into effect, targeting a broad range of goods, including consumer electronics, machinery, and raw materials. In response, China has imposed reciprocal tariffs, further intensifying the cost pressures for businesses engaged in trade with China. The Chinese tariffs are impacting industries such as agriculture, automotive, and technology, creating additional challenges for U.S. companies already facing supply chain disruptions.

In addition to these developments, the U.S. has paused tariffs on Canada and Mexico for 30 days to allow for negotiations, offering a temporary reprieve for businesses that rely on trade with these nations. However, this relief may be short-lived. If negotiations do not lead to a resolution, tariffs on these countries could resume, further escalating costs for businesses. The uncertainty surrounding these tariff negotiations means companies must remain prepared for potential tariff hikes after the 30-day negotiation period ends, and develop contingency plans accordingly.

Customs duties are typically calculated as a percentage of the inventory’s declared transaction value at the border. Historically, with average duty rates of around 2%, many businesses have deprioritized customs costs. However, the recent surge in duty rates has made strategic cost management essential. By reducing the cost of goods sold (COGS) on imported items, companies can achieve substantial savings—for example, a $100 reduction in COGS equates to a $25 savings at a 25% duty rate. Companies must focus on managing their pricing structures more closely and re-evaluating supply chain costs to maintain profitability.

However, businesses must also navigate the conflicting priorities of U.S. Customs and the IRS. Customs authorities scrutinize inventory prices to ensure accurate duty payments, while the IRS often seeks to raise taxable income by increasing intercompany transaction values. This discrepancy can create compliance risks, particularly for companies engaged in transfer pricing adjustments. The recent developments in tariffs only add another layer of complexity, as businesses must now consider the potential future adjustments to the cost of goods, especially with fluctuating duty rates on imports from China, Mexico, and Canada.

To balance these competing regulatory concerns while minimizing costs, businesses can explore strategic reallocation of expenses. Some companies may benefit from shifting a portion of their import costs to non-dutiable service fees and royalties, thereby lowering their customs duty obligations without triggering adverse tax consequences. Proper implementation of these strategies requires adherence to the arm’s length principle under U.S. and global transfer pricing regulations, ensuring compliance with both Customs and IRS requirements.

In addition to reducing duty costs, optimizing customs valuation strategies can improve cash flow, free up capital for reinvestment, and enhance overall operational efficiency. A well-structured approach can help businesses navigate the complexities of rising tariffs while maintaining compliance with tax authorities.

As companies continue to face an unpredictable tariff environment, proactive planning and strategic cost management will be key to navigating these new challenges. For businesses engaged in international trade, staying informed and adjusting strategies as tariffs evolve will be essential to minimizing financial impact.

For a more in-depth look at these tariff mitigation strategies, read the full article here: KBKG | How Companies Can Manage Higher Tariffs That Are on the Way

Organizations Dependent on Federal Funding Need to Consider Options

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REAL ECONOMY BLOG | February 04, 2025

Authored by RSM US LLP

As we have seen recently, federal funding operations and priorities often shift with new administrations or during economic uncertainty. Organizations relying heavily on federal funding are especially vulnerable. In the context of the Trump administration’s recent proposal to pause some categories of federal spending, organizations should consider the following best practices to mitigate liquidity and financial risk due to operational disruptions:

  • Diversify revenue streams, such as seeking other grant or contract opportunities, organizing fundraising events or collaborating with local corporations or nonprofits
  • Maintain clear communication with major supporters and those charged with governance
  • Review reserves on a regular basis
  • Establish a line of credit to cover immediate expenses
  • Develop a contingency plan
  • Monitor cash flow
  • Discuss potential audit implications early with your auditors

Federal agencies are responsible for determining which programs are implicated by executive orders. The only way for a recipient to know for sure that their program is affected is to receive written notice from their agreement officer or grant officer. If organizations receive notice that an award is being suspended, paused or terminated (fully or partially), recipients should consult with legal counsel and advisors.

