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Volume 7, Issue 2: March - April 2012

Accrual vs. Cash Accounting

Selecting a record-keeping method is an important decision for many businesses. Whether you choose cash or an accrual method depends on many things such as business type, future expansion, and accountability to third parties, like lenders or shareholders. Below are some basic definitions of each method to help you decipher the difference.

Accrual Accounting
Accrual accounting is more widely used and is the basis for generally accepted accounting principles (GAAP), serving businesses of all sizes and complexities. Accrual systems measure income when it is earned and expenses when they are incurred without regard to the receipt or disbursement of payments.

Cash Accounting
Cash-based accounting is often used by business owners who have no employees or inventory. A cash-based system may seem easier to maintain because all accounting events are tracked by the flow of cash in and out of the business. It’s essentially a checkbook. When an expense is paid, it is recorded. Similarly, income is not recorded until it is actually received, which offers tax advantages by pushing off end-of-year income to the following year.

Some of the greatest differences in the two systems show up in reporting inventory. In a true cash-based system, the cost of buying inventory would come in one period that could be many months, or even years, away from when its sale produces revenue. Because the timing of the revenue receipt is not matched with that of the cost of goods sold, it’s difficult to determine whether the ultimate sale produced a gain or a loss for the company. In the near term, the company would have significant tax losses that become overstated when the inventory is purchased.

When starting up a new business or changing your accounting method we recommend you consult a local certificated public accountant for guidance on what is best for your business.

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Are You Giving Your Uncle an Interest Free Loan?

Receiving a refund check from the IRS is like getting money you didn’t have to work for — the check just appears in your mailbox after you file your income-tax return. Perhaps you’ve come to think of it as your annual bonus from the government.

Here’s another way of looking at it: Receiving a refund means you overpaid your taxes and provided an interest-free loan to Uncle Sam. That money could have been invested throughout the year to generate income. For example, suppose you’ve been receiving a $12,000 annual refund for the past 10 years. If you had invested that $1,000 a month in a fund earning 8% a year (compounded monthly), you would have about $183,000 after 10 years — $9,000 more than if you had invested your refund each year as a lump sum.

Remember, it’s up to you to change your withholding allowances or estimated tax payments as your tax circumstances change. If you get married, have children, or purchase a home, you may want to make an adjustment in your withholding to better reflect your particular situation. Simply ask your employer to change the amount you have withheld from your paycheck. And, if you pay quarterly estimated taxes, review your income and deductions annually to determine the appropriate amounts to pay.

For more information about tax planning or wealth management strategies designed for the different stages of your life, visit our financial resource center.

2012 Business Academy Classes - Disaster Recovery Lunch and Learn

Any disruption in your business is unwelcome, but a major issue can be catastrophic and even end your enterprise. How do you survive such a significant event? You need to plan for it, know what to do when it happens, and train your employees to respond appropriately.

Join us for a lunch and learn session featuring Jami Haberl of the Safeguard Iowa Partnership and Jay Allpress, Information Security Officer at Hills Bank, as they discuss why and how to create an effective disaster recovery plan. Together they will share resources to help you build a disaster resolution, providing guidance regarding several options, and provide a comprehensive list of contacts.

Thursday, March 22, 2012
12:00 - 1:30 pm
Hills Bank and Trust Company
590 W Forevergreen Road, North Liberty

Email Carrie Ebel at or call 319-358-2272 to RSVP. This free lunch and seminar is provided by Hills Bank and the Safeguard Iowa Partnership.

Non-Profit Seminar – Advising, Accounting and Ethical Considerations for Your Non-Profit

Together the Association of Fundraising Professionals (AFP) Eastern Iowa Chapter and Hills Bank present educational programing for local non-profit organizations. A panel discussion will provide information and answer questions on topics including accounting, financial and ethical considerations facing non-profits. Panelists include Adam Reisch from Honkamp Krueger, Mark Ahlers from Hills Bank, and Paul Morf from Simmons Perrine.

Wednesday, March 21, 2012
11:30 am - 1:00 pm
Hills Bank and Trust Company
3905 Blairs Ferry Rd NE, Cedar Rapids

Email Carrie Ebel at or call 319-358-2272 to RSVP. This free lunch and seminar is provided by Hills Bank and the Association of Fundraising Professionals (AFP) Eastern Iowa Chapter.

Celebrate Spring and Agriculture

This month Hills Bank is celebrating spring and our agricultural heritage by hatching baby chicks. The hatching of our chicks represents the anticipation of new life and all of the good things that agriculture production provides us. Life’s new beginnings each spring portray Mother Nature at her best. The eggs are currently incubating and set to hatch the week of March 19th. Stop by your local Hills Bank location now to view a unique agriculture display and visit the chicks!

Barnyard Day at Hills Bank

Hills Bank invites you and your family to Barnyard Day at our Coralville, Cedar Rapids Blairs Ferry Road, and Mount Vernon locations on Saturday, March 24th from 9:00 - 11:00 am. You'll see many different animals and maybe even pet a few!

Ask the Expert

Q. My accountant requested copies of all my bank statements and current loan balances. I was able to gather them but is there an easier way to do this for next year?

A. If you are a Hills Bank and Trust Company customer, accountants can access your financial information through Hills Bank Online, with your permission. The accounts are view only and are accessible 24 hours a day, 7 days a week. Simply contact your local Hills Bank and complete an application granting your accountant access to view your accounts online. Information that can be viewed includes:

  • Checking, savings, and money market account balances
  • Account statements for the past 12 months
  • 90 days of check and deposit image history
  • Current loan balances
  • Complete loan history with breakdown of principal and interest payments, and total interest paid
  • Certificates of Deposit (CDs)
  • ACH Origination for direct deposit of payroll
  • Initiate Positive Pay/ARP files

If you would like more information on Hills Bank Online Business Connections, please contact your local Hills Bank location or call us at 319-679-5500 for the Iowa City area, 319-654-8100 for the Cedar Rapids area, or toll free at 1-800-445-5725 and ask to speak to a Commercial Deposits Representative.

Gife your business a LIFT with a business loan from Hills Bank. Contact your Commercial Banking Officer for more information.  Click to learn more!

10 Second Tip

Administrative Professionals Week
This year marks the 60th anniversary of Administrative Professionals Week, which was created to call attention to the important workplace role of administrative professionals. Don't forget to recognize the administrative professionals in your business the week of April 22nd and on Administrative Professionals Day, April 25th.

Hills Happenings

North Liberty Forevergreen Open House

Please stop by our new North Liberty Forevergreen location (on the corner of Hwy 965 and Forevergreen Road) to see our new office and visit with our staff during our grand opening celebration April 16th-21st. The two-story location houses our Trust and Wealth Management Department* and also provides retail, commercial, and real estate services.

*Non-deposit investment products are not FDIC insured, carry no bank guarantee, and may lose value.

University of Iowa Locations

Hills Bank and Trust Company has been selected by the University of Iowa as the new campus financial services provider. This contract provides two campus bank locations – one at the Iowa Memorial Union, which is now open, and one at the University of Iowa Hospitals and Clinics, which opens on Tuesday, March 20th.

In addition to the new offices, Hills Bank will provide more than 20 ATMs on campus, which will be installed over the next several months.

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