7 Things Tax-Savvy Business Owners Should Do Before Year-End

/in /by

StrategyDriven Managing Your Finances ArticleIt’s not too late for you to take steps to minimize your 2018 business taxes!

At the end of the year, many small business owners start looking for ways to lower their business taxes using a TFSA calculator. Although the best tax plans are usually implemented year-round, it’s not too late for you to save in 2018 while you begin to plan for next year.

Here are just a few of the many tax-saving strategies we recommend to our business clients at year-end:

1. Time your income and expenses

Although it is difficult to predict how your business will fare next year, we can review your books and business plan to see whether receipt of income and payment of expenses would benefit you more this year or next. If you have had a great year, you may wish to decrease your revenue by delaying some of your December billings until early January. If you have the cash available, you can also increase your deductions this year by (1) purchasing equipment that you were planning to buy in the near future; (2) stocking up on office supplies and other items that you utilize on a regular basis; and (3) pre-paying your business mortgage, rent, insurance and/or professional subscriptions.

2. Depreciate your new equipment

The Section 179 deduction has been expanded – business are now permitted to take a first year deduction of up to $1 million on purchases of qualified equipment. Above this amount, the deduction is reduced dollar for dollar until it completely phases out at $2.5 million. For equipment expenditures that either don’t qualify under or exceed the limits of Section 179, you can take an immediate first-year deduction of 100% of the adjusted basis of the property under the new bonus depreciation rules. The new law also allows you to take this depreciation allowance for equipment that you purchased second hand – just make sure to put it in service before the end of the year. (Well, if you want to estimate how fast the value of an asset decreases over time, then simple try this smart depreciation calculator that helps to calculate depreciation by using four different methods. This depreciation rate calculator allows you to determine simple, auto, and property depreciation instantly.)

3. Set up a 401(k) plan

You are entitled to a tax credit of up to $500 per year towards the setup and the first three years of administering a company 401(k) plan. You also receive a deduction for all amounts put into the plan, which are tax-deferred until you or your employees withdraw funds.

4. Give bonuses to your staff

You can lower your business taxes and make your employees happy with gifts or bonuses at year-end. Keep in mind that while S Corporations can deduct the full amount, C Corporations can only deduct bonuses to shareholders with a 50% or greater interest in the company. These deductions are not available at all to LCCs, partnerships and sole proprietors.

5. Take all available deductions and write-offs

Remember that pass-through entities such as S Corporations and Partnerships are now able to take a 20% off qualified purchases under Section 199A of the new tax code. Also, don’t forget to take a deduction for business loan interest and to write off bad debts and obsolete equipment!

6. Buy energy-efficient business property

Be good to the environment and yourself (through tax deductions and credits) by purchasing energy-efficient business property, vehicles and equipment.

7. Meet with your tax professional now!

“It is vital that you plan your taxes before the end of the year in order to utilize as many new benefits of the new tax law as you can,” says Moskowitz, “otherwise, you may regret missing a tremendous benefit because you only found out about it after December 31st.”

So before you go any further, check out Simplex Group and find all the tax permits and services that could benefit your business.

About the Author

StrategyDriven Managing Your Finances ArticleSteve Moskowitz founded the full-service tax law firm of Moskowitz, LLP with the firm belief that everyone with the drive and commitment to start and operate a profitable business should not be held back by fear or ignorance of the tax code. In fact, one of the core principles of our firm is that individuals and businesses should learn how to benefit from it.

About Moskwitz, LLP

The tax lawyers and other financial professionals at Moskowitz, LLP offer comprehensive assistance to businesses large and small, including year-end business tax planning services. Located in the heart of the financial district of San Francisco, Moskowitz LLP works with businesses of all sizes. To learn more about Moskowitz, LLP and how we can help you legally save taxes, visit our website at: https://moskowitzllp.com/ or call toll-free at: (888) 829-3325.