Here are suggestions to improve the chances of cost recovery if an award is paused:

  • Read any notices of award suspension or pauses carefully for information about costs that will be allowable during the suspension period.
  • Read through award terms and applicable agency supplements to the Uniform Guidance for provisions that address suspensions to pause activities for non-disciplinary reasons. For example, USAID addresses suspensions at 2 CFR 700.14. Other agencies do not address non-disciplinary suspensions in their regulations, and they may or may not include separate award terms for non-disciplinary suspensions or pauses to the award.
  • For pre-pause costs, document allowable award costs incurred before the award was paused, any related in-progress reports or other award deliverables. Attempt to collect for allowable costs incurred prior to the pause.
  • For pause-related costs, separately track costs (e.g., setting up a separate charge code) that are related to the pause (e.g., winddown costs, legal fees), and costs you will continue to incur that are unavoidable or necessary to promptly continue activities if the award is resumed (e.g., lease costs, securing project property). Keep detailed documentation of your efforts to minimize costs during the pause period.
  • Communicate with your grant officer. Acknowledge receipt of the suspension or pause notice and confirm you are halting activities as directed. Explain that certain costs will continue to be incurred and provide estimates and justifications for pause-related costs.

If an award is terminated, here are some best practices to consider:

  • Read through the notice of termination, note the effective date and refer to the process described at 2 CFR 200.340 “Termination.” Also note any applicable agency supplemental regulations and specific award terms addressing the termination process.
  • Document pre-termination costs and in-progress work. Also separately track and document termination-related costs that are incurred to close out the program (e.g., staff time to close out activities, legal costs), including any unavoidable costs (e.g., pre-paid, nonrefundable vendor costs, costs of breaking leases). Be prepared to justify termination-related costs and develop a written request to be reimbursed for these costs.
  • Again, communicate with your grant officer. Acknowledge receipt of the termination notice and confirm you are complying. Explain that certain costs will be incurred to promptly and responsibly close out award activities and provide examples and justifications for termination-related costs. Indicate your intent to submit a request for reimbursement of these allowable termination costs.

Organizations can be ready in the short term for any pauses in funding by creating a plan for how activities can be wound down, which improves the chances of recovering pause-related costs. In the long term, organizations can mitigate the risk of a stoppage from any one funder by diversifying funding streams across multiple donors.

Kristen Blandford contributed to this article.

This article was written by Matt Haggerty, Carla Contreras and originally appeared on 2025-02-04. Reprinted with permission from RSM US LLP.
© 2024 RSM US LLP. All rights reserved. https://realeconomy.rsmus.com/organizations-dependent-on-federal-funding-need-to-consider-options/

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent assurance, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/about for more information regarding RSM US LLP and RSM International.

2025 Forecast: What Financial Institutions Can Expect in the Coming Year

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As we step into 2025, the financial services industry is poised for another year of transformation. With rapid technological advancements, evolving regulatory landscapes, and increasing consumer demands for transparency and sustainability, financial institutions are facing both new challenges and exciting opportunities. To stay competitive and continue driving growth, institutions must adapt to these changes and leverage emerging trends.

Here’s a look at what financial institutions can expect in 2025 and how they can prepare for success in the year ahead:

  1. The Rise of Artificial Intelligence and Automation

Artificial Intelligence (AI) and automation are expected to continue reshaping the financial industry in 2025. Financial institutions are increasingly using AI to streamline processes, enhance customer service, and reduce operational costs. From automated customer service to risk analysis, AI is enhancing efficiencies and providing more personalized services. The continued adoption of AI tools will drive innovation and improve customer experiences, positioning financial institutions for growth.

  1. The Continued Growth of Blockchain Technology

Blockchain technology continues to make significant strides in financial services. In 2025, blockchain will further enhance transaction speed, improve transparency, and reduce fraud. While blockchain is increasingly integrated into cross-border payments, lending, and compliance processes, financial institutions will need to stay aligned with evolving regulations and explore how blockchain can optimize operations and security.

  1. Green Finance and Sustainability

With sustainability becoming a core concern, financial institutions are expected to see more demand for green finance in 2025. Green finance involves investments and projects focused on environmental sustainability, including green bonds and ESG (Environmental, Social, and Governance) funds. Meeting the increasing demand for sustainable investments will not only attract environmentally conscious clients but will also position financial institutions as responsible corporate citizens.

