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.
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.
The start of a new year is a time for fresh starts and new goals, but it’s also the beginning of the oft-dreaded tax season, which means Tax identity thieves are on the lookout for information they can use in order to create fraudulent tax returns. Here are some tips to help protect yourself from tax identity theft during tax season.
File Early to Prevent Tax Identity Theft
Tax-related identity theft most commonly occurs from February to early March because thieves want to beat real taxpayers to the punch by filing fraudulent returns before legitimate ones. Because the IRS allows only one tax return per Social Security number per year, your best defense against identity theft is to file your taxes as early as possible.
Use E-File Instead of Postal Mail
An e-filed tax return arrives instantly at the IRS, which then sends back an acknowledgement receipt. At this point you’ll be notified if there’s any suspicious activity, such as possible identity theft. The quicker you know, the quicker you can deal with it. Before you e-file, however, be sure that your firewall, antivirus, and anti-spyware software are all up to date. If you do send your tax return in by post, think about taking it directly to the post office rather than letting it sit in your mailbox.
Don’t Fall for Scams
The IRS will not contact you by phone, email, or text to ask for personal or financial information. Never give out your Social Security number, passwords, PINs, and credit card or bank information to someone who reaches out via these channels. Official correspondence from the IRS is issued in the form of a letter and sent through the mail. However, scammers are getting increasingly clever, and sometimes phony links can look just like the real IRS website. If you ever have questions about the legitimacy of an IRS related query, your best bet is to call the IRS at 800-829-1040.
Protect Your Financial Accounts
Start by using a different password for each of your financial accounts, preferably one that combines letters, numbers, and special characters. It’s also wise to use a two-factor authentication when available, which requires you to verify your login—typically a code sent via call or text.
How to Report Tax Identity Theft
If you’re a victim of tax-related identity theft, you’ll find out when you try to file your return and learn that a return has already been filed with your Social Security number, or you’ll receive a letter from the IRS stating that a suspicious return using your Social Security number has been identified. If either of these happen, you should do the following:
Complete a paper return. As shocking as it is to learn that you’ve been the target of identity theft, you still need to file your tax return. In order to avoid tax penalties or late fees, submit a paper return by the filing deadline.
Go to IdentityTheft.gov to file a report with the FTC and IRS.
File an Identity Theft Affidavit (Form 14039). Fill out and attach this form to your paper return. It will make its way to the Identity Theft Victim Assistance Organization, which will work on your case. Be prepared to submit various forms of documentation proving your identity.
Contact the three major credit bureaus—Equifax, Experian, and TransUnion—and ask them to place a fraud alert on your credit records. You should also consider asking them to freeze your credit in case the thief should try to open new credit accounts in your name.
Request a copy of the fraudulent return via Form 4506-F. Seeing the fraudulent return will help you determine the specifics of the theft, such as what family information has been compromised.
As a precaution, delete any stored credit card numbers from shopping sites and change saved passwords to online accounts.
If you have questions on tax identity theft or would like to discuss your 2019 tax return, please feel free to email me at dkittell@mkrcpas.com or call 317.549.3091.
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.
With additional guidance and regulations released consistently since President Trump signed the Tax Cuts and Jobs Act of 2017 into law, one thing remains clear: strategic tax planning is key to lowering a business’s total tax liability. Read on for some moves on lowering your 2019 business tax bill.
Establish Tax-Favored Retirement Plan
Current tax rules allow for significant deductible contributions, so if your business doesn’t already have a retirement plan in place, it’s worth considering. Small business retirement plan options include 401(k), SEP-IRA, SIMPLE-IRA, and the defined benefit pension plan. Some of these plans can be established up until December 31 and allow for a deductible contribution for the 2019 tax year, except for the SEP-IRA and SIMPLE-IRA, which mandate a set-up deadline of October in order to make a contribution for the same year.
Review Your Reports
The end of the year is typically a time for businesses to begin goal setting for the next year, so it’s crucial to have a firm grasp on how your business performed financially this year. Make sure your books are up to date and accurate so you have a clear picture before diving into next year’s plan.
