Congress has approved, and President Obama has signed into law, a multi-billion dollar tax cut package, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) (H.R. 4853). The new law follows through on the framework agreed to December 6 by President Obama and GOP leaders in Congress.
For most individuals, the most immediate impact of the new law will be the payroll tax cut and the extension of the reduced individual income tax rates. Below are some highlights:
• The 2010 Tax Relief Act reduces the employee-share of the OASDI portion of Social Security taxes from 6.2% to 4.2% for wages earned in calendar year 2011 up to the taxable wage base of $106,800. Self-employed individuals would pay 10.4% on self-employment income up to the threshold.
• Current income tax rates will remain in place for two years (2011 and 2012) with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
• The 2010 Tax Relief Act boosts 50% bonus depreciation to 100 percent for qualified investments made after September 8, 2010 and before January 1, 2012. Unlike Code Section 179 expensing, it is not limited to use by smaller businesses or capped at a certain dollar level. It also makes 50% bonus depreciation available for qualified property placed in service after December 31, 2011 and before January 1, 2013.
• The 2010 Tax Relief Act extends the Bush-era individual and capital gains/dividend tax cuts for all taxpayers for two years.
• The bill provides an Alternative Minimum Tax “patch” intended to prevent the AMT from encroaching on middle income taxpayers by providing higher exemption amounts and other targeted relief for 2010 and 2011. Without this patch, an estimated 21 million additional households would be subject to the AMT.
• The bill offers an extension of the $1,000 child tax credit for two years, through December 21, 2012. The qualifying child must be under age 17 at the close of the year and satisfy relationship, residency, support, citizenship and dependent tests. It continues to be phased out for taxpayers with adjusted gross income in excess of $110,000 for joint filers.
• The bill extends a number of individual credits including adoption, dependent care, education and qualified energy efficiency improvement credits.
• The bill also extends a number of deductions for individuals including state and local sales tax, higher education tuition, teachers’ classroom expense and specific charitable donations.
• The Act extends a number of business tax extenders generally for two years. These business tax extenders had expired at the end of 2009.
The new law gives taxpayers some certainty in tax planning for the next two years, especially concerning the individual income tax rates, capital gains/dividend tax rates and the estate tax; however, these provisions are temporary.
With questions or to schedule a consultation with one of our tax specialists to discuss how the new law may impact you specifically, please contact Simons Bitzer at (317) 782-3070.
Thursday, December 23, 2010
Thursday, December 9, 2010
2010 Year-End Tax Planning for Business Owners
As another year winds down and the holidays approach, it is time to consider all the latest tax law changes and plan accordingly to minimize any tax liability. While congress continues to work on last minute changes to the tax laws, rest assured that we will be staying abreast of these changes for you. Although we've blogged about these new laws throughout the year, we thought it would be beneficial to highlight some particular areas so that you can begin your year-end planning.
Health Insurance Credit for Small Employers—If your business has less than 25 employees and pays less than $50,000 in average wages, you may be able to take this credit. There are many restrictions that will exclude many businesses from taking this credit, but it may be worth looking into.
HIRE Act—If your business hired any previously unemployed employees on or after February 4, 2010, you may not need to pay the employers’ portion of the Social Security tax. This relief could be as high as $6,622 per employee hired. This relief provision is available only in 2010.
Extension of Section 179 Depreciation—The Small Business Jobs Act of 2010 also extended and increased the amount of Section 179 depreciation that a small business is allowed to expense on its fixed asset purchases. You may want to consider the purchase of fixed assets that you need in your business.
In addition to the new laws above, the following are areas that the IRS has been scrutinizing more closely. Please pay particular attention to these areas.
Health Insurance Premiums for S Corporation Owners—It is critical to properly report the premiums on your W-2 so it is deductible for the S Corporation as compensation and allows the S Corporation owners to deduct this on their personal tax return. If your business is an S corp and it paid your health insurance premiums, we will work with you and your payroll provider to ensure this is completed properly by the end of the year.
Personal Auto Usage on W-2—If your business owns an auto that the owner is using, it is very important that the personal usage portion is calculated and added to your W-2. We will work with you and your payroll provider to ensure this is completed properly by the end of the year.
Detailed Inventory Records—If your business has inventory, the IRS is continuing to place an increased emphasis on actual physical inventory on hand at the end of the year. Therefore, be sure to physically count your inventory, retain the records, and provide us with the accurate total cost of inventory on hand December 31, 2010. Do not include consignments you are holding from other people in this number. In the event of an audit you must be able to provide copies of physical count sheets; therefore, we are placing an increased emphasis upon obtaining correct year end physical inventory amounts.
Corporate Minutes—We would also like to remind you that your corporate minutes must be maintained on an annual basis. These minutes are maintained by the officers of the corporation. Please keep in mind that only S and C corporations are required to maintain minutes.
If you have questions or would like to schedule a consultation with one of our tax experts, please call Simons Bitzer at (317) 782-3070.
Health Insurance Credit for Small Employers—If your business has less than 25 employees and pays less than $50,000 in average wages, you may be able to take this credit. There are many restrictions that will exclude many businesses from taking this credit, but it may be worth looking into.
HIRE Act—If your business hired any previously unemployed employees on or after February 4, 2010, you may not need to pay the employers’ portion of the Social Security tax. This relief could be as high as $6,622 per employee hired. This relief provision is available only in 2010.
Extension of Section 179 Depreciation—The Small Business Jobs Act of 2010 also extended and increased the amount of Section 179 depreciation that a small business is allowed to expense on its fixed asset purchases. You may want to consider the purchase of fixed assets that you need in your business.
In addition to the new laws above, the following are areas that the IRS has been scrutinizing more closely. Please pay particular attention to these areas.
Health Insurance Premiums for S Corporation Owners—It is critical to properly report the premiums on your W-2 so it is deductible for the S Corporation as compensation and allows the S Corporation owners to deduct this on their personal tax return. If your business is an S corp and it paid your health insurance premiums, we will work with you and your payroll provider to ensure this is completed properly by the end of the year.
Personal Auto Usage on W-2—If your business owns an auto that the owner is using, it is very important that the personal usage portion is calculated and added to your W-2. We will work with you and your payroll provider to ensure this is completed properly by the end of the year.
Detailed Inventory Records—If your business has inventory, the IRS is continuing to place an increased emphasis on actual physical inventory on hand at the end of the year. Therefore, be sure to physically count your inventory, retain the records, and provide us with the accurate total cost of inventory on hand December 31, 2010. Do not include consignments you are holding from other people in this number. In the event of an audit you must be able to provide copies of physical count sheets; therefore, we are placing an increased emphasis upon obtaining correct year end physical inventory amounts.
Corporate Minutes—We would also like to remind you that your corporate minutes must be maintained on an annual basis. These minutes are maintained by the officers of the corporation. Please keep in mind that only S and C corporations are required to maintain minutes.
If you have questions or would like to schedule a consultation with one of our tax experts, please call Simons Bitzer at (317) 782-3070.
Wednesday, November 17, 2010
Recharacterize: Should you do it?
Congress has expanded conversion and rollover options for IRAs. Beginning January 1, 2010, taxpayers with adjusted gross income in excess of $100,000 can convert a traditional IRA to a Roth IRA. A Roth Ira has substantial benefits: Income from a Roth IRA is tax exempt and there are no minimum distributions at age 70 1/2. The conversion can be accomplished through a trustee-to-trustee transfer, a rollover or account redesignation.
The converted amount less any after-tax contributions must be included in gross income. If the rollover is accomplished in 2010, the income is reported on the individual’s tax return in equal installments over 2011 and 2012. Taxpayers can elect to include the entire amount in income in 2010. Given the projected increase in tax rates, taxpayers may want to consider including the entire amount in income in 2010.
Taxpayers have until October 17, 2011 to recharacterize a 2010 rollover or conversion to a Roth IRA. Recharacterizing an IRA contribution involves transferring amounts previously converted to a Roth or traditional IRA to an IRA of the opposite type. Therefore, a taxpayer is not committed to a decision to reconvert to a Roth IRA. A taxpayer may recharacterize conversions that decrease in value.
With questions or for more information, please contact a Simons Bitzer Tax Specialist at (317) 782-3070. Visit www.SimonsBitzer.com.
The converted amount less any after-tax contributions must be included in gross income. If the rollover is accomplished in 2010, the income is reported on the individual’s tax return in equal installments over 2011 and 2012. Taxpayers can elect to include the entire amount in income in 2010. Given the projected increase in tax rates, taxpayers may want to consider including the entire amount in income in 2010.
Taxpayers have until October 17, 2011 to recharacterize a 2010 rollover or conversion to a Roth IRA. Recharacterizing an IRA contribution involves transferring amounts previously converted to a Roth or traditional IRA to an IRA of the opposite type. Therefore, a taxpayer is not committed to a decision to reconvert to a Roth IRA. A taxpayer may recharacterize conversions that decrease in value.
With questions or for more information, please contact a Simons Bitzer Tax Specialist at (317) 782-3070. Visit www.SimonsBitzer.com.