  1. The Evolution of Cybersecurity

As digital banking continues to grow, cybersecurity remains a top priority. Financial institutions will face increasing pressure to protect sensitive client data from rising cyber threats. In 2025, investing in advanced cybersecurity measures such as AI-driven threat detection and multi-factor authentication will be essential to safeguarding customer data and maintaining trust.

  1. Regulatory Changes and Compliance

The regulatory landscape for financial institutions will continue to evolve in 2025, with a focus on transparency, data privacy, and ESG reporting. Financial institutions must remain agile to comply with new regulations, including potential climate-related disclosure requirements. Ensuring strong compliance programs and enhancing reporting capabilities will be critical to avoiding penalties and maintaining industry credibility.

  1. The Rise of Digital Banking and Fintech Partnerships

The digital banking sector will continue to expand as consumers demand more online and mobile banking solutions. Fintech companies, in particular, are disrupting traditional banking models with innovative offerings. Financial institutions that form strategic partnerships with fintech firms will be well-positioned to offer cutting-edge services while reducing operational costs. Expect more collaborations and acquisitions between traditional banks and fintech startups in 2025.

  1. Customer-Centric Banking

In 2025, customer expectations will drive financial institutions to place a greater emphasis on personalized, seamless banking experiences. Using advanced data analytics and AI, financial institutions can create tailored financial solutions that meet individual customer needs, fostering loyalty and differentiation in a competitive market.

  1. The Growing Influence of Digital Currencies and CBDCs

Central Bank Digital Currencies (CBDCs) are expected to make significant strides in 2025. As countries like the U.S. continue exploring the potential for a digital dollar, financial institutions must stay informed and prepared to integrate these new digital currencies into their services as they become more widespread.

Preparing for 2025: Key Takeaways for Financial Institutions

To thrive in 2025, financial institutions must stay ahead of emerging trends, enhance security, and meet the increasing demand for sustainability. By adopting technologies such as AI, blockchain, and cybersecurity, institutions can enhance operations, offer better services, and align with green finance initiatives. Staying prepared for evolving regulations will also be key to maintaining compliance and positioning for long-term success.

At Brady Martz, we understand the challenges and opportunities facing financial institutions in 2025. Our team of experts is here to guide you through these changes and help you navigate the evolving landscape. Whether it’s adopting new technologies, managing regulatory complexities, or exploring sustainable finance options, we’re committed to helping your institution succeed in 2025 and beyond.

 

Business Valuation in 2025: The Hidden ROI of Knowing Your Company’s Worth

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When most business owners think about valuations, they picture the final steps of a sale process—pinpointing a number that helps close a deal. But the truth is, an updated valuation can offer a powerful edge long before you ever decide to sell. Whether you’re growing the business, planning for ownership transitions, or simply striving to make better decisions, having a clear understanding of your company’s worth can unlock surprising benefits.

Below, we explore why valuations matter even (and sometimes especially) when an immediate transaction isn’t on the horizon.

1. Fuel for Strategic Planning and Growth

Why It Matters

  • Identify Profit Drivers: An updated valuation often reveals which products, services, or client segments generate the most value—insights you can double down on to boost profitability.
  • Spot Bottlenecks: The valuation process can unearth inefficiencies in operations, supply chains, or staffing that might otherwise go unnoticed.

How It Helps

Think of a valuation as a “health check” that goes beyond revenue and profit margins. By delving into cash flow patterns, asset utilization, and other operational metrics, you’ll have clearer direction on where to invest or cut back. Over time, these informed decisions can compound, driving sustainable growth and a more resilient business.

2. Stronger Relationships with Lenders and Investors

Why It Matters

  • Clarity Builds Confidence: Banks, private lenders, and potential investors want reassurance that their funds are going into a well-managed enterprise.
  • Better Loan Terms: Demonstrating a thorough, data-driven valuation can help you negotiate more favorable interest rates or credit lines.

How It Helps

If you need funding—whether for new equipment, an expansion, or bridging a slow season—having an updated valuation in your back pocket shows you know your numbers. Lenders appreciate transparent financials, and investors value forward-looking data about growth potential. That trust can translate into smoother financing experiences and stronger negotiation positions.

