Thursday, April 30, 2015

Can a business grow too fast?

Can a business grow too fast?





Most businesses hope to grow. They consider themselves successful if growth is taking place, and the faster the growth the better. Can too much business growth be bad for a company? It can be if the growth is not adequately planned.

For example, an established company that doubles its sales volume in a year may find itself strapped for cash, for working space, and for trained personnel.

For most established companies, a 12% to 15% annual growth rate would probably be manageable. The ideal growth rate for your company depends on the unique circumstances in your firm and industry.

A new company (starting with zero sales) must obviously grow more rapidly than an established one. Some new businesses may double their sales each year for the first five years or so before reaching the level where a 15% annual rate is healthy.

Rapid growth often requires more inventory and more space. And it may require money to fund additional work-in-process or accounts receivable. Who will fund the growth? A 15% growth rate can probably be funded by retained earnings. A more rapid rate may require an injection of outside capital. If the owners can't provide the money, will it be the suppliers (increasing the accounts payable) or a banker (new short-term debt)?

Every business should have a written business plan with its growth projections clearly identified. The plan should include provisions for the finances, space, equipment, and personnel that such growth will require.


Your company's growth should be both workable and profitable. Please contact us for assistance with your business planning.

Tuesday, April 28, 2015

Use your income tax refund wisely

Use your income tax refund wisely



To many people, an income tax refund might be one of the largest single cash receipts for the entire year. Avoid the temptation to spend your refund on consumption items. There are several places you can invest the refund to enhance your long-term financial goals. You can pay off current debt, invest in the stock market, make home improvements, or invest in a pension plan for retirement.

Let's assume you will be getting a $5,000 tax refund. The best return on your investment may well be to pay off current amounts you owe that have high interest rates. If you are carrying a credit card balance at 15% interest, a reduction in the balance is the equivalent of earning a 15% return on your money. Your $5,000 payment will save you $750 in interest expense over the next year. This is an outstanding return when compared to most other investments. If you leave the $5,000 balance on the credit card and make only the minimum monthly payment, you can pay up to twice that amount in interest, depending on your interest rate.

A second choice might be to pay down the principal balance on your home mortgage. A $5,000 reduction in a 4% thirty-year loan will save $11,000 in interest expense over the life of the loan.

Consider putting the cash into your retirement program. Only one out of five Americans can retire with adequate resources to live independently. $5,000 invested at a 6% compounding return will be worth $28,000 in thirty years. Your retirement fund could grow to almost $450,000 if you invest $5,000 each year for thirty years at a 6% compounding return. Have you ever heard anyone say that they retired with too much money?


Monday, April 27, 2015

Smart business people learn to delegate work

Smart business people learn to delegate work

As a business owner or manager, you may think that if you want things done "the right way," you have to do them yourself. But that isn't always the best approach at work, even if you firmly believe you're the best person for the job. There simply isn't enough time in the day not if you have a business to run.

Like it or not, you must learn how to delegate work to subordinates. Here are some helpful hints.

* Get organized. Start by deciding which tasks to delegate and which employees will be assigned responsibilities. The workload doesn't have to be etched in stone, but you should develop a game plan for subdividing jobs.

* Focus on self-starters. You will need to rely on people who can think for themselves. Don't rely on employees who you anticipate will be constantly seeking your guidance. If you have to show someone what to do every step of the way, it defeats the entire purpose.

* Give workers authority to act independently and make decisions on the fly. Don't hinder the process by requiring employees to obtain your approval on every decision. This will only turn into a variation of doing things the same old way.

* Monitor work progress. This aspect must be handled with sensitivity. You'll want to keep an eye on employees, but you can't keep looking over their shoulders either. Find the proper balance.

* Analyze the results to determine if the work met your expectations. If it didn't, offer constructive criticism for improvements. Make this a learning experience for both of you.


As you become more comfortable delegating work, you can continue to loosen the reins. When you spend less time on routine matters, you'll have more time to devote to growing your business profits.

Friday, April 24, 2015

Should you be making estimated tax payments?

Should you be making estimated tax payments?

During the tax year you must prepay a substantial amount of the taxes you'll owe for that year, or you risk being hit with an underpayment penalty. If you're an employee, that's usually not a problem. Your employer will withhold taxes from each paycheck. You can adjust the amount withheld so that it covers your total tax bill, even if you have extra income from moonlighting or investments. But if you're self-employed or retired, you might need to make estimated tax payments.

To avoid a penalty, the total of your withholding and estimated tax payments must generally be at least 90 percent of your tax liability for the year, or 100 percent of your last year's tax liability. There's no penalty if your underpayment is less than $1,000. Special rules apply to farmers, fishermen, and higher-income taxpayers.

