by Stephen Reed | Business Consulting, News, Professional Services
Experiencing business growth is always exciting for an entrepreneur, but periods of growth aren’t always continuous given that every business has ups and downs. Implement growth strategies with the tips below to help your business become more sustainably profitable over time.
Define the Purpose of Your Business
A clear purpose propels growth, profit, and sustainable success, but business owners must regularly review their objectives to be sure that they’re still serving the company in an authentic way. Does your purpose still prompt strong engagement within the company as well as with clients? Does it still lend itself to focus, drive, and innovation? A genuine and straightforward vision helps both entrepreneurs and team members to create valuable and original products and services.
Maximize Operational Efficiency
Delegate, delegate, delegate. Transferring tasks and projects to qualified employees saves you time by removing the burden of smaller duties from your proverbial plate, which allows you to focus on larger aspects of running a business. Relinquishing some of this control also allows you to move into a business leadership and visionary position at a macro level rather than spinning your wheels at the micro level just to keep the business afloat.
Build Your Brand
Your business can grow by leaps and bounds when you develop a reputable and reliable brand. A well-considered brand will help you stand out among competitors and stay fresh in the minds of both new and potential customers. However much of your budget you can allot to marketing, make sure you pin point your target audience, connect with your audience in an authentic way, and keep your messaging concise, simple, and inspiring.
Cultivate Customer Loyalty
A vital factor of business growth and sustainability is your company’s ability to keep repeat customers. Not only does establishing client loyalty help to bolster sales, it also spurs word-of-mouth testimonies that will bring in more business. Be sure to implement expectations within your hiring, training, and review processes that will strengthen your company’s relationship with customers. Keeping in touch with clients and asking their opinions will also help to ensure repeat business.
Be Attentive to Budgeting
Maintaining a budget keeps unnecessary expenses at bay and necessary expenses within financial means. Additionally, acute awareness of your company’s funds means that you know how much can be spent on marketing, technology, new product, new hires, etc. in any quarter or season. Let your budget slip and you risk delving into debt, which will only slow the long-term growth of your business.
Embrace Change
Businesses can grow under the guidance of flexible and adaptive leaders who are willing to embrace new methods and processes, new technology, new industry standards, etc. All businesses unavoidably experience seasons of growing pains, but how you as an entrepreneur approach those seasons makes all the difference. You can continue to do the things the way you’ve always done them and risk a stagnant business, or you can embrace change and move your business forward.
by Stephen Reed | Business Consulting, News, Resources, Tax
Failure is a very real possibility for small businesses. It’s a reality that will test your resolve as a business owner as well as the durability of your business strategy. When giving up feels like the only option, here are some tips to turn a sinking ship around.
Network
Connect with other business owners, influential people in your industry, and even professional business consultants. The chances are highly likely that you’re not the first business owner to be going through this phase. Be willing to ask questions and be open to new ideas.
Execute A Strategy
Do you have a clear vision of your overall strategy and the bigger picture for your business? If not, consider working with a professional marketing agency or consultant to help develop an effective plan to nurture client relationships and keep customers engaged in the long game, which will translate to consistent sales.
Invest in Employee Trust and Motivation
You wouldn’t have made it this far without significant contribution from your team, but be sure all employees are on the same page. Do they understand your business model and long-term goals? Are their contributions and talents valued? A dedicated and active team will build company morale and translate to better sales, better products, and better output.
Know Your Client Base
Business survival is dependent upon fulfilling customer needs and expectations, so it’s important to always be in tune to the pulse of industry current events, news, products, advertising trends, and overall awareness. Likewise, it’s crucial to keep your ears open to customer engagement, feedback, and satisfaction. Partake in market surveys, meet the customers you’re serving, have one-on-one meetings with clients, and invest in low-cost advertising methods.
Realize the Potential of Your Assets
If you find your business in dire circumstances, relief may come in the form of your company’s assets, which are meant to supply capital for your business. Trading assets might just prove to be the lifeline you need to keep from going under. For example, you can lease out buildings, office space, or machinery for a generous stipend. If at all possible, negotiate a rental or leasing arrangement rather than sell completely. However, if you’re convinced that selling is the right move for you, strive to maintain some proprietary rights in the property.
Go Back to the Drawing Board
Try to determine where things went awry in your business. If you collect data and monitor negative feedback, the trends will give you a clue. Start asking difficult questions about salaries, the amount of staff you’re employing, and compensation packages. What additional cost-cutting actions can you take?
by Jean Miller | Accounting News, Bookkeeping, Business Consulting, COVID-19, News, Resources, Tax
Congress passed the Paycheck Protection Program Flexibility Act (PPPFA) on June 5, 2020, amending several provisions in the original PPP loan program. Along with granting business owners more flexibility and time to spend the PPP loan proceeds, the Act permits funds to be used on a wider-ranging variety of expenses while still allowing for loan forgiveness. Here is how this will affect businesses moving forward with a PPP loan.