3. A Roadmap for Succession and Estate Planning

Why It Matters

  • Future-Proofing: Even if you’re not ready to retire, laying the groundwork for succession avoids frantic scrambling when circumstances change.
  • Tax and Gifting Strategies: A well-supported valuation helps clarify how to transfer ownership shares to family members or key employees without triggering unexpected tax consequences.

How It Helps

An up-to-date valuation ensures you have realistic targets in mind for any future transfer—be it to your children, a co-owner, or valued team members. You’ll also gain greater peace of mind knowing your estate plan reflects your business’s true worth, protecting your family’s interests down the line.

4. Clarity for Partner Buy-Ins or Buyouts

Why It Matters

  • Avoiding Disputes: Having an objective figure reduces tension between existing owners and those looking to enter or exit.
  • Aligning on Equity: Knowing your company’s fair market value clarifies what percentage a new owner should receive—and what that stake is truly worth.

How It Helps

Valuation disputes can fracture relationships and stall business momentum. Keeping a current, credible valuation minimizes guesswork and encourages smoother negotiations when partners or key employees want to invest—or when someone needs to step away.

5. Motivating Key Employees with Equity

Why It Matters

  • Retention and Engagement: Offering equity or phantom stock can be a powerful motivator—but only if you know how much that equity is worth.
  • Transparency and Trust: Employees will be more confident in your equity-based incentives if the company’s valuation is grounded in solid financial data.

How It Helps

When top performers see a tangible connection between their efforts and the business’s market value, they’re often more invested in hitting goals. An accurate valuation also helps you fairly structure equity grants without diluting ownership more than you intend.

6. Getting Ahead of Unsolicited Offers

Why It Matters

  • Knowing Your Range: If a buyer suddenly comes knocking, you don’t want to scramble for a rough, potentially understated value.
  • Avoiding Undervaluation: The best opportunities sometimes appear when you least expect them—being unprepared can lead to a rushed conversation and missed upside.

How It Helps

With a current valuation, you can quickly assess whether any unsolicited offers are reasonable or if you should hold out for a stronger deal. This readiness also demonstrates professional management to potential suitors, strengthening your position if negotiations proceed.

7. Bigger Vision for Community Impact

Why It Matters

  • Anchoring Legacy: For many owners, their business is the cornerstone of local economic development, jobs, and charitable donations.
  • Maximizing Local Benefit: A carefully planned strategy—rooted in a realistic valuation—helps ensure you have the resources to give back in meaningful ways.

How It Helps

When you understand the true worth of your company, you can plan philanthropic or community-related initiatives with greater confidence. That might mean earmarking a portion of future profits for local charities or investing in expansions that create more jobs. Either way, the clarity of valuation aids in creating a far-reaching vision.

How Brady Martz Can Help

At Brady Martz, our Valuation, Transaction, & Transformation (VTT) team goes beyond “just the numbers.” We help you understand why your business is valued the way it is—and how you can use that information to make smarter decisions, achieve your personal and financial goals, and strengthen the legacy you’re building.

  • Holistic Valuation Analyses: We don’t do cookie-cutter appraisals; we tailor our approach to your unique operations, industry, and strategic objectives.
  • Future-Focused Insights: In addition to pinpointing your current worth, we highlight growth levers that can elevate your value down the road.
  • Seamless Collaboration: From assisting with bank discussions to estate and succession planning, our integrated services help ensure no opportunity (or risk) is overlooked.

Curious about how a fresh valuation could help your business thrive—even if a sale isn’t on the horizon? Contact the Brady Martz VTT team today. We’ll help you unlock the hidden ROI of knowing your company’s true worth—and set you on a path to greater confidence, clarity, and long-term success.

Preparing to Sell in the New Year: Top Sell-Side Risks — And How to Address Them

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For most business owners, selling a company is a once-in-a-lifetime event—one that can shape retirement plans, family legacies, and the well-being of employees and the local community. Because so much rides on the outcome, it’s crucial to recognize the hidden pitfalls that often reduce a seller’s final proceeds or prolong the deal to everyone’s frustration.

