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To succeed in business, have a plan

Wednesday, December 28th, 2011

Taking a trip without a map may get you lost, and trying to run a business without a plan is likely to have the same result.

A business plan is a map, your company’s written guide into the future. Not only does a good plan let you know where you are and where you’re headed, it provides potential lenders and investors with a portrait of your company.

Each plan will differ, but certain items are essential.

* First, you must define your market niche and identify the competition. How does your product or service differ from theirs?

* Next, determine your product and delivery costs; then look at your product pricing.

* Do you need new equipment or skills to compete now and in the future?

* What is your marketing scheme?

* How will you get the capital you need for your plans?

* Examine your key operating ratios, and determine projected profits for years covered by the plan.

Most business plans fail because they lack detail. A well-developed plan gives a new company immediate respect in the eyes of lenders, not only because it shows you to be thorough and far-sighted, but because lenders rarely see good business plans.

Wayne Gretzky, when asked the reason for his success said, “Some people skate to where the puck is. I skate to where the puck is going to be.” A good plan should help you do the same for your business.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

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Five Year-End Tax Tips

Tuesday, December 20th, 2011

* Early this month check the amount of 2011 tax you have prepaid through withholding and quarterly estimates. If you’ve underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent your being charged underpayment penalties for 2011.

* Avoid the marriage penalty. If a wedding or divorce is in your plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes. Even though recent tax laws provided some relief from the marriage penalty, they did not eliminate it.

* Plan for losses. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

* Use this year’s annual gift tax exclusion. If you make annual gifts to family members or others, make sure you complete your gifts for 2011 by December 31.

* Squeeze in planned equipment purchases before December 31. Taxpayers must usually deduct the cost of business property over several years. A special election allows taxpayers to expense up to $500,000 of new and used property purchased and put into service in 2011. Also check into the 100% bonus depreciation allowance for new equipment purchases.

Property such as machinery, equipment, and furnishings qualify. Be careful with special rules that apply to automobiles and personal computers.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Bookkeeping, Business Tax Issues, Individual Tax Issues, Tax Updates | No Comments »

Sticking to the rules when making charitable contributions can save tax dollars. Here are three tips.

Monday, November 14th, 2011

* Recordkeeping is vital if you want to be able to deduct a contribution to charity.

What records do you need? For starters, to claim an itemized deduction, you’re required to have support for all cash contributions, no matter what the amount. A bank statement, a copy of the cancelled check, or a credit card record will usually suffice for donations under $250. For donations of $250 or more, a statement from the charity is required, giving the charity’s name, the date, the amount of your donation, and the value of goods and services received for the donation, if any. In the case of payroll donations, your pay stub or W-2 can back up your deduction.

The substantiation rules for noncash donations such as household items differ depending on the type of property and its value. For instance, you’ll need a contemporaneous written acknowledgment from the charity for donations of $250 or more. As a general rule, “contemporaneous” means you receive the acknowledgment before you file your return or before the due date of your return, whichever is earlier.

* Make a gift from your IRA. The break allowing a transfer of up to $100,000 from your IRA to a qualified charity is available for 2011. To benefit, you must be over age 70½, and the contribution has to be a direct payment from your IRA to the charitable organization.

* Write down your vehicle mileage for charitable driving. Written records rule, whether you claim the standard mileage deduction of 14¢ a mile or actual expenses. Make sure your log or other paperwork includes the name of the charity, the date, and the miles you drove or the total cost you incurred.

Please call for advice on getting the most benefit from your donations, including appreciated property and out-of-pocket expenses.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Accounting, Bookkeeping, Individual Tax Issues, Tax Preparation, Tax Updates | No Comments »

Employee theft happens more frequently than you hear or read about. It’s believed that only a small percentage of cases of employee dishonesty are reported and prosecuted. Read more.

Wednesday, November 9th, 2011

Employee theft happens more frequently than you hear or read about. It’s believed that only a small percentage of cases of employee dishonesty are reported and prosecuted. Too often, the employee is just dismissed and moves on to steal from someone else. In other cases, especially where financial controls are weak, the employee may steal small amounts for years without being detected.

There are many things you can do to spot employee theft in your business. Have an inquiring mind, ask lots of questions, and never accept answers that don’t make sense. Spend time each month monitoring your financial results. Look for inconsistencies, such as inventory declining in a slow sales month or excessive customer returns. Listen to customer complaints about late deliveries or missing items, and don’t accept “computer problems” as an excuse. If you know your business, you don’t have to be an accounting expert to sense when something is wrong.

You could also spot-check your accounting records by reviewing one category each month. For example, you might scan the check register to see just what payments are being made. Look for missing check numbers and ask to see any voided checks. Another month you might review the payroll log or look over the records of returned items. Look for multiple entries of similar items or suspicious customer names.

Finally, watch your employees for changes in behavior or spending that seems to be beyond their means. And beware of an employee who insists on doing all the detail work and never takes a vacation. It could be the sign of someone with something to hide.

For assistance with this or any business problem, contact our office.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

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