Defer Income If It Makes Sense
Depending on where your income level is, you can potentially cut your tax bill by postponing any end-of-the-year income until January 1 or later. Ask your accountant if shifting receivable income to the new year makes sense for your business.
Purchase Business Essentials to Take Advantage of Deductions
Upgrade equipment and furniture, stock up on office supplies, take care of repairs, and make vendor payments in advance in order to maximize deductions. And thanks to the TCJA, you can claim 100% bonus depreciation for qualified asset additions that were acquired and put in place in 2019.
Make Charitable Contributions
Tis the season for giving…and claiming a deduction for the fair market value of your donations. In addition to money, think outside the box and contact a program that sponsors families for the holidays. They often need food, bedding, toys, cookware, and clothing. It’s a great way for employees to feel like they’re making a difference too. Just don’t forget to get the necessary documentation and receipts to keep with your records.
Start Preparing for Next Year
If you put these tips into action, you’ll be better prepared at this time next year. For instance, you’ll already have a retirement plan in place. By going through the process of tax preparation this year, you have the opportunity to create systems for organization that will expedite the process next year.
As a small business owner, the more you can stay organized, improve daily operations, control business expenses, and generally make life as an entrepreneur run a little more smoothly, the more proficient and prolific your business will become. Below are some top-rated apps and programs available to help you manage your business’s financial situation.
Mint
Though it’s intended mainly for individual users, this financial tracking app is effective for businesses too. Aside from tracking bills and cash flow, Mint also has Quicken MyBusiness, a tool for small businesses that helps categorize expenses, and gives you up-front information for tax filing.
QuickBooks
With the ability to connect to your bank account, PayPal, Square, credit cards, and more, you can use QuickBooks to track sales and expenses, view financial statements, pay employees and vendors, track unpaid invoices, maximize tax deductions, and more. With QuickBooks Online, you can access QuickBooks on both iOS and Android phones and tablets.
FreshBooks
For businesses and freelancers alike, cloud-based FreshBooks helps you create personalized invoices, with an option to automatically bill clients for recurring invoices, and generate customizable business reports, such as profit and loss statements. You can also automate tasks like organizing expenses and receipts, tracking your time, and following up with clients.
Wave
Created for businesses with nine or fewer employees, Wave is an accounting software platform that has the ability to track sales and expenses; manage invoices, customer payments, and payroll; scan receipts; and generate accounting reports. With Wave’s free apps for iOS and Android, you can send invoices on the go, and get notified when an invoice is viewed, becomes due, or gets paid. Also available through the platform is a free personal finance software to help small-business owners manage their finances in one place.
Truebill
Once you connect your accounts to the Truebill app, it will generate a report of where your money is going, categorizing and charting subscriptions and expenses. An added bonus with Truebill is a feature that compares your bills and subscriptions to average service levels, and with your initiation, will call providers and negotiate on your behalf.
Xero
Intended for small and mid-sized businesses, this accounting app (accessible by both desktop and mobile platforms) can handle payments and expenses, asset management, bank account reconciliation, invoicing and purchase orders, sales tax calculations, and multi-currency accounting.
PlanGuru
If you’re looking for a forecasting program to help with strategic planning and analysis, PlanGuru might be a good fit. It’s pricey, with business plans starting at $99 per month, but with an analytics dashboard, Excel add-on, a budget and forecasting platform, and training, it might be worth the cost to keep business spending in check.
Expensify
This simple expense tracker uses multiple platforms to keep tabs on expenses and mileage by reading and importing expenses from linked bank accounts and credit cards. And with the ability to scan and upload receipts, expenses can easily be submitted to employers.
InDinero
This bookkeeping service halts the need to invest in big bookkeepers and implements tax services for small businesses. It also helps with forecasting by syncing with bank accounts and credit cards to predict future cash flow determined by current trends and previous expenses.