Below, we explore the most common risks from a sell-side perspective, along with general strategies to ensure you enter the new year prepared for a smooth, value-enhancing transaction.

Why Sell-Side Risks Matter So Much

Every misstep in the selling process carries a real cost. If you go into a deal underprepared or lacking clarity around your company’s financials, you might receive a lower offer—or face extended due diligence that saps your time, energy, and leverage. Being aware of these potential pitfalls lets you position your business in the most attractive light and retain control of the process.

Common Pitfalls Sellers Face—And How to Address Them

1. Relying on Irregular or Outdated Financials

  • Why It’s a Problem: Many owners keep close tabs on annual results but don’t consistently track monthly or quarterly trends. When a buyer sees gaps or inconsistencies, they perceive higher risk—and can lower their offer or demand more scrutiny.
  • How to Address It: Work with financial advisors to standardize your reporting. Presenting well-documented, credible statements signals a healthy business and speeds up buyer confidence.

2. Underestimating the Role of a Quality of Earnings (QOE) Analysis

  • Why It’s a Problem: As acquirers grow more sophisticated, many expect a deeper look at revenue streams, customer contracts, and profitability drivers—beyond your standard financial statements. If you don’t prepare for this, you could face last-minute concessions.
  • How to Address It: Consider engaging professionals to conduct or review a QOE analysis on your terms. This proactive approach helps you spot and fix red flags before a buyer uses them to negotiate down the price.

3. Overlooking Working Capital Management

  • Why It’s a Problem: Buyers typically look at historical benchmarks to determine how much cash, inventory, and receivables are necessary to run the business post-sale. If you carry excess inventory or have slow receivables, you might effectively lower the proceeds you take home.
  • How to Address It: Identify ways to optimize inventory levels and improve receivables collection. A leaner working-capital structure often boosts your credibility—and your final payout.

4. Accepting a Single Offer Without Exploring Options

  • Why It’s a Problem: An unsolicited offer can be tempting, but going straight into one-on-one negotiations might mean missing out on stronger bids or better deal structures.
  • How to Address It: Before committing, at least gauge the market’s interest. A quick market test or strategic outreach can confirm whether you’re getting a fair price and terms.

5. Sharing Confidential Information Too Soon

  • Why It’s a Problem: Sellers sometimes provide proprietary data—like detailed customer lists or trade secrets—before nondisclosure agreements or careful buyer vetting are in place.
  • How to Address It: Protect yourself. Work with advisors to set up phased disclosures. An NDA is essential, but also confirm buyers have the financial capacity and genuine intent to proceed before revealing highly sensitive information.

6. Delaying Professional Guidance

  • Why It’s a Problem: By the time you bring in M&A advisors, attorneys, or tax specialists—often after an informal “handshake” deal—you may have already given away negotiating power or overlooked key tax-efficient deal structures.
  • How to Address It: Engage experts early. They can streamline the sale process, optimize deal terms, and let you focus on running your business instead of getting bogged down in technical details.

7. Letting Operations Slip During the Deal

  • Why It’s a Problem: Sellers often get so absorbed in negotiations that they neglect core operations—leading to missed sales or declining performance just when buyers are paying the most attention.
  • How to Address It: Delegate. Let your advisory team handle much of the deal process, and keep your attention on maintaining the business’s growth and profitability. Sustained strong performance only strengthens your negotiating position.

8. Not Maximizing Value for Your Family, Employees, or Community

  • Why It’s a Problem: When sellers don’t capture the full value of the business, that lost equity doesn’t disappear—it simply transfers to the buyer. This can mean fewer resources for personal retirement, community philanthropy, or employee rewards.
  • How to Address It: Recognize the broader impact of your sale price. Engaging professionals to secure a fair—and potentially premium—valuation helps ensure those resources remain with you, your family, or your local community.

9. Accepting Unclear or Prolonged Due Diligence Timelines

  • Why It’s a Problem: Buyers might drag out the due diligence phase, causing “deal fatigue” and creating opportunities to renegotiate. Sellers without proper support may feel compelled to accept these changing terms just to close the deal.
  • How to Address It: A structured, preemptive approach sets fair timelines and expectations. When you prepare documents and data in advance—and have advisors ready to manage buyer requests—you’re less likely to be at the mercy of endless negotiations.

