Take Steps to Boost your Business Profits

Keeping your company profitable when the economy slows down is a challenge for every business. You may be able to boost your bottom line with the following financial controls.

  • Watch your customer credit. Use an accounts receivable aging report to flag past due accounts. Follow up with a customer immediately when you spot a delinquent bill. Don’t extend any more credit until the customer brings the account up to date.
  • Don’t pay too quickly. Use an accounts payable aging report to keep money in your account as long as possible. Take advantage of early payment discounts if it makes sense. Otherwise consider using the full grace period to pay your bills.
  • Invest surplus funds. Keep most of your money in a business savings or money market account where it will earn interest until you need it.
  • Reserve cash for your short-term needs. Prepare a quarterly cash forecast report so you can anticipate cash shortfalls in time to carefully weigh your financing options. Establish a line of credit before you need it.
  • Reduce inventory. Create a tax deduction and free up valuable shelf space by donating obsolete inventory to your favorite charity. If your inventory includes slow-selling or high-cost items, consider making them special order items.
  • Control your labor expense. Provide adequate training for your employees. Cross-train every employee to do another’s job. Ask your employees to make a list of their assigned tasks. These steps may help you eliminate paying for unnecessary work and create more efficient processes for getting a job done.
  • Resist the temptation to lower prices. Instead, look for ways to improve your product or your customer service to attract new customers and retain the ones you already have.

Please give us a call to discuss these and other profit-boosting ideas for your business.

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Don’t Pay Tax on Nontaxable Income

There are several sources of revenue that are not subject to income tax.

Here are the most common sources of money that are not taxed on your federal income tax return:

  • Borrowed money, such as from banks or personal loans.
  • Money received as a gift or inheritance from family or friends.
  • Money paid on your behalf directly to a school or medical facility.
  •  Most life insurance proceeds.
  • Cash rebates from businesses when you buy an item.
  • Child support payments.
  • Money you receive for sustaining an injury.
  • Scholarships for tuition and books.
  • Disability insurance proceeds from a policy purchased with after-tax dollars.
  • Up to $500,000 of profit for a married couple selling their personal residence.
  • Interest received on municipal bonds.

If you have included any of these as taxable income on your income tax return for the past three years, you can amend your return for a tax refund.

If you would like assistance in determining what to include on your income tax return, please contact us. We are here to help you.

 

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Health Insurance Tax Credits are Good Medicine for Small Businesses

Small businesses may be missing out on an important new tax perk related to health insurance. And the stakes are even higher in 2014.

The Affordable Care Act provides a tax incentive for small business owners who pay at least a portion of their employees’ health insurance. This year as much as 50% (up from 35% in 2013) of the employer’s cost for worker health care premiums can be deducted as a tax credit. That’s a dollar-for-dollar reduction in your 2014 tax bill. But as with most tax deals, you must meet certain requirements to qualify.

First, you must employ fewer than 25 full-time equivalent (FTE) employees. A half-time employee would count as a .5 FTE, so you must consider all workers in your calculation. The fewer FTE employees you have, the higher the tax credit percentage.

Second, the average annual wages of your employees must be less than $50,000. To make the calculation, you would take your total wages and divide by the FTE number you figured above. In most cases the owner’s salary is not included in the formula.

Finally, the business owner must contribute at least 50% of the total cost for single coverage. Family coverage is not factored in. The policy must also be purchased through the Small Business Health Options Program, or SHOP to be eligible for the credit.

A few more wrinkles: if a business doesn’t owe tax for the current year, they can apply the credit to past or future years. In addition, the excess of the employer’s actual cost of health insurance over and above the credit received can still be deducted as a business expense. And the new rules also mean that small nonprofit organizations can receive a tax credit of up to 35% of their health insurance costs if they meet the above requirements.

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