It’s Time To Tighten Our Belts : 4 Essential Money Saving Strategies For SMEs

/in /by

StrategyDriven Managing Your Finances Article |Money Management|It's Time To Tighten Our Belts : 4 Essential Money Saving Strategies For SMEsNo matter what your company’s vision and values, proper money management will play a significant role in its success and longevity. Unfortunately, there are so many ways that your business could be hemorrhaging money unnecessarily. The good news is that educating yourself on these issues and their solutions can help your company tighten its belt, and still work effectively and productively.

Check the efficiency of your IT

Few businesses operate without the extensive use of complex IT systems. What that means is if you want to keep outgoing costs low, your system’s performance and network efficiency need to be as refined as possible.

Of course, perfecting your company’s IT system to the point where there is no redundancy is usually a task that is beyond your in house IT support. Fortunately, there are specialist managed It services like
Navious Technologies out there that can help you do just this. Something that means the entire infrastructure of your business will run as efficiently as possible. Therefore thus preventing downtime and saving you valuable business resources.

Cut back on overheads

Another way that your business can significantly reduce its outgoing costs is to cut down the amount you pay for overheads. Of course, traditionally, this was done by using fewer material resources such as paper, office supplies, and even manufacturing supplies.

However, in our connected world, there is an even easier way to drastically reduce overhead costs and its setting to a remote working model. After all, if your employees work from home, a costly premises is no longer needed. Plus, many employees will see this as a benefit as they no longer have to count on money, time, and making a positive difference to the environment. It really is a win-win situation.

Review your purchasing policies

Next, if you want to tighten your company’s belt, be sure to take a long hard look at your purchasing policies. In fact, there are several things you can do here to slash outgoings.

The first is to make sure that instead of buying in dribs and drabs, you stock up on the most used resources in bulk, making sure you buy them when the price is low.

Additionally, making sure you have a good relationship with your suppliers is critical. Then you will be able to negotiate longer payment terms, and bulk discounts, which can make a massive difference to how much you end up paying out.

Automate

You can also make significant savings by choosing to automate many of the tasks your business needs to do in a day. Of course, automation isn’t just about investing in robots for the warehouse or production line. In fact, it can now be put to work in just about any type of business there is.

The reason being that many online tasks can be automated with the right software. Something that means your employees will be free of the mundane and reactive tasks that can damage morale, and that you get to make significant monetary savings as well.

How to Boost Your Profits

/in , /by

StrategyDriven Managing Your Finances ArticleAmerica is built on the spirit of entrepreneurship. There are over 28 million small businesses nationwide, and a further 22 million that are solely operated. That’s a large number of businesses that contribute to the country’s economy. However, the number of businesses that fail within the first four years is a significant 50%, and out of the survivors, only a third will reach a decade.

Running your own business is a challenge no matter what industry you are in or the products and services that you provide, and there is no singular reason for these failure rates.

Common Reasons for Business Failure

Failing to plan

For your business to be a success, you need to make both short and long-term plans. You need to identify your goals and define objectives that will help you reach them, from the next few months through to the following years. Your goals will shape every business decision you make and give you direction. They need to be quantifiable so that you can assess how successful the actions that you take are. This is important; how will you know what is working and what isn’t if you have nothing to measure?

Ignoring customer needs

The customer is always right. That’s a correct statement, surely. Not always, but it has you relate to your customers that will affect the success of your business. In the digital age that we live in, there has never been a better time to truly understand your customers’ and clients’ needs and wants. Always keep an eye on what your customers want and tell you about your business; their perception of your business may be very different from what you intend. They are fickle, and your business needs to be able to respond to emerging trends, feedback and correspondence. It requires flexibility and patience, but if you not only listen but hear to what your customers say, you will reap the rewards.

Lack of profit

Lack of profit is very different to lack of revenue. Your business turnover may be high, but that does not mean that it is a profitable business. For your business to grow, the profit needs to flow. There are several reasons for a lack of profit: poor management decisions, cash flow problems and premature scaling; all can be related back to a failure for adequate planning. Only 40% of small businesses are profitable – the others either break even or lose money. If your business is not making a profit, you need to assess every aspect of your business so that you can identify why you are not.