10. Assuming All Buyers Have the Same Post-Sale Objectives

  • Why It’s a Problem: Private equity groups, strategic acquirers, and other buyers each have unique timelines and culture-integration approaches. Treating them as interchangeable can lead to misaligned post-sale expectations for you or your employees.
  • How to Address It: Early in discussions, clarify each buyer’s vision for your company—whether that’s rapid expansion, tighter cost controls, or something else. Aligning with a buyer who shares your values and goals can lead to a smoother transition.

How Brady Martz Can Help

At Brady Martz, our Valuation, Transaction, & Transformation (VTT) team understands that selling your business is about more than just signing on the dotted line; it’s about achieving the right outcome for you, your employees, and your community. We offer:

  • Financial and Operational Readiness Assessments to standardize reporting and optimize working capital.
  • Quality of Earnings Insights that ensure you’re equipped to handle buyer scrutiny.
  • Tailored Deal Structuring to safeguard your interests—legally, financially, and tax-wise.
  • Transaction Management Support so you can keep your attention on running a profitable operation during the sale process.

Interested in learning how to protect your hard-earned value in the new year? Reach out to Brady Martz today. Together, we’ll craft a proactive sell-side strategy that helps you avoid common pitfalls and secure the future you’ve envisioned.

Building the Future: How Succession Planning Sets Your Business Up for Long-Term Success

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For many business owners, “succession planning” sounds like a project for the distant future—until the unexpected happens. Whether you plan to sell to an outside buyer (like a strategic acquirer or private equity group) or transfer ownership internally (via a management buyout, ESOP, or family transition), the best time to start planning is always “as soon as possible.” By mapping out how your business will operate—both with and without you—you can protect its value, minimize disruptions, and create a smoother path for the next generation of leadership.

Below, we explore why succession planning matters, why you should start now, the key components of a strong plan, and how Brady Martz can help guide you through the process.

Why Succession Planning Is Crucial

  1. Safeguards Your Legacy
    You’ve built a thriving organization through years of hard work. A well-thought-out succession plan ensures that your company’s mission, culture, and impact endure—even if circumstances require your sudden departure or retirement.
  2. Maximizes Business Value
    Buyers—whether external or internal—look closely at continuity. If you demonstrate strong leadership development, clean financials, and clear operational processes, you’re far more likely to command a premium price. Even if you opt for an internal transition (e.g., selling to key employees or family), having a solid plan can help preserve and potentially boost enterprise value.
  3. Provides Clarity to Stakeholders
    Uncertainty about who’s in charge can lower morale, sow confusion, or spark disputes—especially in family-owned businesses. A documented succession plan keeps everyone on the same page regarding roles, responsibilities, and future leadership.
  4. Positions You for Strategic Growth
    The process of succession planning often reveals operational gaps and inefficiencies that, once addressed, can significantly increase profitability. Better processes, stronger internal controls, and a focused leadership pipeline make your business more competitive now—long before any ownership change.
  5. Reduces Risk of Disruption
    Life happens—health issues, economic downturns, or unsolicited buyout offers can appear at any time. Having a succession blueprint in place makes it easier to respond calmly and strategically, instead of scrambling under pressure.

Why You Need to Start Now

  1. Longer Runway for Developing Future Leaders
    Whether you’re transitioning to a family member, an ESOP, or a new management team, leadership skills take time to nurture. Identifying and mentoring successors early maximizes their readiness and minimizes transition headaches.
  2. Flexible Options for External or Internal Sales
    If you aim to sell to an external buyer (strategic or private equity), you’ll need well-presented financials and a compelling growth story to achieve the best valuation. If your plan leans toward internal buyers—like employees or family—additional considerations around financing and training come into play. Early planning leaves room for both scenarios to evolve.
  3. Tax and Financial Strategies Require Lead Time
    Techniques to optimize taxes—such as gifting shares or reorganizing your entity structure—often need multiple years to implement effectively. Setting the wheels in motion now ensures you won’t miss out on strategic advantages later.
  4. Smoother Transition for Employees and Customers
    Succession planning is as much about people as it is about profit. Transitioning day-to-day management with minimal turbulence keeps employees engaged and customers confident, safeguarding the relationships you’ve spent years building.