Thursday, November 11, 2010
2010 Year End Tax Planning for Individuals
Year-end tax planning for 2010 presents new challenges for individual taxpayers like you to reduce or defer your federal income tax liability. Although it is generally beneficial to defer income and accelerate expenses, with tax reform on the horizon, the focus shifts to balancing overall tax rates in 2010 and beyond. As you know, the Obama administration has proposed an increase in the income and capital gains tax rates for 2011. Additionally, over $1 trillion in tax cuts enacted in 2001 (EGTRRA) and 2003 (JGTRRA) are scheduled to sunset after December 31, 2010. Unless Congress acts to extend or modify these provisions, the impacted rates, deductions, and credits will revert to pre-2001 levels in 2011.
The rate increases proposed by the current administration would affect single individuals with income exceeding $200,000, and married couples with incomes greater than $250,000. If you fall within these parameters, the traditional year-end planning strategy of deferring income into next year may not be effective in 2010. Higher income taxpayers are more likely to benefit by accelerating 2011 income into 2010 and deferring losses to 2011 and later years to escape higher rates. If you think you will be in a higher tax bracket in 2011, you may want to:
• Accelerate income, including bonuses if possible, into 2010
• Defer selling capital assets at a loss until 2011 and later years
• Move some assets into tax-free instruments, like municipal bonds, that are not subject to federal tax
• Take capital gains in 2010 while the top rate is still 15 percent
• Accelerate billings and/or provide incentives for clients or customers to make payments in 2010 (for self-employed cash-basis taxpayers)
• Take taxable retirement plan distributions before 2011 (for taxpayers over age 59-1/2)
• Bunch itemized or business deductions into the 2011 tax year
• Consider paying all of the tax owed on a Roth IRA conversion in the 2010 tax year
However, if you anticipate being in a lower tax bracket in 2011 as compared to 2010, you may want to take advantage of the complete elimination of phase-outs for personal exemptions and itemized deductions that is available for the 2010 tax year only. If you have been affected by these limitations in the past, you may be able to take advantage of this opportunity, but you should carefully review all of your options beforehand.
For more information regarding year end tax planning, please contact Simons Bitzer & Associates at (317) 782-3070.
The rate increases proposed by the current administration would affect single individuals with income exceeding $200,000, and married couples with incomes greater than $250,000. If you fall within these parameters, the traditional year-end planning strategy of deferring income into next year may not be effective in 2010. Higher income taxpayers are more likely to benefit by accelerating 2011 income into 2010 and deferring losses to 2011 and later years to escape higher rates. If you think you will be in a higher tax bracket in 2011, you may want to:
• Accelerate income, including bonuses if possible, into 2010
• Defer selling capital assets at a loss until 2011 and later years
• Move some assets into tax-free instruments, like municipal bonds, that are not subject to federal tax
• Take capital gains in 2010 while the top rate is still 15 percent
• Accelerate billings and/or provide incentives for clients or customers to make payments in 2010 (for self-employed cash-basis taxpayers)
• Take taxable retirement plan distributions before 2011 (for taxpayers over age 59-1/2)
• Bunch itemized or business deductions into the 2011 tax year
• Consider paying all of the tax owed on a Roth IRA conversion in the 2010 tax year
However, if you anticipate being in a lower tax bracket in 2011 as compared to 2010, you may want to take advantage of the complete elimination of phase-outs for personal exemptions and itemized deductions that is available for the 2010 tax year only. If you have been affected by these limitations in the past, you may be able to take advantage of this opportunity, but you should carefully review all of your options beforehand.
For more information regarding year end tax planning, please contact Simons Bitzer & Associates at (317) 782-3070.
Friday, October 1, 2010
Small Business Jobs Act of 2010-What does it mean for you?
Congress has passed a small business jobs bill (the Small Business Jobs Act of 2010) with valuable individual and business tax incentives. Many of the $12 billion tax incentives are temporary so taxpayers
have only a short window in which to take advantage of them. Others are permanent but require careful
planning to maximize your tax benefits. Below we highlight some of the tax incentives and revenue raisers in the new law.
Although the new law is labeled a "small business bill" it actually is much more. The new law includes a
number of provisions targeted to small businesses and investors in small businesses, such as 100 percent exclusion of gain on qualified small business stock, an increase in the amount allowed as a deduction for start-up expenditures, and more. Other provisions may benefit businesses of all sizes, such as extended bonus depreciation and extended and doubled Code Sec. 179 expensing. Many individuals will benefit from a new rule allowing rollovers from elective deferral plans to Roth designated accounts, along with other retirement savings incentives. Self-employed individuals benefit from a temporary deduction for health insurance costs in computing self-employment income.
To ensure passage of the bill, supporters had to find revenue raisers to pay for the tax incentives. The
largest revenue raiser designed to force greater disclosure of taxable income is a new information reporting requirement for rental property expenses, which is projected to raise $2.5 billion over 10 years. The new law also increases information return penalties. An additional revenue provision places curbs on the cellulosic biofuel producer credit, and another shifts corporate estimated taxes in 2015.
The new law is much more than a small business bill, although many small businesses and their owners will benefit greatly from its provisions. Many provisions within the new law are broad-based and far-reaching. Moreover, many of the tax incentives are temporary, requiring prompt
action to take full advantage of them.
Please contact Simons Bitzer & Associates for additional information. We can help you design a tax strategy to maximize your benefits from the new law. Visit www.SimonsBitzer.com to read a more detailed explanation of these changes.
have only a short window in which to take advantage of them. Others are permanent but require careful
planning to maximize your tax benefits. Below we highlight some of the tax incentives and revenue raisers in the new law.
Although the new law is labeled a "small business bill" it actually is much more. The new law includes a
number of provisions targeted to small businesses and investors in small businesses, such as 100 percent exclusion of gain on qualified small business stock, an increase in the amount allowed as a deduction for start-up expenditures, and more. Other provisions may benefit businesses of all sizes, such as extended bonus depreciation and extended and doubled Code Sec. 179 expensing. Many individuals will benefit from a new rule allowing rollovers from elective deferral plans to Roth designated accounts, along with other retirement savings incentives. Self-employed individuals benefit from a temporary deduction for health insurance costs in computing self-employment income.
To ensure passage of the bill, supporters had to find revenue raisers to pay for the tax incentives. The
largest revenue raiser designed to force greater disclosure of taxable income is a new information reporting requirement for rental property expenses, which is projected to raise $2.5 billion over 10 years. The new law also increases information return penalties. An additional revenue provision places curbs on the cellulosic biofuel producer credit, and another shifts corporate estimated taxes in 2015.
The new law is much more than a small business bill, although many small businesses and their owners will benefit greatly from its provisions. Many provisions within the new law are broad-based and far-reaching. Moreover, many of the tax incentives are temporary, requiring prompt
action to take full advantage of them.
Please contact Simons Bitzer & Associates for additional information. We can help you design a tax strategy to maximize your benefits from the new law. Visit www.SimonsBitzer.com to read a more detailed explanation of these changes.
Monday, September 27, 2010
Dayspring Homecoming Celebration...'80's style!
Even during challenging economic times, it is hard to believe that on any given night over 1,500 children are homeless in our city. Homelessness hurts, especially the children.
But, there is a place of hope. Dayspring Center provides emergency shelter, clothing, and three nourishing meals-a-day for homeless families with children in central Indiana. Families turn to Dayspring Center as a last resort; some to escape domestic abuse, others have experienced financial collapse, medical problems, or other crises that caused them to lose their home. Dayspring Center is a place where parents and their children get the help they need for a better life, a new beginning. Since our doors opened 23 years ago, Dayspring Center has been a place of comfort for over 11,000 homeless children and their parents.
The team at Simons Bitzer is pleased to be associated with this wonderful organization, both professionally and personally. This October we will be running the Silent Auction check-out during the center's important fall fundraiser: Dayspring Homecoming Celebration 2010...80's style!.
Click here to watch a video about this wonderful organization. To learn more about the celebration, contact Raegan Potter at rpotter@simonsbitzer.com.
But, there is a place of hope. Dayspring Center provides emergency shelter, clothing, and three nourishing meals-a-day for homeless families with children in central Indiana. Families turn to Dayspring Center as a last resort; some to escape domestic abuse, others have experienced financial collapse, medical problems, or other crises that caused them to lose their home. Dayspring Center is a place where parents and their children get the help they need for a better life, a new beginning. Since our doors opened 23 years ago, Dayspring Center has been a place of comfort for over 11,000 homeless children and their parents.
The team at Simons Bitzer is pleased to be associated with this wonderful organization, both professionally and personally. This October we will be running the Silent Auction check-out during the center's important fall fundraiser: Dayspring Homecoming Celebration 2010...80's style!.
Click here to watch a video about this wonderful organization. To learn more about the celebration, contact Raegan Potter at rpotter@simonsbitzer.com.
Monday, September 13, 2010
Celebrating 15 Years of Assisting Customers
Simons Bitzer & Associates, a local public accounting firm, was pleased to celebrate their 15 year anniversary by hosting a ribbon cutting conducted by the Greater Greenwood Chamber of Commerce. The celebration was held at their office on September 10th from 11:30-1:00 with the actual ribbon cutting commencing at 12:00 p.m. Tony Nguyen, founder of the Indiana Asian Chamber of Commerce, posted video from the event on YouTube. Click here to watch: http://www.youtube.com/iacc2020.