How to Boost Your Business Profits

The quandary you have is how to generate more sales while reducing your expenditure. While your current efforts have been successful to some extent, you must maximize the opportunity to turn a profit.

Modify your strategy

You need to implement a new strategy to do this. Research online about how other successful businesses in your niche have succeeded. The chances are high that they have switched to a more relationship-based model that uses technology to improve their customer experience and loyalty. Here is an example of how this change in strategy has been used to grow a law form, check it out.

Increase the product selection

To increase sales, identify which products you can cross-sell to existing clients and customers. You already know that they are interested in your niche, but are there other relating products that your customers will buy from elsewhere? An example of this is for a yoga clothing company to sell yoga mats. The key to making this cross-selling strategy work is to comprehensively understand who your current and target customers are. Know what they want and what they need. You can incentivize your customers to buy more from you by offering bundles and discounts.

Review operational procedures

There will always be aspects of your operational functions that can be improved upon. The Japanese word ‘kaizen’ translates as improvement, and is the name given to a strategy that works on the principle that all employees work together to improve process incrementally. Kaizen is a valuable mindset to adopt and can dramatically reduce waste and improve a business’s profitability. It is imperative that you get all staff members on board and seek their feedback on how to improve your business’s function.

For example, a sub-total column on an invoice can help speed up the efficiency of your accounts department; introducing cloud-based technology so that your teams can collaborate easier, or even something as simple as moving the printer’s location to be nearer to the receptionist can help to make working more efficient. Kaizen is not a one-off experience, consistently aim to improve efficiency. Ask your employees for their recommendations and act upon the information that they give you.

Regularly review expenditure

You may just have been focusing on the income and profit columns of your account reports; however, you need to pay equal attention to your costs. Businesses evolve over time, and so you need to make sure that your regular outgoings are still relevant to your business today, and not based on historical data.

Review your running costs and identify areas that you could save money. Rolling contracts are a great way of controlling cash flow as you know how much money is leaving your account and when, but they can also make you complacent to other deals that are currently up for grabs and can save you money.

Are there routine tasks that you can outsource? Or, would it be more cost-effective to hire someone on a part-time or freelance basis to complete jobs that you currently pay for a full-time member of staff or do yourself? Outsourcing can be a great solution to boosting efficiency and profits; you only pay for the project that you need completing.

You should also review your suppliers. There may be better market deals that you can access that may not have been available when you started out. It can be risky, as there is potential to damage the relationship you have with your current supplier, but it is worth opening the conversation up, just tread carefully.

While it can seem daunting to undertake such a thorough review of your business, it is critical for your business to be a success. You need to adjust your business to the changing times and embrace technology to help your customer’s user experience and increase the efficiency of your organization.

How You Can Avoid Bankruptcy as a Business

/in /by

StrategyDriven Managing Your Finances ArticleOne of the worst nightmares for any business owner is their business becoming bankrupt. While some companies have been able to rise from the dust in such instances, this isn’t the fate for many. In this case, it’s safe to say that if you can, avoid getting to the point of bankruptcy in the first place, you should. However, this means paying close attention to your business’ finances by budgeting and closely watching your expenditures.

In case you’re wondering what steps you need to take to avoid such from happening to you, you’re going to find a few essential ideas you can try below.

Get a Qualified Accountant

One of the first ways to avoid bankruptcy as a business is to invest in a qualified accountant. Seeing as they have experience and the required knowledge when it comes to finances, they’re in the best position to help you avoid major money mistakes and keep your books in order. When you’re looking for an accountant, be sure to look for someone who has experience working in your sector if possible. They should also be certified as you’re entrusting your business’ finances into their hands. In addition to this, other general qualities to look out for are someone who is detail oriented enough to pick up on irregularities and mistakes as well as an accountant that is trustworthy.