You pay your estimated taxes by making four payments, due in April, June, and September of the current year, and in January of the next year. You can't just wait until the last date to pay what you owe. You must start paying estimated taxes as you earn taxable income. You can either pay all the tax you owe on each quarter's earnings, or you can pay it in installments over the remaining periods. But you must be sure to pay enough to avoid an underpayment penalty for each period. Again, special rules apply to farmers and fishermen.


Please contact our office if you think you might need to make estimated tax payments. The quarterly calculations can be complicated, and we can help you figure out how much you need to pay at each date.

Wednesday, April 22, 2015

Act fast or you'll lose your refund

Act fast or you'll lose your refund


you could be about to lose out on a nice refund check. The IRS reports that it is holding an astonishing one billion dollars in refunds from the year 2011. Here's how the situation arose.

Nearly one million filers, many of them students and retirees, had taxes withheld from their earnings that year but didn't bother to file a return. That was quite legal if they didn't earn enough to reach the minimum income for required filing. And in many cases they forgot that taxes had been withheld and that they were eligible for a refund. For example, a student might have worked at a summer job, gone back to school in the fall, and not given taxes a second thought.

If you think you are due a refund for 2011, it's worth filing a return. The IRS estimates that around half those who are eligible would receive refunds of over $1,000. In some cases, you could find you're eligible for even more than the refund. If you were a low-income worker that year, you might also have qualified for the earned income tax credit. But you'll need to act fast. Unless you file a year-2011 return by April 15, 2015, the statute of limitations will have run out and you'll be too late to claim your refund.

Be aware that the IRS won't issue a 2011 refund check unless you've also filed returns for years 2012 and 2013. And if you owe taxes for those years, they'll deduct that from the amount of the 2011 refund.


Contact our office as soon as possible if you think you might be due a 2011 refund.

Monday, April 20, 2015

Are you able to benefit from an ABLE account?

Are you able to benefit from an ABLE account?


The "tax extenders" legislation that became law in December included the "Achieving a Better Life Experience Act" (also called the ABLE Act). This law provides for tax-exempt accounts that can help you or a family member with disabilities pay for qualified expenses related to the disability. These "ABLE accounts" are exempt from income tax although contributions to an account are not deductible on your federal income tax return. ABLE accounts are generally not means tested and some can provide limited bankruptcy protection.

You or a family member are eligible to open an ABLE account if:

1.      You're entitled to social security disability benefits due to blindness or other disability, and that blindness or disability occurred before age 26; or

2.      You file a disability certification with the IRS for the tax year.

Annual contributions to an ABLE account are limited to the amount of the annual gift tax exclusion ($14,000 for 2015). Distributions are tax-free as long as they are less than your qualified disability expenses for the year. The list of qualified disability expenses includes housing, education, employment training/support, health prevention/wellness services, financial management, legal fees, and funeral expenses. Other expenses are also approved under the regulations.

Distributions exceeding qualified disability expenses are included in taxable income and are generally subject to a 10% penalty tax. Distributions can be rolled over to another ABLE account for another qualified beneficiary and beneficiaries can be changed between family members. Funds in the account can earn interest or dividends and are not subject to federal income tax as long as distributions are used for qualified disability expenses. ABLE accounts do not have a "use it or lose it" feature and funds can carry over to future years.

The balance remaining in the account after the beneficiary passes away can be used to reimburse state Medicaid payments made on behalf of the beneficiary after the account was established. The remainder goes to the deceased's estate or to another qualified designated beneficiary. After-death distributions that are not used for qualified disability purposes are subject to income taxes, but not the 10% penalty.

If you are thinking many of these rules sound familiar, you're correct. ABLE accounts are modeled on 529 college savings accounts and can be as powerful and beneficial. Give us a call so we can help you make the most of this new opportunity.


Thursday, April 16, 2015

If you made gifts in 2014, check this tax filing requirement

If you made gifts in 2014, check this tax filing requirement




Tuesday, April 14, 2015

Can't file by April 15? Get an extension

Can't file by April 15? Get an extension

Friday, April 10, 2015

Check your financial status with an annual balance sheet

Check your financial status with an annual balance sheet

Get in the habit of preparing an annual balance sheet. Your net worth is simply the difference between your assets and debts. Comparing your balance sheet from year to year will show you how and if your financial world is improving. Be sure to involve your spouse in gathering the information for the balance sheet.

Wednesday, April 8, 2015

Tax deadline approaching for tax-exempt groups

Tax deadline approaching for tax-exempt groups

Monday, April 6, 2015

IRS publishes 2015 business vehicle deduction limits


For details relating to your 2015 business vehicle purchases, contact our office.

Thursday, April 2, 2015

Time is running out to claim refunds

Time is running out to claim refunds

The IRS reminds taxpayers that tax refunds for the year 2011 remain unclaimed by a million taxpayers who failed to file a return for that year. The tax law provides a three-year period for claiming a refund when no return is filed. That means these individuals must file a tax return for 2011 no later than Wednesday, April 15, 2015, or their refunds will be lost.