Marking this momentous occasion in the firms’ history, Simons Bitzer & Associates has established a scholarship fund at the IU Kelley School of Business Indianapolis.
“Your generous commitment is essential to the success of Indiana University,” said President Eugene R. Tempel. “Because of the dedicated support of thoughtful donors like you, the university is positioned to offer new technologies, maintain cutting edge research facilities, and attract world renowned faculty.”
Since 1995, the team at Simons Bitzer & Associates has focused on providing accounting services to small and medium-sized businesses in Central Indiana. The firm has been recognized for our honest and direct approach as we realize the importance of our role in our customers’ businesses and financial plans. We strive to serve the needs of each of our customers with the utmost professionalism and forthright communication, building relationships not just associations. Our customers appreciate our team’s approach and willingness to roll up their sleeves, working beside them on every level of project development and execution.
“I started my own firm 15 years ago with the goal of assisting business owners improve their performance, drive shareholder value and create a competitive advantage. Barb (Bitzer) and I, along with our team, are dedicated to helping our customers meet their dreams and goals by improving efficiencies and maximizing their profitability,” said Greg Simons, principal and founder.
Marking this momentous occasion in the firms’ history, Simons Bitzer & Associates has established a scholarship fund at the IU Kelley School of Business Indianapolis.
“Your generous commitment is essential to the success of Indiana University,” said President Eugene R. Tempel. “Because of the dedicated support of thoughtful donors like you, the university is positioned to offer new technologies, maintain cutting edge research facilities, and attract world renowned faculty.”
Since 1995, the team at Simons Bitzer & Associates has focused on providing accounting services to small and medium-sized businesses in Central Indiana. The firm has been recognized for our honest and direct approach as we realize the importance of our role in our customers’ businesses and financial plans. We strive to serve the needs of each of our customers with the utmost professionalism and forthright communication, building relationships not just associations. Our customers appreciate our team’s approach and willingness to roll up their sleeves, working beside them on every level of project development and execution.
“I started my own firm 15 years ago with the goal of assisting business owners improve their performance, drive shareholder value and create a competitive advantage. Barb (Bitzer) and I, along with our team, are dedicated to helping our customers meet their dreams and goals by improving efficiencies and maximizing their profitability,” said Greg Simons, principal and founder.
Monday, August 30, 2010
Monday, August 16, 2010
Promote KPI Data Within The Team
Over the last several weeks, we have been discussing the characteristics that make up a good Key Performance Indicator. Now that we know how to create a KPI, let's discuss collecting the data for and managing your new monitoring system.
It can be very useful in promoting company policy and getting buy-in to make sure team members see some of hte data that is being gathered. This can be done in the form of a scoreboard for example. This chart or handout can show the numbers that drive business profitability-sales, Cost of Good Sold,etc.-and the KPIs for the critical success factors in each area. Some companies even include the team's bonus evaluation forecast based on the up-to-date KPI indicators. This can prove to be a highly motivating measurement tool.
Providing the scores and explaining the situation is one way of keeping them focused on the jobs that really need doing and encouraging them to move the KPI's in the right direction.
Of course you may desire to do some training around this. Some team members may not be familiar with such terms as "operating efficiency", "turnover", or "gross margin" without some type of explanation. After they become familiar with the terms, and have the data made available to them, you can ask them to discuss ideas on improving the situation.
For more information about knowing what to do with the KPIs once developed, please contact a Simons Bitzer team member at (317) 782-3070.
It can be very useful in promoting company policy and getting buy-in to make sure team members see some of hte data that is being gathered. This can be done in the form of a scoreboard for example. This chart or handout can show the numbers that drive business profitability-sales, Cost of Good Sold,etc.-and the KPIs for the critical success factors in each area. Some companies even include the team's bonus evaluation forecast based on the up-to-date KPI indicators. This can prove to be a highly motivating measurement tool.
Providing the scores and explaining the situation is one way of keeping them focused on the jobs that really need doing and encouraging them to move the KPI's in the right direction.
Of course you may desire to do some training around this. Some team members may not be familiar with such terms as "operating efficiency", "turnover", or "gross margin" without some type of explanation. After they become familiar with the terms, and have the data made available to them, you can ask them to discuss ideas on improving the situation.
For more information about knowing what to do with the KPIs once developed, please contact a Simons Bitzer team member at (317) 782-3070.
Monday, August 9, 2010
KPIs Should Allow for Correction
We have been discussing the traits that make up a good set of Key Performance Indicators. Today, we'll round out the conversation with the fourth and final characteristic of a good KPI. It should point to the activities you might need to alter if things in your business start to veer off track. To recap, KPIs are the measures of the processes and financial markers that are critical to the success of your business. You know you are on track to achieving your objectives when they are moving in the right direction. You also know that you have an issue to address when they move in the wrong direction.
Your KPIs ought to point to just what is contributing to the problem so you can make changes in a timely manner. For example, you may decide you have a problem with cash flow, but is it die to slow paying customers, poor internal cash management processes, not enough sales, or some combination of those? To determine this, you will actually need to drill down just a bit further by creating a system of sub-system KPIs. When it comes to targeting areas needing correction, it is necessary to take this more granular approach to track in detail what is going on in individual areas.
For more information about establishing and monitoring a set of Key Performance Indicators for your business, please contact a Simons Bitzer team member at (317) 782-3070.
Your KPIs ought to point to just what is contributing to the problem so you can make changes in a timely manner. For example, you may decide you have a problem with cash flow, but is it die to slow paying customers, poor internal cash management processes, not enough sales, or some combination of those? To determine this, you will actually need to drill down just a bit further by creating a system of sub-system KPIs. When it comes to targeting areas needing correction, it is necessary to take this more granular approach to track in detail what is going on in individual areas.
For more information about establishing and monitoring a set of Key Performance Indicators for your business, please contact a Simons Bitzer team member at (317) 782-3070.
Monday, July 26, 2010
KPIs Must Be Measurable
We continue to describe in greater detail the characteristics that make a good Key Performance Indicator. To review, a KPI should reflect your business' goals and should be derived from your business' critical success factors. Today let's discuss making your KPI measurable. It may sound simple but there is a bit more to it than meets the eye at first glance.
In fact, you should establish in writing four things about each chosen KPI:
* a name for it
* a definition of what it involves
* the method you will use to measure it
* your goal or target for the KPI
A KPI itself is not about doing anything. It is a measure rather than a desired outcome. What is important is that you decide upon a definite measure and stay with it. Changing what you include in your KPI or the way you measure it will mean that figures cannot be compared from one period to another or to your target. In other words, they will not be useful to you.
Remember, what you can measure you can manage. Next week we'll discuss the final characteristic of a good KPI. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to discuss establishing a set of measurable KPIs for your own business.
In fact, you should establish in writing four things about each chosen KPI:
* a name for it
* a definition of what it involves
* the method you will use to measure it
* your goal or target for the KPI
A KPI itself is not about doing anything. It is a measure rather than a desired outcome. What is important is that you decide upon a definite measure and stay with it. Changing what you include in your KPI or the way you measure it will mean that figures cannot be compared from one period to another or to your target. In other words, they will not be useful to you.
Remember, what you can measure you can manage. Next week we'll discuss the final characteristic of a good KPI. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to discuss establishing a set of measurable KPIs for your own business.
Tuesday, July 20, 2010
KPIs Should Derive From Your Critical Success Factors
Let's pick up where we left off last week. Looking again at the mall cafeteria example, customer turnover rate is the critical success factor which needs to be measured because that drives profitablility in this business. To measure turnover rate, the appropriate Key Performance Indicator would be the number of customers per table per opening period.
On the other hand, for the more relaxed dining establishment that we discussed last week, repeat business and customer satisfaction are the critical success factors. A suitable KPI for this business might be the number of customer complaints received during an established time period. It then becomes important to look at trends. Are complaints decreasing by providing excellent customer service?
In each case the KPI derived from a factor that was critical to the success of the business. Of course it would be important for each business to have a clear business plan that dictates their business goals. Without knowing what is really important to your business and where you want it to go, it will be difficult, if not impossible, to establish your success factors. You could end up measuring irrelevant factors, in other words factors that are not truly critical success factors at all.
Stayed tuned next week when we will discuss the third and final characteristic of a KPI: measurability. In the meantime, with questions about establishing and measuring your own set of Key Performance Indicators, please contact a Simons Bitzer Team Member at (317) 782-3070.
On the other hand, for the more relaxed dining establishment that we discussed last week, repeat business and customer satisfaction are the critical success factors. A suitable KPI for this business might be the number of customer complaints received during an established time period. It then becomes important to look at trends. Are complaints decreasing by providing excellent customer service?
In each case the KPI derived from a factor that was critical to the success of the business. Of course it would be important for each business to have a clear business plan that dictates their business goals. Without knowing what is really important to your business and where you want it to go, it will be difficult, if not impossible, to establish your success factors. You could end up measuring irrelevant factors, in other words factors that are not truly critical success factors at all.
