5 Things To Help Lower Your Tax Bill

Before the year is through and you put away all the Christmas decorations, stop and consider your bottom line – your business bottom line.  Your goal is to decrease your taxable income and lower your overall tax bill.

Here are 5 easy steps cash based businesses can take now that may help:

1. 1. Pay any and all outstanding bills – If you have stacks of bills on your desk that you have set aside until after the holidays to pay – don’t!  Pay your bills now.  If you write the checks on or after January 1st you may not be able to claim the expense on your 2009 tax return.
2. 2. Consider buying new equipment – The IRS will again allow you to expense as much as $250,000 worth of new equipment purchases before depreciation comes into play.  Take advantage of this opportunity.  Even upgrading your software or purchasing a new printer can lower your taxable income for the year.  Remember the equipment must be for business and not personal use.
3. Purchase any needed supplies – A jewelry designer has orders for 50 sets of earrings to be delivered in early February.  Don’t wait until January to buy the supplies you know you will need.  Purchase them before the end of the year and expense them on your 2009 tax return.
4. Pay employee bonus’s – Employee bonuses are often based on total income earned for the year or other revenue goals.  This is a great incentive, but write the check on December 31st so you can record the expense in 2009.
5. Invoice after the 1st of the year – If your business is cash based, meaning you don’t accrue income using accounts receivable and you only recognize income when the cash is received, wait to invoice clients until January 1st.   This will allow you to recognize the income in 2010 rather than 2009.

These are just a few ideas to get you started. As always, please consult your accountant or tax advisor as these strategies may not be best for all individuals and/or small business.  You are also welcome to contact me directly with any questions at lindseypatrick1 (at) yahoo (dot) com I would love to speak with you.

When do you know that it’s time to hire an Accountant vs. doing QuickBooks?

This is a fantastic question and one that gets asked of me often. The answer depends on who is asking the question. If you are the type of person who balances your checkbook every month and can stay on top of personal finances, then you will likely do well with either spreadsheets or other accounting software like QuickBooks. Even so, I like to recommend that you sit down with a CPA at least once or twice a year – for most this is done around tax time. As your business grows you may find that your accountant becomes more like a business advisor and you will meet with them more and more often.

If you are the type of person who is unclear what your net income is or you have never balanced your personal checkbook, you would benefit from sitting down with an accountant right away and establishing a plan. The accountant can walk you through what you will need at tax time so you can keep track of the information all year long rather than having to scramble to find everything at tax time. In either case QuickBooks can make the accounting process easier.

QuickBooks in the number one accounting software for small business and is used by millions of small business owners. Having used the product for 10+ years, I can say that Intuit has done a great job in making bookkeeping tasks easy and the QuickBooks software is very user friendly. I have seen QuickBooks work for businesses that have less than $100,000 in sales per year, all the way up to sales of $34 million. Most business owners can use QuickBooks every day with no problems and actually find comfort in having all their numbers in one place rather than spread between sticky notes, excel spreadsheets and notebooks.

What is the secret for successful QuickBooks users? First the program file has been setup correctly for them and the way they do business. For the basic business just starting up the QuickBooks company templates work great. When you install the program, QuickBooks asks about the type of business and has prefilled account names and types available for use. Another great thing about QuickBooks is that even after the initial setup it is very easy to customize. Your accountant or a certified QuickBooks advisor can assist you with this customization if needed.

Second, successful QuickBooks users take the time to receive some training, either through a live course, or using free QuickBooks training provided with the software. Even an hour of basic training can save time and headaches when you need to make your first bank deposit or write your first check.

So, in actuality you may need both an accountant and personal knowledge of QuickBooks to some degree, and your time, desire and knowledge will determine how much of each. An accountant can do it all if you don’t have the time or desire. QuickBooks can be a tool used to do it all yourself if you have the desire, with your accountant only reviewing the numbers a few times a year. Be honest with yourself and decide where your time and energy will be most profitable, and you will be successful.

I am always happy to answer questions, so please feel free to contact me at lindseyp@squire.com. Also, my firm offers several beginning business and QuickBooks classes. For more information, visit the website www.squire.com or email me.

Managing Cash Flow

Knowing what you have is often the key to knowing where you can go.  Managing and maintaining a healthy cash flow is essential for a business to grow and thrive.  Below are a few ideas for better managing your cash flow, review each idea and ask “do we do this in our business” and if so “why or why not “.  Adding just of few of these ideas to your business management can help to improve your cash flow and increase profitability.

• Make prompt payments to suppliers only when discounts apply, otherwise schedule payments near due date
• Maintain good business relations with all suppliers
• Sell items for cash or credit cards rather than on terms
• Accept deposits with balance due upon shipment
• Offer discounts to customers for early payment
• Don’t let policies automatically renew – review them first and shop around for a better deal
• Invoice clients/customers as soon as work is done or order filled – don’t wait
• Be sure the invoice due date is clear and prominent – large BOLD print is best
• Review monthly accounts receivable – who owes you money – and follow up immediately
• Be aggressive in collecting debts
• Require customers to be current on their account before doing additional work
• Deposit payments promptly into an interest bearing checking account
• Reduce inventory to the most necessary items
• Dispose of slow moving items (sell at cost or bundle and discount etc.)
• Vary prices by season
• Encourage non-urgent customers to wait for delivery until a slower time of year

*ideas adapted from Squire Insights Corporate Education Series “Cash Flow Best Practices”

If you’re in Utah County, Square offers FREE Quickbooks courses. Visit www.squire.com for more information.