Key Components of a Successful Succession Plan

  1. Clear Ownership Path
    Decide whether you plan to sell externally (strategic buyer, private equity, etc.) or internally (management buyout, ESOP, family transfer). Each path has unique implications for financing, leadership, and ongoing governance.
  2. Accurate Business Valuation
    Establishing a fair market value is critical, whether you’re dealing with outside acquirers or internal shareholders. It also clarifies how much capital a management team, ESOP, or family member needs to secure if they’re the intended buyer.
  3. Formal Agreements (Including Buy-Sell Provisions)
    For multi-owner businesses (e.g., S-corporations with multiple shareholders), a buy-sell agreement is essential to define what happens when someone exits, passes away, or otherwise transitions out. While it may not reduce taxes on its own, it ensures continuity and helps avoid disputes over pricing or ownership stakes.
  4. Leadership Development and Mentoring
    If you’re grooming an internal successor—whether that’s a family member or a key executive—outline the skills and experiences they’ll need, and put a plan in place to get them there. This can include rotating through various departments, shadowing current leadership, or taking on more responsibilities over time.
  5. Tax and Estate Planning
    Succession often intersects with personal financial goals. Consider how estate planning tools and potential entity restructures might align with your transition strategy. By addressing these elements early, you can help protect wealth for you and your heirs while ensuring the business remains stable.
  6. Communication Strategy
    Transparency reduces anxiety and rumors. Be sure to inform key employees, co-owners, and family members of your vision. If you’re selling externally, keeping staff and important customers in the loop (at the right time) helps maintain relationships and operational momentum.

How Brady Martz Can Help

Our Valuation, Transaction, & Transformation (VTT) team at Brady Martz understands that no two succession stories are the same. We offer:

  • Business Valuation Expertise
    We’ll determine your company’s true worth and spotlight areas to boost profitability or reduce risk—making you more attractive to any buyer, external or internal.
  • Tailored Transition Strategies
    Whether you envision selling to a strategic acquirer, private equity, or transferring the reins to a key employee group or family, we’ll help you craft a roadmap that fits your goals, timeline, and financial considerations.
  • Ongoing Advisory for Leadership
    From identifying your future leaders to establishing their training pathways, we’ll work hand-in-hand with you to ensure the right people are in the right roles at the right times.
  • Holistic Tax and Estate Planning
    We’ll partner with you to explore entity structures, gift/estate strategies, and other key elements so that your personal and business objectives remain aligned through the transition.

Ready to chart a sustainable future for your company—on your own terms? Reach out to the team at Brady Martz today, and let’s start building a succession plan that protects your legacy and sets your business on a path to long-term success.

Key Trends in Public Administration for 2025

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As we step into January 2025, government agencies are gearing up for the opportunities and challenges that this new year will bring. With emerging regulations, evolving public expectations, and continued technological advancements, it’s crucial for agencies to remain proactive and stay ahead of the curve. The beginning of the year presents an ideal time to assess current operations, address compliance requirements, and set strategic goals for the future. At Brady Martz, we’re here to help government entities navigate these shifts and lay a strong foundation for success in 2025.

With fiscal year-end approaching for many agencies and critical deadlines looming for financial reporting and grant compliance, now is the time to focus on preparation. Below, we highlight key trends government agencies should be ready for as they enter 2025.

1. Managing 2024 Funding and Grant Compliance

The continued impact of federal funding through programs such as the Infrastructure Investment and Jobs Act (IIJA) and ongoing allocations from pandemic-related relief initiatives will require agencies to ramp up their reporting and compliance efforts early in 2025.

Key Focus Areas: Ensuring accurate tracking and reporting of federal grants, particularly with Single Audit deadlines coming up in the first half of 2025.
Why It Matters: Increased federal oversight requires airtight processes to avoid compliance risks.