Stayed tuned next week when we will discuss the third and final characteristic of a KPI: measurability. In the meantime, with questions about establishing and measuring your own set of Key Performance Indicators, please contact a Simons Bitzer Team Member at (317) 782-3070.
Wednesday, July 14, 2010
Key Performance Indicators Should Reflect Your Business' Goals
Last week we discussed an overview of the characteristics of good Key Performance Indicators. As promised, we will delve into each characteristic a little more thoroughly.
First, your business goals should determine what things you will measure. Here is an example:
A local mall cafe providing lunches to workers in the surrounding office buildings will need to serve its customers promptly and efficiently to meet its overhead as well as make a good profit. They choose not to encourage customers to linger at their establishment. Customer turnover is an important goal in their business plan.
On the other hand, a street front restaurant in the local shopping center may decide that high customer satisfaction will bring in repeat and higher-spending customers it needs. In this instance the goal is to encourage repeat business by eliminating any reason for customers complaints.
In each case the choice of the KPI to monitor will need to reflect the goal of the particular establishment. To determine what that KPI might be, we will need to look at the critical success factors that would drive achievement of that goal.
Come back next week to learn how your KPIs should be derived from your Critical Success Factors. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to speak to someone personally about establishing and monitoring your own indicators.
First, your business goals should determine what things you will measure. Here is an example:
A local mall cafe providing lunches to workers in the surrounding office buildings will need to serve its customers promptly and efficiently to meet its overhead as well as make a good profit. They choose not to encourage customers to linger at their establishment. Customer turnover is an important goal in their business plan.
On the other hand, a street front restaurant in the local shopping center may decide that high customer satisfaction will bring in repeat and higher-spending customers it needs. In this instance the goal is to encourage repeat business by eliminating any reason for customers complaints.
In each case the choice of the KPI to monitor will need to reflect the goal of the particular establishment. To determine what that KPI might be, we will need to look at the critical success factors that would drive achievement of that goal.
Come back next week to learn how your KPIs should be derived from your Critical Success Factors. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to speak to someone personally about establishing and monitoring your own indicators.
Tuesday, July 6, 2010
What Makes a Useful KPI For Your Business?
So what would make a useful Key Performance Indicator in your business? Some apply to almost all businesses, such as various financial ratios. But in deciding others that would be useful to your particular business, there are a number of things to consider. To be worhtwhile monitoring, the KPI should have these characteristics:
* Reflect the goals of your business
* Be critical to the success of your business
* Be measurable
* Point to the activities you might need to alter if things start to go off track
Stay tuned to future posts as we will be discussing each characteristic in further detail as well as sharing some examples. For more information about establishing your own Key Performance Indicators, please contact Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com. We're passionate about your success!
* Reflect the goals of your business
* Be critical to the success of your business
* Be measurable
* Point to the activities you might need to alter if things start to go off track
Stay tuned to future posts as we will be discussing each characteristic in further detail as well as sharing some examples. For more information about establishing your own Key Performance Indicators, please contact Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com. We're passionate about your success!
Monday, June 28, 2010
KPIs-Tools for Business Performance Management
Every business, large or small, regardless of industry, depends on getting certain things right on a regular basis. Survival depends on it. These things we like to call the Critical Success Factors.
Critical Success Factors relate to the business porcesses and activities that REALLY drive business results. At the top level, these are:
Processes and activities that are important to acquiring and holding customers
Processes and activities that determine revenue
Processes and activities that impact efficiency and productivity
Processes and activities that determine team morale
To know how well your business is managing these Critical Success Factors, you need a system of measurement. In effect, Key Performance Indicators ARE these measures. It's important to understand how you can develop a set of KPIs that will allow you to monitor your business' performance on these critical processes and activities.
We'll begin a series of postings related to establishing and monitoring Key Performance Indicators in your business. For more information or one-on-one consultation, please call Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com.
Critical Success Factors relate to the business porcesses and activities that REALLY drive business results. At the top level, these are:
Processes and activities that are important to acquiring and holding customers
Processes and activities that determine revenue
Processes and activities that impact efficiency and productivity
Processes and activities that determine team morale
To know how well your business is managing these Critical Success Factors, you need a system of measurement. In effect, Key Performance Indicators ARE these measures. It's important to understand how you can develop a set of KPIs that will allow you to monitor your business' performance on these critical processes and activities.
We'll begin a series of postings related to establishing and monitoring Key Performance Indicators in your business. For more information or one-on-one consultation, please call Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com.
Monday, June 21, 2010
The Next Great Wave of Innovation - Succeeding Through Turmoil
Do you see change as a threat or an opportunity? Our industries, our society and even our planet are in a state of flux as we struggle to come to terms with turbulent economies, dwindling resources and a changing climate.
In “The Sixth Wave”, a book on business and innovation, authors Moody and Nogrady predict that we are on the cusp of the next great wave of change for the future. They also demonstrate that periods of change in history have always been the time when the greatest opportunities exist for the introduction of new technologies, new products and services, and for inspired ideas about whole new ways of doing things.
If you see change as a threat, you’re taking a “glass-half empty” perspective. You probably say, “I can’t keep up with this constant technological innovation. There’s something new to learn every week.” You’ll be annoyed whenever there’s a new trend in management. You’ll wince whenever you hear of competitors introducing new business processes. You’ll see change as the slings and arrows of business misfortune.
On the other hand, if you see change as an opportunity, you’re taking a “glass-half full” perspective. You are likely to think, “Every time there’s a change, new niches open up for me.” You know that some of your competitors will be slow to adapt and you’ll be the first to step in and relieve them of a few customers. You’ll say to yourself, “I’m a small business. I have a small, flexible and effective team. Adaptability is my middle name. We’re the 'make it happen' people!”
If you take this attitude, business will become more of a game than a chore. You’ll feel freer to think creatively. You’ll try to communicate this attitude to your team. You’ll do so with a frank and open management style, because honesty is the best way to help people manage change. Fear of the unknown is one of the greatest impediments to change in the workplace.
During this time of transformation, stay alert and keep well informed. Look out for the winds of change. Seek advice. A Business Diagnostic and Performance Review from Simons Bitzer & Associates might be a good way to help you scan the external environment for changes in the industry that could have an impact on your business. This review will also analyze the internal operational strengths and weaknesses of your business.
Yes, it may mean major change for your business, but the way to look at that change is to see it as the opportunity for growth and improvement.
In “The Sixth Wave”, a book on business and innovation, authors Moody and Nogrady predict that we are on the cusp of the next great wave of change for the future. They also demonstrate that periods of change in history have always been the time when the greatest opportunities exist for the introduction of new technologies, new products and services, and for inspired ideas about whole new ways of doing things.
If you see change as a threat, you’re taking a “glass-half empty” perspective. You probably say, “I can’t keep up with this constant technological innovation. There’s something new to learn every week.” You’ll be annoyed whenever there’s a new trend in management. You’ll wince whenever you hear of competitors introducing new business processes. You’ll see change as the slings and arrows of business misfortune.
On the other hand, if you see change as an opportunity, you’re taking a “glass-half full” perspective. You are likely to think, “Every time there’s a change, new niches open up for me.” You know that some of your competitors will be slow to adapt and you’ll be the first to step in and relieve them of a few customers. You’ll say to yourself, “I’m a small business. I have a small, flexible and effective team. Adaptability is my middle name. We’re the 'make it happen' people!”
If you take this attitude, business will become more of a game than a chore. You’ll feel freer to think creatively. You’ll try to communicate this attitude to your team. You’ll do so with a frank and open management style, because honesty is the best way to help people manage change. Fear of the unknown is one of the greatest impediments to change in the workplace.
During this time of transformation, stay alert and keep well informed. Look out for the winds of change. Seek advice. A Business Diagnostic and Performance Review from Simons Bitzer & Associates might be a good way to help you scan the external environment for changes in the industry that could have an impact on your business. This review will also analyze the internal operational strengths and weaknesses of your business.
Yes, it may mean major change for your business, but the way to look at that change is to see it as the opportunity for growth and improvement.
Thursday, June 17, 2010
Is A Merger The Way To Grow Your Business?
Most businesses grow slowly. They acquire new customers, add more products to their range, and expand into new territories as their resources permit. However, increased competition can mean that this slow rate of growth is inadequate to retain existing market share. A business could also simply reach a plateau where further growth isn’t possible without finding new sources of capital and increasing the company’s risk exposure.
At times like these, business owners may well consider the possibility of merging their company with another business. The two organizations can be similar to each other or they can be complementary to each other, but at the end of the process they become a totally new business with a new leadership and a new culture.
There are benefits to merging.
Why might you want to merge your business with another business? You might want to extend your geographical reach or simply acquire a large number of new customers. You may need to diversify your product range into higher profit areas or you may require the capacity to fund the development of new products.
It’s estimated that about half of all mergers fail to achieve their projected goals. This means that great care needs to be taken before beginning the process of merging two enterprises.
What to look for in a merger prospect.
The ideal business to merge with is one that will complement yours. Their strengths will offset your weaknesses and the merged entity will be synergistically stronger than the two firms were individually. When evaluating a potential merger partner:
• Look at their management and decision making methods – are they similar to yours?