Extended Covered Period
Originally, borrowers had 8 weeks from the receipt of loan proceeds to spend funds on forgivable expenditures. Now the covered period specifies 24 weeks after the origination of the loan, or December 31, 2020, whichever is sooner. To qualify for forgiveness, however, borrowers must maintain payroll levels for the full 24-week period. Borrowers do have the option to stick with the 8-week deadline, and they must likewise maintain payroll levels through the full 8 weeks to qualify for the full loan forgiveness amount.
Additional extensions include the timeline for eliminating reductions in workforce and wages, as well as restoring workforce levels and wages to pre-pandemic levels required for loan forgiveness (both extended to December 31, 2020).
Changes to Percentage of Payroll Costs
The PPPFA reduced the payroll expense requirement from 75% to 60%, which means that 40% of the PPP loan funds may now be put towards forgivable non-payroll expenses such as mortgage interest, rent, and utilities. Note that the expenses originally designated as forgivable have not changed.
Changes to Repayment Period
For borrowers whose loans are not forgiven, the PPPFA increases the repayment timeline from two years to five years. The 1% interest rate remains the same.
Changes to Rehiring Requirements
The PPPFA also extends the rehire date to December 31, 2020 and allows for a reduced headcount. Rather than basing loan forgiveness on a borrower’s ability to rehire the same number of employees on payroll as was used to calculate the loan, the PPPFA allows for loan forgiveness amount to be determined by documentation showing that the borrower was (1) not able to rehire former employees and unable to hire similarly qualified employees, or (2) not able to return to pre-pandemic levels of business activity in response to federal guidelines related to COVID-19.
Changes to Payroll Tax Deferment
The CARES Act originally prevented borrowers who received PPP loan funding from deferring additional payroll tax once the lender decided to forgive the loan, but the PPPFA eliminates this restriction, and borrowers can now defer the payroll tax for the period from March 27 to December 31, 2020.
Overall, the PPPFA will ease the burdens of businesses that received PPP loans, but it doesn’t fix everything or answer all the questions, so expect more regulations and changes to the PPP program in the near future.
by Stephen Reed | Accounting News, Business Consulting, COVID-19, CPA, IRS, News, Professional Services, Retail & Distribution, Tax Consulting
On March 27 the CARES Act was signed into law in response to the COVID-19 pandemic. Below is an overview of the types of assistance available to small businesses in an effort to lessen some of the economic impact.
Paycheck Protection Program (PPP) Loan
This is a $350 billion loan program that will provide loans to small businesses for 2.5 times the average monthly payroll based on payroll reports from the previous year, with a cap of $10 million.
The interest rate for the Payment Protection Plan is 1%, and loan payments for any non-forgivable parts will be deferred for six months. The loan can become forgivable if funds are used for approved expenses: payroll costs, including continuation of health care benefits during periods of paid sick, medical, or family leave; insurance premiums; employee salaries and commissions; payments of interest on any mortgage obligation, rent, and utilities; and interest on any other debt obligation incurred before February 15, 2020. No more than 25% of the loan forgiveness can be related to non-payroll costs, and the amount of the loan available for forgiveness will be reduced if full-time employee count, salaries, or wages decrease.
Businesses and charitable nonprofits with fewer than 500 employees, self-employed individuals, sole proprietors, and independent contractors are eligible. There may be some exception to larger restaurant and hospitality businesses who have less than 500 employees per location.
Emergency Economic Injury Grants
Small businesses, private nonprofits, sole proprietors, and independent contractors who were in operation as of January 31, 2020 are also eligible for $10,000 of SBA economic injury disaster loans (EIDLs) without a repayment requirement. These loans can be used to pay for expenses such as payroll, paid sick leave to employees, production costs, as well as business debts, rent, and mortgage payments. However, using these funds to refinance pre-existing debt or to pay dividends in not permitted. The deadline to apply for an EIDL is December 16, 2020 for most states.
Debt Relief for SBA Borrowers
Included in the stimulus package is $17 billion for immediate relief to small businesses through standard SBA 7(a), 504, or microloans, which covers loan payments for existing SBA borrowers for six months. This includes principal, interest, and fees. This relief is also offered to new borrowers who take out an SBA loan within six months after March 27, 2020.
Employee Retention Credit
For employers whose businesses were fully or partially suspended as a result of COVID-19, the CARES Act specifies a refundable payroll tax credit for 50% of wages paid by employers during the pandemic. This also applies to business owners whose gross receipts declined by more than 50% when measured against the same quarter in 2019. Qualified employers with 100 employees or less are entitled to the credit, whether business is open or subject to a shut-down order. However, employers with greater than 100 employees qualify for the credit based on wages paid to employees while business is halted due to COVID 19-related circumstances.
by Pete McAllister | Accounting News, Business Consulting, News, Resources, Tax, Tax Consulting, Tax Planning
Entrepreneurs are tasked with not only managing their business finances, but their personal finances as well, and when needs, circumstances, and priorities don’t align with the two, managing it all can feel overwhelming. To keep personal finances from getting pushed to the side, below are some tips to help you handle your own money while overseeing your business’s.