How to Prepare:

  • Review your Schedule of Expenditures of Federal Awards (SEFA).
  • Collaborate with auditors to identify and resolve potential compliance gaps before reporting deadlines.

2. GASB Standards Updates Taking Effect in 2025

Government agencies need to stay ahead of updates from the Governmental Accounting Standards Board (GASB). The most impactful updates include:

  • GASB Statement No. 101 – Effective for fiscal years starting after January 1, 2025, this standard addresses compensated absences, requiring improved recognition and measurement of leave liabilities.
  • Implementation of Prior Pronouncements – Agencies finalizing processes for GASB 96 (subscription-based IT agreements) will need to refine reporting and disclosures heading into 2025.

How to Prepare:

  • Review how GASB 101 will impact your current leave accruals and ensure compliance.
  • Evaluate any subscription-based IT arrangements to ensure compliance with GASB 96.

3. Cybersecurity Threats and Federal Requirements

With cyberattacks on government systems increasing, cybersecurity remains a top priority in 2025. Additionally, federal and state mandates are ramping up requirements around cybersecurity protections.

Key Event: The Cybersecurity and Infrastructure Security Agency (CISA) is expected to release additional guidance for state and local agencies in early 2025.
Why It Matters: Agencies managing sensitive data—such as financial records and public services—face significant risks without proactive cybersecurity measures.

How to Prepare:

  • Conduct an end-of-year cybersecurity audit to identify vulnerabilities.
  • Develop a 2025 cybersecurity plan, including updated incident response protocols and employee training.

4. Leveraging AI and Technology for Financial Reporting

In 2024, there was a significant uptick in the adoption of artificial intelligence (AI) and automation tools to streamline public administration tasks. Heading into 2025:

  • AI in Financial Management: Agencies are increasingly using AI to automate budgeting, forecasting, and financial reconciliation processes.
  • Data-Driven Decisions: AI tools will improve the ability to analyze data for better resource allocation and program performance evaluation.

How to Prepare:

  • Explore tools that can automate manual processes in financial reporting to free up staff for higher-level tasks.
  • Invest in training to help teams adapt to and leverage new technologies effectively.

5. Preparing for Workforce Transitions

Many government agencies are facing staffing challenges due to retirements, talent shortages, and evolving workforce expectations. In 2025, agencies will need to prioritize:

  • Succession Planning: Preparing the next generation of leadership to ensure smooth transitions.
  • Recruitment Strategies: Offering competitive salaries, flexible work arrangements, and training opportunities to attract top talent.

How to Prepare:

  • Conduct workforce assessments to identify gaps in leadership and key roles.
  • Create professional development programs to retain and upskill current employees.

6. Increasing Demand for Financial Transparency

Public trust and stakeholder expectations for transparency continue to grow. Heading into 2025, government agencies must:

  • Provide timely and clear reporting on the use of public funds.
  • Implement interactive tools and dashboards that allow constituents to access financial and operational data.

How to Prepare:

  • Update reporting systems to produce clear, user-friendly reports.
  • Collaborate with financial professionals to ensure accuracy and transparency in year-end reporting.

How Brady Martz Can Help

As your trusted advisors, Brady Martz is committed to helping government agencies navigate these key trends and prepare for a successful 2025. Whether you need assistance with year-end audits, GASB compliance, or technology implementation, our Government Niche team has the expertise to provide tailored solutions that ensure accuracy, transparency, and efficiency.

Our Services Include:

  • Audit and Assurance – Ensuring compliance with GASB standards and federal grant requirements.
  • Strategic Consulting – Helping agencies adopt technology, implement cybersecurity measures, and optimize operations.
  • Financial Reporting Support – Assisting with year-end financial statements, SEFA preparation, and transparency initiatives.

Start 2025 Strong with Brady Martz

The new year brings both challenges and opportunities for government agencies. By preparing now, you can ensure your organization is ready to meet deadlines, adopt new standards, and thrive in 2025.

If your agency needs support, contact the Brady Martz Government Niche team today. We’re here to help you stay ahead of the trends and serve your community with confidence.

Contact Us
Visit our Government Services page to learn more about how Brady Martz can help your agency prepare for the future.