• Look at their culture. Is it positive? Is it compatible with yours?
• Is their marketing effective and well targeted?
• Is their approach to IT up-to-date?
• What is their risk profile – do they take too many chances or are they too risk averse?
Steps to merging.
The two companies must determine jointly how they will face the future as a unified force. Before a merger can take place there are several steps that each party must take:
• Extensive due diligence must be conducted on both businesses
• Conduct a SWOT analysis on both businesses
• Decide which products will be retained and which will be dropped
• Prepare a comprehensive model showing how the new entity will operate
• Know which employees are essential and which will be let go
• Agree on a management structure including who makes decisions and how they are made
• Agree on a system of remuneration
• Pre-negotiate issues of ownership and responsibility
Invest whatever time and funds are necessary before the event, verify all financial data and get financial and legal advice before proceeding.
At times like these, business owners may well consider the possibility of merging their company with another business. The two organizations can be similar to each other or they can be complementary to each other, but at the end of the process they become a totally new business with a new leadership and a new culture.
There are benefits to merging.
Why might you want to merge your business with another business? You might want to extend your geographical reach or simply acquire a large number of new customers. You may need to diversify your product range into higher profit areas or you may require the capacity to fund the development of new products.
It’s estimated that about half of all mergers fail to achieve their projected goals. This means that great care needs to be taken before beginning the process of merging two enterprises.
What to look for in a merger prospect.
The ideal business to merge with is one that will complement yours. Their strengths will offset your weaknesses and the merged entity will be synergistically stronger than the two firms were individually. When evaluating a potential merger partner:
• Look at their management and decision making methods – are they similar to yours?
• Look at their culture. Is it positive? Is it compatible with yours?
• Is their marketing effective and well targeted?
• Is their approach to IT up-to-date?
• What is their risk profile – do they take too many chances or are they too risk averse?
Steps to merging.
The two companies must determine jointly how they will face the future as a unified force. Before a merger can take place there are several steps that each party must take:
• Extensive due diligence must be conducted on both businesses
• Conduct a SWOT analysis on both businesses
• Decide which products will be retained and which will be dropped
• Prepare a comprehensive model showing how the new entity will operate
• Know which employees are essential and which will be let go
• Agree on a management structure including who makes decisions and how they are made
• Agree on a system of remuneration
• Pre-negotiate issues of ownership and responsibility
Invest whatever time and funds are necessary before the event, verify all financial data and get financial and legal advice before proceeding.
Tuesday, June 8, 2010
Our Top 10 Cash Flow Tips-Part 2 of 2
The best way to ensure that Cash Flow remains positive, timely and available is to have a Cash Flow Plan and Forecast. Below you will find additional tips on managing and possibly even improving your cash flow.
4. Set your credit terms carefully.
If the nature of your business requires offering credit, then it is important to set clear limits to your terms of credit.
5. Get payments in quickly.
Master the art of debtor management. Let debtors know how much time remains before due dates. Stay in close touch with major debtors as payment deadlines approach. Consider offering small discounts for early payment as an incentive.
6. Pay your creditors strategically.
Take advantage of credit terms and prioritize payments according to the consequences involved in going overdue. Wages, taxes and direct debits are at the top of the list for on-time payment; key suppliers may be prepared to wait a while to keep your business. Don’t pay early just to get a discounted price unless getting the discount is better than being without the cash.
7. Plan for the lumps.
Be aware of when lean cash flow patches are coming up and plan accordingly. Avoid funding major purchases from your business’ working capital unless you are sure you have the cash to cover it.
8. Get finance products working for you.
Overdrafts, premium funding, lease facilities and cash flow funding products can all be excellent tools to help match a business’ cash supply with planned outlays. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in.
9. Don’t incur tax and other statutory penalties.
10. Keep your hands out of the till.
Make cash drawings for personal purposes according to conservative cash flow forecasts.
For more information about cash flow projections, please contact a Simons Bitzer team member at (317) 782-3070 or visit us at www.simonsbitzer.com.
4. Set your credit terms carefully.
If the nature of your business requires offering credit, then it is important to set clear limits to your terms of credit.
5. Get payments in quickly.
Master the art of debtor management. Let debtors know how much time remains before due dates. Stay in close touch with major debtors as payment deadlines approach. Consider offering small discounts for early payment as an incentive.
6. Pay your creditors strategically.
Take advantage of credit terms and prioritize payments according to the consequences involved in going overdue. Wages, taxes and direct debits are at the top of the list for on-time payment; key suppliers may be prepared to wait a while to keep your business. Don’t pay early just to get a discounted price unless getting the discount is better than being without the cash.
7. Plan for the lumps.
Be aware of when lean cash flow patches are coming up and plan accordingly. Avoid funding major purchases from your business’ working capital unless you are sure you have the cash to cover it.
8. Get finance products working for you.
Overdrafts, premium funding, lease facilities and cash flow funding products can all be excellent tools to help match a business’ cash supply with planned outlays. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in.
9. Don’t incur tax and other statutory penalties.
10. Keep your hands out of the till.
Make cash drawings for personal purposes according to conservative cash flow forecasts.
For more information about cash flow projections, please contact a Simons Bitzer team member at (317) 782-3070 or visit us at www.simonsbitzer.com.
Tuesday, June 1, 2010
Our Top 10 Cash Flow Tips-Part 1 of 2
1. Know your business’ balance sheet thoroughly.
This may sound obvious; however, many people don’t know how cash flow works and its significance to sustaining their business. Many owners focus on their profit and loss statements alone. Unfortunately, healthy profits can mask an impending cash flow crisis. Profit and loss statements don’t usually contain the information required to make an adequate cash flow projection. For that, you need a structured balance sheet that includes all the influencing factors including debts, interest payments, inventory and so on. This is the basis for your cash flow projection which represents the likely incomings and outgoings over a particular period of time.
2. Set up a cash flow budget.
You need to focus on forward planning to generate a “best guess” about likely future sales and expenses. You can set up your own program in Excel. If you’re not familiar and skilled with Excel software, ask your accountant for help to set it up properly initially.
3. Review and update cash flow budgets regularly.
This is your best insurance against potential cash shortages. If your business has a predictable cash flow, then cash flow budgeting on a quarterly basis is often enough. The rule of thumb is that the greater the cash flow uncertainty a business faces, the more often a new cash flow budget should be prepared.
If cash is really tight, you might need to move to weekly projections and decide which invoices you’ll pay and whom you need to get payment from as soon as possible. Watch bank balances and make sure you don’t have checks waiting to be deposited. This can be time consuming, but you won’t be the first business that has had to do that from time to time.
Rapid growth sounds good but, ironically, too much of this good thing can bring on a cash crunch – which takes many business owners by surprise. Strong sales one month often means a cash shortage next month. By monitoring the business’ cash status you may be able to arrange credit from suppliers and banks to cover the temporary shortfalls. However, these arrangements take time to set up so you need to be prepared in advance.
This may sound obvious; however, many people don’t know how cash flow works and its significance to sustaining their business. Many owners focus on their profit and loss statements alone. Unfortunately, healthy profits can mask an impending cash flow crisis. Profit and loss statements don’t usually contain the information required to make an adequate cash flow projection. For that, you need a structured balance sheet that includes all the influencing factors including debts, interest payments, inventory and so on. This is the basis for your cash flow projection which represents the likely incomings and outgoings over a particular period of time.
2. Set up a cash flow budget.
You need to focus on forward planning to generate a “best guess” about likely future sales and expenses. You can set up your own program in Excel. If you’re not familiar and skilled with Excel software, ask your accountant for help to set it up properly initially.
3. Review and update cash flow budgets regularly.
This is your best insurance against potential cash shortages. If your business has a predictable cash flow, then cash flow budgeting on a quarterly basis is often enough. The rule of thumb is that the greater the cash flow uncertainty a business faces, the more often a new cash flow budget should be prepared.
If cash is really tight, you might need to move to weekly projections and decide which invoices you’ll pay and whom you need to get payment from as soon as possible. Watch bank balances and make sure you don’t have checks waiting to be deposited. This can be time consuming, but you won’t be the first business that has had to do that from time to time.
Rapid growth sounds good but, ironically, too much of this good thing can bring on a cash crunch – which takes many business owners by surprise. Strong sales one month often means a cash shortage next month. By monitoring the business’ cash status you may be able to arrange credit from suppliers and banks to cover the temporary shortfalls. However, these arrangements take time to set up so you need to be prepared in advance.
Monday, May 24, 2010
Key Performance Indicators - Tools for Business Performance Management
KPIs are the measure of a business' success at achieving its operational and financial goals. When the KPIs move in the right way, you know the business is operating successfully. When they move in the wrong way, you have a warning that something is not going to plan. But what are KPIs, how do you decide which you need to track, how do you go about putting a KPI system in place in the business, and how do they relate to benchmarking?