Plan for Rainy Days
Building an emergency fund for rainy days is not novel advice, but business owners might want to stash away even more than the recommended three to six months’ worth of living expenses. Are you prepared for circumstances like irregular fluctuations in cash flow, loss of a major client, or a national pandemic? Keep in mind that the purpose of an emergency fund is not to earn a big yield on this money but to be sure it’s there and accessible, so keep it in an FDIC-insured cash bank account.
Separate Business and Personal Finances
When you first start a business, open a business bank account and apply for a business credit card for business expenses. In addition to helping you build business credit, this will streamline your tax prep during tax season, lend more credibility to your business as an actual business, remove personal liability in case of adversity, and eliminate the burden of your business’s financials from your personal accounts.
Automate Bill Payment Schedules
A common personal financial tip is to automate your bill payment schedule, so consider carrying this practice over to your business finances as well. This will hep to prevent you from getting overwhelmed with both personal and business bills, thereby avoiding late payment fees and knocks to your credit score.
Manage Your Personal Credit
You know how crucial good credit is for your business, so it makes sense to keep your personal credit in check as well. Be sure to pay bills on time even if there are months when you can only make the minimum payment. Also be aware of your credit utilization (the percentage of credit that you’re actually using versus your total available credit limit). Keeping your credit utilization below 30% will keep your credit in good standing for loan approval.
Save for Retirement
Although it’s typical for business owners to invest profits back into their business, you still need to prepare for retirement, and investing and diversifying your savings may help you save more money for retirement than you could as an employee. SEP IRAs, SIMPLE IRAs, Solo 401(k)s, and SIMPLE 401(k)s are all retirement plan options available to small businesses. Research each one to determine which would be the best fit for you and your business. As for diversifying investments, look into options like stocks, bonds, ETFs, and money market mutual funds. Allocating your assets into different funnels will give you some breathing room should your business experience a struggle period.
Look to Tax Professionals
It’s no secret that U.S. tax laws are complex, and different business entities have different taxation rules. An accountant or tax professional can help you determine what your obligations are. To streamline the process, be sure to keep clear and organized records all year long.
by Stephen Reed | Bookkeeping, Business Consulting, IRS, News, Professional Services, Tax, Tax Consulting, Tax Planning
With the learning curve of the first tax filing season in the TCJA era behind us, year-end tax planning is a perfect time to incorporate those lessons learned. Here is a general overview of some steps business owners can take in their year-end tax planning.
Depreciation-related Deductions
If your business has acquired a fixed asset or property (one that you don’t intend to sell for at least one year and will be used to earn long-term income), and it’s placed in service before the end of the year, you can typically write off the cost in 2019. Thanks to changes made by the TCJA, this now applies to both new and used assets. The TCJA boosted the deduction limit to $1.02 million with a phase-out threshold of $2.55 million for 2019. It also increased bonus depreciation to 100% for property placed in service after September 27, 2017 and before January 1, 2023.
Travel Expenses
The IRS recently clarified that food and beverage costs are deductible by 50% in certain circumstances and when those costs are stated separately from entertainment on invoices or receipts.
QBI Deductions
One of the most significant changes made by the TCJA affects owners of pass-through entities (partnerships, S corporations, and LLCs) as it authorized a deduction of up to 20% of the owner’s qualified business income (QBI) for the tax years 2018 through 2025. The QBI deduction is reduced for some taxpayers based on the amount of their income, so some individuals may need to consider reducing their taxable income so it falls under the $157,500 threshold ($315,000 for married filing jointly), whether by making contributions to retirement plans or health savings accounts, or even through charitable contributions. Something to keep in mind is that specified service business owners, which includes most personal-service providers, are not eligible for the deduction if their taxable income is above a certain threshold.
Business Repairs
It isn’t a bad idea to complete minor repairs by the end of the year because the deductions can offset taxable business income. However, costs of improvements to business property must be written off over time. If you’re unsure whether a specific renovation or upgrade falls under a repair or an improvement, the IRS recently issued regulations that clarify the distinctions.
Estimated Tax Payments
If your corporation is anticipating a small net operating loss for 2019 but a substantial net income in 2020, you might think about accelerating just enough of the corporation’s 2020 income to create a small amount of net income for 2019. You could also choose to defer some 2019 deductions. This way, rather than having to pay estimated taxes based on 100% of your 2020 taxable income, you will be able to base your estimated tax installments on the comparatively small amount of income shown on your 2019 return.