Get a Mobile Office

If a physical office isn’t an absolute necessity, why not get a mobile one? Doing so should help you keep expenses to a minimum and free up your finances. Renting out an office space can be incredibly expensive, especially if it’s in the city center or a mainstream area. However, by getting a mobile office, you can reduce that cost as well as move your office just about anywhere you want to! If you’ve never heard of them before, they can be used as alternatives for conventional office spaces, as conference rooms, or as a training facility. If you want to save even more, this company has used construction office trailers you could consider.

Manage Your Debt

One of the most common causes of bankruptcy is debt. Businesses often need to borrow for a variety of reasons, such as to give their business a push or to help expand operations. However, when debt spirals out of control, it can be extremely damaging for a business. Keep track of the institutions that you’re owing and try to pay off your debts as quickly as possible. Also, before taking out any loans, make sure you’re getting a fair deal in terms of interest and repayments. Nevertheless, debt can help to jumpstart your business when its used and managed in the right way. Some of the ways it can include tax deductions in some cases, faster growth, and better credit if you’re consistent with repayments.

Lower Expenditures

When it comes to bankruptcy, one of the biggest culprits is probably unnecessary expenses. There are so many things that you may feel you need as a business that ends up being entirely unnecessary. Have a look through your outgoings for the past three months and make a note of what you’re spending on. Identify any patterns, such as spending too much on work lunches, high travel expenses or anything that can’t be accounted for. There will be things that aren’t essential to business growth like cable TV, for example. Other practical ways to cut business expenses is by reducing office supply expenses, looking for ways to save on insurance, and doing in-house marketing to mitigate costs. The point is to be as frugal as possible so that you can save money and avoid hitting rock bottom.

Separate Accounts

You’d be surprised at the number of businesses that go under because of a failure of owners to separate accounts. When you’re depositing and withdrawing from a business account for both business and personal reasons, it can throw your finances off course and make it difficult to see how your business is growing. The easiest way to avoid this is to make sure your personal account is entirely separate from the business one. Once you pay yourself a salary every month, there should be no reason to dabble into business funds. Also, by getting your business a separate credit card, it should ensure that any small or miscellaneous purchases you make for the company are easily accounted for.

Consolidate Loans

In addition to the mentioned, you should think about consolidating your loans. Managing your debt adequately is imperative if you want your business finances to remain healthy. If at any point, you notice that your repayments are becoming overwhelming and you want to reduce the amount you’re paying, why not try and see whether you can consolidate your loans meaning you take out a new loan to pay off liabilities and consumer debts on more favorable terms. Although paying smaller amounts means it will take you longer to repay, it frees up your finances so that you can use them for operations or to expand your business and increase revenue. In some instances, you could even get lower interest rates.

Revisit Your Budget

When trying to avoid debt, it always boils down to one thing which is your budget. See how you can improve this so that you’re genuinely saving all that you can and financially managing your business in the best way possible. There’s always room for improvement and an opportunity to ensure your finances are improving as opposed to declining. You can do a regular audit as well as occasionally shop around to see if there are cheaper alternatives to all of your expenses. Ultimately, always think about every expense carefully and how it could impact your business.

Conclusion

Bankruptcy doesn’t have to be something your business experiences if you learn to be frugal as a business and budget. Your focus should be on raking in steady income and new business as opposed to unnecessary spending. When you’re able to do this, you should find that you’re moving forward and growing financially as a business.

8 Steps to Building Your Business Credit

/in /by

StrategyDriven Managing Your Finances ArticleOne of the biggest issues facing small and medium businesses is financing. And the ability to secure finance is often directly related to the business’s credit score. But it’s often a challenge for small businesses to establish their credit when they have nothing to show for it. However, there are some things any new small business owner can do to boost their credit and get access to more financing options. Here are the exact steps you should follow to boost your business’s credit score.