KPIs are quantifiable measures of how well you are performing an activity that is critical to the success of your business. Essentially, they should:
• Reflect the goals of your business
• Be critical to the success of your business
• Be measurable
• Point to the activities you might need to alter if things start to go off track
If you do not currently track your critical success factors, this may seem like a daunting task; however, you really just need to track 6-8 indicators that measure the truly critical processes and activities. In fact, a well designed and regularly monitored set of KPIs can provide you with:
• A knowledge of how your business is performing and
• Target the areas where immediate action ought to be applied
Goal setting and monitoring really are the basis of effective business performance management. There are literally hundreds of KPIs that could be established. To get some ideas on which KPIs are important to your business, please join us this Thursday for an interactive workshop entitled “Measuring Your KPIs” presented by Barb Bitzer, CPA. For more information, visit www.simonsbitzer.com.
KPIs are quantifiable measures of how well you are performing an activity that is critical to the success of your business. Essentially, they should:
• Reflect the goals of your business
• Be critical to the success of your business
• Be measurable
• Point to the activities you might need to alter if things start to go off track
If you do not currently track your critical success factors, this may seem like a daunting task; however, you really just need to track 6-8 indicators that measure the truly critical processes and activities. In fact, a well designed and regularly monitored set of KPIs can provide you with:
• A knowledge of how your business is performing and
• Target the areas where immediate action ought to be applied
Goal setting and monitoring really are the basis of effective business performance management. There are literally hundreds of KPIs that could be established. To get some ideas on which KPIs are important to your business, please join us this Thursday for an interactive workshop entitled “Measuring Your KPIs” presented by Barb Bitzer, CPA. For more information, visit www.simonsbitzer.com.
Monday, May 10, 2010
3 Tips for Smart Borrowing
Most businesses operate to some extent on borrowed money. Borrowing too much means you are paying more in interest than you need to. Borrowing too little means you are under financed and may not have enough capital to accomplish what you want to do. That is why you have to work out just how much money you will really need, and when you will need it, before you talk to anyone about borrowing funds for your business. Of course, you will also have to work out how to repay what you are borrowing. Here are just three tips for estimating your borrowing requirements.
Check your business plan
Start by taking a good look at your business plan. It should be an overall guide to both the amount you need to borrow and to the times when funds will be needed. If you don’t have a business plan that tells you this kind of information, create one before going any further.
Consider your vision for the business
Where do you see the business in three years from now? If growth is part of your vision it has to be funded somehow. Usually that means making an investment before you begin to get a return, and timing becomes a critical factor in ensuring your cash flow remains sufficient for business needs. Consider what resources your business will need to reach your vision. People and equipment are always necessary, but do not forget to plan ahead for other resources such as additional warehouse space or outside expertise (legal fees, marketing advice, etc.) that might also be needed.
Model the projected financial position of the business
You need to prepare a financial model of the business that will indicate the effects of borrowing the funds you need. This model should demonstrate that the extra funding injected will improve profitability sufficiently to cover the repayments you will have to make. It should also show clearly that the business will have adequate cash flow at all times until the loan is repaid.
Now you are ready to go to a lending authority and make an application to borrow the money you need. By doing your homework, you will know that you will not be borrowing too much or too little. You can be confident that the business will be able to repay the loan from the income it generates. You may also be more likely to impress the lender and get the loan. For help with business planning, budgeting, and financial modeling, please contact a Simons Bitzer team member.
Check your business plan
Start by taking a good look at your business plan. It should be an overall guide to both the amount you need to borrow and to the times when funds will be needed. If you don’t have a business plan that tells you this kind of information, create one before going any further.
Consider your vision for the business
Where do you see the business in three years from now? If growth is part of your vision it has to be funded somehow. Usually that means making an investment before you begin to get a return, and timing becomes a critical factor in ensuring your cash flow remains sufficient for business needs. Consider what resources your business will need to reach your vision. People and equipment are always necessary, but do not forget to plan ahead for other resources such as additional warehouse space or outside expertise (legal fees, marketing advice, etc.) that might also be needed.
Model the projected financial position of the business
You need to prepare a financial model of the business that will indicate the effects of borrowing the funds you need. This model should demonstrate that the extra funding injected will improve profitability sufficiently to cover the repayments you will have to make. It should also show clearly that the business will have adequate cash flow at all times until the loan is repaid.
Now you are ready to go to a lending authority and make an application to borrow the money you need. By doing your homework, you will know that you will not be borrowing too much or too little. You can be confident that the business will be able to repay the loan from the income it generates. You may also be more likely to impress the lender and get the loan. For help with business planning, budgeting, and financial modeling, please contact a Simons Bitzer team member.
Monday, May 3, 2010
Business Tax Changes in the 2010 HIRE Act
Below you will find an overview of the key tax changes affecting business in the recently enacted Hiring Incentives to Restore Employment (HIRE) Act.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
Monday, April 26, 2010
3 Little Keys to Low Budget Marketing
Even in a downturn, if you do not get in front of people and explain your unique value proposition then your chances of selling will be restricted to current customers or accidental passersby. Marketing is what prepares you for selling. However, there are three important things you should appreciate before you start.
1. Your target customers need to hear your marketing messages at least 7 times to influence a buying decision. You need to choose strategies that allow you to repeat them often enough to work for you.
2. Expensive campaigns do not guarantee sales – even when they are popular with the public. Every marketing dollar has to translate into sales.
3. A sure fire way to improve sales is to use multiple marketing channels. Your underlying message should be consistent, but you need to get it out in a variety of mediums.
If you are a small to mid-sized business on a limited budget, your tactics should be to optimize your spending so that you get in front of the right customers regularly and in a variety of ways.
To learn more about marketing on a budget, make time to come to the “All Things Sales and Marketing” summit on Wednesday, April 28th, from 8:30-11:30 at the Woodland Country Club. Visit http://dlvra.me/s/3ekLl for more details or to register.
1. Your target customers need to hear your marketing messages at least 7 times to influence a buying decision. You need to choose strategies that allow you to repeat them often enough to work for you.
2. Expensive campaigns do not guarantee sales – even when they are popular with the public. Every marketing dollar has to translate into sales.
3. A sure fire way to improve sales is to use multiple marketing channels. Your underlying message should be consistent, but you need to get it out in a variety of mediums.
If you are a small to mid-sized business on a limited budget, your tactics should be to optimize your spending so that you get in front of the right customers regularly and in a variety of ways.
To learn more about marketing on a budget, make time to come to the “All Things Sales and Marketing” summit on Wednesday, April 28th, from 8:30-11:30 at the Woodland Country Club. Visit http://dlvra.me/s/3ekLl for more details or to register.
Monday, April 19, 2010
Is An IPO The Way To Go?
Faced with tighter borrowing requirements, more small to medium enterprises are considering all the options. One of these is “going public” with an initial public offering (IPO). Knowing the facts about IPOs can help you determine whether going public is the right move.
Before looking at the advantages and disadvantages of IPOs, you need to ask whether your company is ready. First, you have to be growing quickly enough to justify an IPO. Accelerating growth over several years is a prerequisite to be a contender in the market. You also will have a justifiable need for substantial funding and should consider the timing in the market by looking at how similar public companies are doing. On average, it takes one year to prepare the IPO, so you need to think about the performance of your industry when your offer is ready.
Advantages and Disadvantages
Many small and medium sized companies have stepped up to the next level with an IPO. An initial public offering can enable you to raise substantial amounts of equity capital without incurring interest and needing to repay debt. In addition, it creates an objective market valuation of your company, builds your image and legitimacy, and provides funds for future acquisitions. Against these benefits, you need to consider the loss of control, as well as the cost and time involved, in going public.
Alternatives
A direct IPO is one alternative to a conventional IPO. For example, businesses can sell shares online by filing a Small Corporate Offering Registration (SCOR). While there is minimal external review and oversight required under this process, backing up your case with audited financial statements will make it easier to sell your offering on the open market. A major disadvantage of the direct IPO is the time and effort required to sell the shares and the risk that you might not be able to sell them.
The advantages of an IPO may seem irresistible but they need to be balanced against the disadvantages.
Before looking at the advantages and disadvantages of IPOs, you need to ask whether your company is ready. First, you have to be growing quickly enough to justify an IPO. Accelerating growth over several years is a prerequisite to be a contender in the market. You also will have a justifiable need for substantial funding and should consider the timing in the market by looking at how similar public companies are doing. On average, it takes one year to prepare the IPO, so you need to think about the performance of your industry when your offer is ready.
Advantages and Disadvantages
Many small and medium sized companies have stepped up to the next level with an IPO. An initial public offering can enable you to raise substantial amounts of equity capital without incurring interest and needing to repay debt. In addition, it creates an objective market valuation of your company, builds your image and legitimacy, and provides funds for future acquisitions. Against these benefits, you need to consider the loss of control, as well as the cost and time involved, in going public.
Alternatives
A direct IPO is one alternative to a conventional IPO. For example, businesses can sell shares online by filing a Small Corporate Offering Registration (SCOR). While there is minimal external review and oversight required under this process, backing up your case with audited financial statements will make it easier to sell your offering on the open market. A major disadvantage of the direct IPO is the time and effort required to sell the shares and the risk that you might not be able to sell them.
The advantages of an IPO may seem irresistible but they need to be balanced against the disadvantages.
