For many small businesses, the fourth quarter of the year presents their greatest opportunity to meet budget and sales expectations for the entire year. How you prepare your business now can mean a big difference in your bottom line for the New Year. Here are eight suggestions that can help improve the fiscal fortunes of your small business:
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- Watch your cash. For the best possible results, keep a cautious eye on cash flow and always know where your dollars are being spent. Do you have outstanding collections that need attention? Many businesses face payments that stretch as far as 60 to 90 days past due. If left unchecked, collections can have a severe impact on cash flow, leaving you strapped during your busiest selling season. How are your cash reserves? A solid savings program enables the business to fund purchases, build inventory and respond to emergencies quickly.
- Inventory tracking. Fourth quarter is a critical time to review your existing inventory and re-evaluate slow moving items before the end of the tax year. In order to take a deduction for slow moving inventory, you must make an effort to reduce the inventory by discounting, special offers or even selling off items to another vendor. If discounting fails to generate sales, you can then take a deduction. When in doubt, talk with a tax professional about how to manage your inventory for the best tax outcome.
- Debt management. Carefully review your monthly credit card statements for varying interest rates and refinance for lower interest cards whenever possible. Be sure to make monthly payments on time so you can avoid hefty penalties and increased interest rates that are often found in the fine print.
- Make taxes less taxing. There are many options available to small business owners to reduce the business' tax burden. Start by taking a look at how your business is structured. If you're a sole proprietorship or partnership who is producing a net profit in excess of a reasonable compensation for your time, you could save money by moving toward incorporation and electing an S Corporation status. Why pay taxes on monies above and beyond your payroll? As a sole proprietor, any monies taken out of the business are applied to your personal tax statement and are taxed accordingly. By incorporating and electing S status, the salary you take will be subject to both income and payroll taxes, however, any profits above that amount are subject to income taxes only.
- Separate maintenance from capital expenditures. Make sure to separate maintenance and repair costs from capital improvements. Customary repairs and maintenance are tax deductible, whereas capital purchases must be depreciated over a period of years. Beware that you must also adjust depreciation if you make a large percentage of your equipment purchased during the fourth quarter of the year.
- Track your equipment. By implementing a small equipment tracking system, you'll be able to deduct individual items as they are replaced. An example of this would be if your company purchases five fax machines and two of the machines are replaced with upgraded models after a period of time. If the business didn't itemize each purchase, you would have to defer realizing the full value of the depreciation until the entire class of items depreciated. One easy way to track small purchases like computers or fax machines is to implement a bar coding system and place each bar code number into an Excel spreadsheet, tracking the number, location and date of purchase and use.
- Presentation is everything. For the perfect retail experience, remember that your image doesn't just begin inside the store, but with every ad, circular and conversation outside the store as well. If streamlining these marketing and public relations tasks is becoming overwhelming, consider outsourcing to a marketing communications firm. These marketing gurus can help to create a consistent image, build a plan and implement tactics while you focus your efforts on the business at hand.
- Review your website. If you are both a bricks and mortar retailer, don't overlook your online presence. Go online and actually shop your own web site. Are there broken links or areas of the site that seem confusing to you? Take corrective steps now to streamline the buying experience. Review your hot products and give them strategic placement at the forefront of your site. Provide easy access to the shopping cart and offer repeat customers buying discounts as a reward for brand loyalty.
September is a great time to review key business areas and make any necessary corrections to ensure the best possible selling season.
This article was contributed by Fiducial. If you would like more information on how to maximize your business for a successful year end, visit the Fiducial web site at www.Fiducial.com.