Know the Basics

If you want to build your business’s credit, you first have to understand how it works. While consumer credit scores are usually rated on a scale of 300 to 850, business credit scores are usually rated from 0 to 100. A variety of other indicators are also used to calculate business credit scores, like Fico’s rating service for small businesses (SBSS), which rates business credit on a different scale.

You should also know that each of the main credit bureaus for businesses, Dun & Bradstreet, Experian and Equifax, all have their own set of criteria when scoring a business’s credit. However, for the most part, they will all look at things like credit obligation data, how much outstanding debt you have with lenders and supplier, your total credit utilization, background info on your company, such as what sector you operate in and how long you’ve been in business, and various other factors.

While having no history can make getting credit more difficult, it’s also the perfect place to start since you have no blemishes on your record yet, which allows you to start building your credit on solid grounds.

In 2019, it becomes very hard to understand the credit score world, if you want to read more about credit score and basics, check out this guide from the experts of Finimpact.

Make Sure That Your Finances are Separated

If your business happens to be incorporated, keeping finances separate will be easy. But if you’re a sole proprietor, you have to make sure that you completely separate your finances and that you keep your personal transactions and business transactions separate at all times. This means opening a bank account and getting a business credit card as well.

When choosing a business credit card, make sure that you pick one with perks that will benefit you in your line of business. For instance, if you spend a lot on wireless phone service, there are business credit cards that will give you bonus cash back on wireless spending. It would also be wise to check reviews of business credit cards Canada so you can compare things like APR and rewards as well.

Keeping your finances separate will ensure that bad personal spending habits and debt do not end up affecting your business credit score and vice versa.

Get a DUNS Number

Dun & Bradstreet is a major credit bureau recognized worldwide and can play a vital role in helping you establish your business’s credit. You can also use your DUNS number to bid on a variety of government contracts.

Once you get your DUNS number, they will open your business’s credit profile using that number. It will help them track your vendor and lender relationships to get a clearer picture of your business’s financial stability and assess your creditworthiness.

Open Multiple Credit Accounts

Getting a business credit card and bank account is only the first step. Now, you should try opening more credit lines to help you establish your credit. These accounts will allow you to show that you are a trustworthy borrower. But you have to have discipline and use them correctly, however. Making one-time payments will help credit bureaus keep a track record of your financial activity and stability and adjust your score accordingly.

Some examples of accounts you could open include gas cards, store accounts, and lines of credit. Not enough small businesses open a line of credit, but it’s an important step for any business trying to establish their credit.

Choose Vocal Vendors

While you want to flex and use that credit, it’s essential that you spend money with vendors that will actually be reporting your activity to credit bureaus. You have to make sure that you spend your money with vendors who have an actual reporting strategy in place. If you aren’t sure, just ask them. If they don’t have one, then you should consider spending your money somewhere else.

Be Responsible

This should be common sense but make sure that you pay your bills on time is essential if you want to establish a strong credit score. And while paying on time is good, paying early is even better. Some indicators will only give you a perfect score if you consistently pay early, so do everything in your power to pay your bills as soon as possible if you can.

Make Sure You Check Your Reports Often

You’d be surprised at how many people got credit rejected because of false information on their credit reports. Maybe it’s an outstanding bill that they paid but didn’t show. Or an account that was closed that still shows as active. These are all things that could affect your credit negatively and that you must address immediately. All you need to do is request a copy of your credit report and look for any inconsistencies. If you see any, credit bureaus will have a clear and easy to set of procedures you can take to correct errors.

Use Your Credit

Credit utilization is an important factor when credit bureaus assess your credit score. So, it’s important that you actually use your credit and don’t leave your credit lines sitting there without using them. This is why you should start using them as soon as possible, but make sure that you don’t max them out. As a rule of thumb, you should aim for about a 20 to 30 percent utilization rate.

Conclusion

Building your credit as a small business is possible if you take the proper steps and maintain good habits. Make sure that you follow the tips in this article if you want to start building your business credit the right way.