Monday, April 12, 2010
Getting the Best R.O.I. on Your Assets
Every business, large or small, has assets that help them perform their work, or deliver the services they provide, to their clients. These physical assets represent a significant monetary investment for even a small business. Curbing operating costs and maximizing asset productivity (asset management) is vital to achieve a greater return on your investment in assets.
Tracking assets
Having an accessible record of the details of individual assets is necessary in order to manage them. There are a number of asset tracking software solutions available specifically designed for the small and medium sized business owner, such as barcodes, radio frequency ID devices (RFID), wireless smart tags and GPS. They can track anything from a fleet vehicle to a computer. The database stores all the lifecycle details of any item such as its purchasing, leasing and invoicing details, physical location and, where relevant, which employee is in possession of it.
In trade occupations it’s not unusual for tradesmen to lose or damage tools and machinery on the job. Though each loss or repair may be small, the cumulative effect can be great. Asset tracking software adds an element of accountability, and encourages a greater degree of responsibility, in the use of company materials. Assets can be instantly located, eliminating wasted time spent searching for them, and unnecessary expenditures to replace supposedly lost items.
In managing equipment over its lifetime, owners and managers typically adopt a run-to-failure “strategy”. Often, they do not see the value in investing time and effort into a regular maintenance regime. Unplanned and reactive maintenance places a significant cost burden on businesses. Planning and management of asset maintenance increases the life cycle of the assets and keeps them performing at peak productivity levels.
Servicing manuals, pictures, warranty contracts, maintenance history and vendor contact details can all be attached to an asset’s record in the asset database. Providing one central location for the information can get a down machine up and running again, with minimum loss of time. This can be critical in potentially avoiding OSHA fines on top of reduced productivity.
Additionally, asset management software simplifies the process of developing a proactive system of asset management that incorporates real time logging of problems by operators, regular maintenance, and early replacement of failing components.
Improved management visibility into the location, use and performance of assets has enabled progressive businesses to shift from a short term, reactive model of asset management to a more strategic long term program that ensures they derive the maximum return on their investment in assets. A streamlined asset management system will reduce asset loss, operating costs and downtime so as to minimize total cost of asset ownership.
Tracking assets
Having an accessible record of the details of individual assets is necessary in order to manage them. There are a number of asset tracking software solutions available specifically designed for the small and medium sized business owner, such as barcodes, radio frequency ID devices (RFID), wireless smart tags and GPS. They can track anything from a fleet vehicle to a computer. The database stores all the lifecycle details of any item such as its purchasing, leasing and invoicing details, physical location and, where relevant, which employee is in possession of it.
In trade occupations it’s not unusual for tradesmen to lose or damage tools and machinery on the job. Though each loss or repair may be small, the cumulative effect can be great. Asset tracking software adds an element of accountability, and encourages a greater degree of responsibility, in the use of company materials. Assets can be instantly located, eliminating wasted time spent searching for them, and unnecessary expenditures to replace supposedly lost items.
In managing equipment over its lifetime, owners and managers typically adopt a run-to-failure “strategy”. Often, they do not see the value in investing time and effort into a regular maintenance regime. Unplanned and reactive maintenance places a significant cost burden on businesses. Planning and management of asset maintenance increases the life cycle of the assets and keeps them performing at peak productivity levels.
Servicing manuals, pictures, warranty contracts, maintenance history and vendor contact details can all be attached to an asset’s record in the asset database. Providing one central location for the information can get a down machine up and running again, with minimum loss of time. This can be critical in potentially avoiding OSHA fines on top of reduced productivity.
Additionally, asset management software simplifies the process of developing a proactive system of asset management that incorporates real time logging of problems by operators, regular maintenance, and early replacement of failing components.
Improved management visibility into the location, use and performance of assets has enabled progressive businesses to shift from a short term, reactive model of asset management to a more strategic long term program that ensures they derive the maximum return on their investment in assets. A streamlined asset management system will reduce asset loss, operating costs and downtime so as to minimize total cost of asset ownership.
Monday, March 29, 2010
Key Skills for Entrepreneurs
What is it that makes a successful entrepreneur? What is it that drives sales and builds a business? Entrepreneurs do seem to have some common traits, including:
- physical and mental stamina
- a drive to take control of their own destiny
- a competitive instinct
- resilience in the face of defeat
- good judgment
- decisiveness
- the ability to inspire others
- an unfailing positive attitude
- great communication skills
This could be quite a daunting list, unless you recognize that some key entrepreneurial traits can be acquired or enhanced. They often need to be, as not all entrepreneurs are natural marketers when they start their business. Some work independently to expand their skills. Others work in partnerships, where the partners pool their skills and parcel out the work accordingly.
Successful entrepreneurs are constantly asking themselves questions. Is this product what the customers want? Is there a way to improve it? What are competitors doing in this area? Are they posing any new risks?
They want to keep an eye on all aspects of the business. Are there problems with operations or marketing? What are the profit projections for the next three months? Is everything adequately financed?
Basically, successful entrepreneurs have trouble sleeping unless they have a good sense of what is happening in all areas of their business. They need to be confident that all areas of their business are working well together.
If you are one of these driven entrepreneurs, you likely feel the need to understand your business at all levels. You can begin by setting up benchmarks and Key Performance Indicators for your business, monitoring them on a regular basis to make sure you are moving in the right direction. Another great place to start would be a Business Diagnostic and Performance Review, where you will get a holistic analysis of your strategic and operational position and an Action Plan to put you in control of your business…so that you can sleep easier at night.
For more information about setting up your Key Performance Indicators or conducting a FREE Business Diagnostic and Performance Review, please contact our office at (317)782-3070.
- physical and mental stamina
- a drive to take control of their own destiny
- a competitive instinct
- resilience in the face of defeat
- good judgment
- decisiveness
- the ability to inspire others
- an unfailing positive attitude
- great communication skills
This could be quite a daunting list, unless you recognize that some key entrepreneurial traits can be acquired or enhanced. They often need to be, as not all entrepreneurs are natural marketers when they start their business. Some work independently to expand their skills. Others work in partnerships, where the partners pool their skills and parcel out the work accordingly.
Successful entrepreneurs are constantly asking themselves questions. Is this product what the customers want? Is there a way to improve it? What are competitors doing in this area? Are they posing any new risks?
They want to keep an eye on all aspects of the business. Are there problems with operations or marketing? What are the profit projections for the next three months? Is everything adequately financed?
Basically, successful entrepreneurs have trouble sleeping unless they have a good sense of what is happening in all areas of their business. They need to be confident that all areas of their business are working well together.
If you are one of these driven entrepreneurs, you likely feel the need to understand your business at all levels. You can begin by setting up benchmarks and Key Performance Indicators for your business, monitoring them on a regular basis to make sure you are moving in the right direction. Another great place to start would be a Business Diagnostic and Performance Review, where you will get a holistic analysis of your strategic and operational position and an Action Plan to put you in control of your business…so that you can sleep easier at night.
For more information about setting up your Key Performance Indicators or conducting a FREE Business Diagnostic and Performance Review, please contact our office at (317)782-3070.
Monday, March 22, 2010
Family Business Transition – Who Gets the Baton?
Family business transition planning is frequently predicated on the assumption that someday the parents will be passing on the baton to one (or several) of their own children. What more satisfactory way of crowning their lifelong efforts and hard won success than to pass on the legacy to their own kin so they too can continue to enjoy and prosper from it.
However, children are never clones of a parent and generations also vary one from another. Changes in educational opportunity, in affluence, and especially in technology have created a different life style and set of expectations among generations from that of the business’ founder. This may translate as a lack of any particular commitment to or passion for the family business or a desire to take a different career path altogether.
Before attempting to develop a business transition plan based on passing it to the next generation you must ask yourself this key question: do the proposed successors have the necessary commitment and passion for the business that will see them through the long hours and tough times that are part of managing and growing a business?
Where there is absolutely no interest in the business demonstrated by the next generation, then, blasphemous as it may sound to the senior generation, selling it to a third party could well be the best decision – for the business and the heirs.
If you are still some way from a transition point, there may be time to develop a grooming program for candidate successors, including working up through the company to establish their knowledge of operations and their credentials with employees and customers, management training and so on. This provides you with the opportunity to evaluate their aptitude, reason for commitment, and level of passion.
Creating a family council opens up a formal forum for discussing succession planning openly and assessing the real wishes and passion of potential heirs to the business. If a child doesn’t want a role in the family business, it is better to arrange an alternative transition strategy that recognizes the fact. This may not necessarily involve selling to a third party though. It may be possible to hedge bets by bringing in external managers or transferring ownership to a trust to delay the need for a decision, at least for a period.
However, children are never clones of a parent and generations also vary one from another. Changes in educational opportunity, in affluence, and especially in technology have created a different life style and set of expectations among generations from that of the business’ founder. This may translate as a lack of any particular commitment to or passion for the family business or a desire to take a different career path altogether.
Before attempting to develop a business transition plan based on passing it to the next generation you must ask yourself this key question: do the proposed successors have the necessary commitment and passion for the business that will see them through the long hours and tough times that are part of managing and growing a business?
Where there is absolutely no interest in the business demonstrated by the next generation, then, blasphemous as it may sound to the senior generation, selling it to a third party could well be the best decision – for the business and the heirs.
If you are still some way from a transition point, there may be time to develop a grooming program for candidate successors, including working up through the company to establish their knowledge of operations and their credentials with employees and customers, management training and so on. This provides you with the opportunity to evaluate their aptitude, reason for commitment, and level of passion.
Creating a family council opens up a formal forum for discussing succession planning openly and assessing the real wishes and passion of potential heirs to the business. If a child doesn’t want a role in the family business, it is better to arrange an alternative transition strategy that recognizes the fact. This may not necessarily involve selling to a third party though. It may be possible to hedge bets by bringing in external managers or transferring ownership to a trust to delay the need for a decision, at least for a period.
Wednesday, February 24, 2010
Jeff Bowe, ACTUM Group, Presented
At the end of 2009, Simons Bitzer & Associates conducted a five question survey of Central Indian Business Leaders. We wanted to find out, among other things, what they felt their business challenges would be in the upcoming year. Overwhelmingly, we found that business owner and leaders were looking for more sales, more orders, more projects – and they did not have a large budget to get there.
With that in mind, we invited Jeff Bowe, ACTUM Group, to present an interactive sales training workshop at our firm last week. While we offer traditional accounting services, as well as outsourced, our true passion lies in helping small and medium sized business owners not only succeed but also maximize their profitability. We were please to host this workshop and we received outstanding feedback from our participants.
While I would encourage any owner or manager to inquire into Jeff Bowe’s training, I wanted to share a few of his key points for those unable to attend.
• Start selling to a smaller niche of people
• Use social media tools to narrow your market
• Focus on profit over volume
• Be perceived as the only one who does what you do in your market
• Ask your customers what they are really buying from you and focus your marketing efforts on that
For more information about Jeff Bowe and ACTUM Group, please visit www.ActumGroup.com
For more information about Simons Bitzer’s next workshop, visit www.SimonsBitzer.com
With that in mind, we invited Jeff Bowe, ACTUM Group, to present an interactive sales training workshop at our firm last week. While we offer traditional accounting services, as well as outsourced, our true passion lies in helping small and medium sized business owners not only succeed but also maximize their profitability. We were please to host this workshop and we received outstanding feedback from our participants.
While I would encourage any owner or manager to inquire into Jeff Bowe’s training, I wanted to share a few of his key points for those unable to attend.
• Start selling to a smaller niche of people
• Use social media tools to narrow your market
• Focus on profit over volume
• Be perceived as the only one who does what you do in your market
• Ask your customers what they are really buying from you and focus your marketing efforts on that
For more information about Jeff Bowe and ACTUM Group, please visit www.ActumGroup.com
For more information about Simons Bitzer’s next workshop, visit www.SimonsBitzer.com
Monday, February 15, 2010
Accountants Help Protect Small Business From Economic Crime
Globally, the number of businesses reporting economic crime, or fraud, increased from 37 percent to 45 per cent. Fully one-third of all crimes are discovered by chance, and no industry is immune. Sadly, the largest group of offenders is employees of the firms that have been impacted by the economic crimes.
Recently, a Daily Journal Publication, The Southside Business Exchange, published a news article discussing just this trend. The principals of Simons Bitzer & Associates were pleased to be interviewed for this article. Please visit the link below to read the story in it's entirety.
http://www.simonsbitzer.com/downloads/Southside%20Business%20Exchange%20January%202010%20Articles%20(2).pdf
Recently, a Daily Journal Publication, The Southside Business Exchange, published a news article discussing just this trend. The principals of Simons Bitzer & Associates were pleased to be interviewed for this article. Please visit the link below to read the story in it's entirety.
http://www.simonsbitzer.com/downloads/Southside%20Business%20Exchange%20January%202010%20Articles%20(2).pdf
Monday, February 8, 2010
For the Record
Behind every successful small business story there’s a lot of hard work and, yes, administrative effort. To really make your business prosper, brilliant ideas are only half the answer – you also need to ensure that your company is solid from the ground up. One way of establishing a solid business base is through good record keeping. While this may not be entrepreneurship’s most glamorous aspect, it is nonetheless a prerequisite to consistently good results.
Accurate and consistent records enable you to keep track of your company’s progress. Records show whether sales are up or down, which customers are spending and which are not, and whether any changes are needed. Without adequate documentation, making reliable business forecasts or looking back to see where you have been successful in the past is considerably more difficult.
Good records are also fundamental to the preparation of financial statements – which are necessary when dealing with banks and creditors, and also allow you to access information about your assets, liabilities and equity in your business quickly and systematically.
Small businesses receive money and property from a variety of sources on a regular basis. By using accurate records you can identify where your various receipts come from and separate non-business receipts from taxable income.
A simple but important function of records is to act as a supplement to your memory. For example, tax-deductible expenses may occasionally slip your mind. Without an adequate record keeping system, you will not be able to claim deductible outgoings at tax time – a loss which could be particularly detrimental to your business.
Records need to reflect the income, expenditure and credits that you note on your tax return. As a general rule, these figures will be the same that you use to monitor your business during the year. Keeping good records throughout the tax year, and not just scrambling to assemble documents when your return is due, also means that you will have accurate figures available for official inspection at all times.
Choose your manner of record keeping based on the type of small business you run. If you operate more than one small business, make sure that each operation’s record keeping is entirely separate. Stay tuned next week for more record keeping tips.
Accurate and consistent records enable you to keep track of your company’s progress. Records show whether sales are up or down, which customers are spending and which are not, and whether any changes are needed. Without adequate documentation, making reliable business forecasts or looking back to see where you have been successful in the past is considerably more difficult.
Good records are also fundamental to the preparation of financial statements – which are necessary when dealing with banks and creditors, and also allow you to access information about your assets, liabilities and equity in your business quickly and systematically.
Small businesses receive money and property from a variety of sources on a regular basis. By using accurate records you can identify where your various receipts come from and separate non-business receipts from taxable income.
A simple but important function of records is to act as a supplement to your memory. For example, tax-deductible expenses may occasionally slip your mind. Without an adequate record keeping system, you will not be able to claim deductible outgoings at tax time – a loss which could be particularly detrimental to your business.
Records need to reflect the income, expenditure and credits that you note on your tax return. As a general rule, these figures will be the same that you use to monitor your business during the year. Keeping good records throughout the tax year, and not just scrambling to assemble documents when your return is due, also means that you will have accurate figures available for official inspection at all times.
Choose your manner of record keeping based on the type of small business you run. If you operate more than one small business, make sure that each operation’s record keeping is entirely separate. Stay tuned next week for more record keeping tips.
Monday, February 1, 2010
Deducting Haitian Relief Contributions on your 2009 Tax Return
To encourage donations to charitable organizations working in Haiti, Congress recently passed and President Obama signed into law, a special measure making your cash contributions tax deductible in 2009 even though they are made in early 2010. The new law gives you flexibility in deciding when to claim a deduction for your early contributions.
Typically, if you file an itemized individual federal return and you want to deduct your charitable contributions, you can only deduct the contributions you made in that tax year. The earthquake hit Haiti on January 12, 2010. Under the normal rules, charitable contributions made to help Haiti would be deductible when taxpayers file their 2010 returns in 2011. The new law makes a special and temporary exception for Haiti relief.
Under the new law, you can treat a contribution made to help Haiti after January 11, 2010 and before March 1, 2010 as if made on December 31, 2009. You can decide whether to deduct your 2010 Haiti contribution on your 2009 return or your 2010 return. However, you cannot deduct the same Haiti contribution on both your 2009 and 2010 returns. You can, however, allocate multiple donations to more than one year. Of course, to take a charitalbe deduction of any kind, you must opt to itemize your deductions rahter than take the standard deduction.
Note that in order to qualify for the accelerated deduction,the contributions must be cash and must be made to a qualifying charitable organization. Some charities use names that sound or look like those of respected, legitimate organizaions yet may be phony.
With questions, please seek advise from your Certified Public Accountant.
Typically, if you file an itemized individual federal return and you want to deduct your charitable contributions, you can only deduct the contributions you made in that tax year. The earthquake hit Haiti on January 12, 2010. Under the normal rules, charitable contributions made to help Haiti would be deductible when taxpayers file their 2010 returns in 2011. The new law makes a special and temporary exception for Haiti relief.
Under the new law, you can treat a contribution made to help Haiti after January 11, 2010 and before March 1, 2010 as if made on December 31, 2009. You can decide whether to deduct your 2010 Haiti contribution on your 2009 return or your 2010 return. However, you cannot deduct the same Haiti contribution on both your 2009 and 2010 returns. You can, however, allocate multiple donations to more than one year. Of course, to take a charitalbe deduction of any kind, you must opt to itemize your deductions rahter than take the standard deduction.
Note that in order to qualify for the accelerated deduction,the contributions must be cash and must be made to a qualifying charitable organization. Some charities use names that sound or look like those of respected, legitimate organizaions yet may be phony.
With questions, please seek advise from your Certified Public Accountant.
Monday, January 25, 2010
Converting to a Roth IRA in 2010
The IRS provides limited opportunities for changing existing traditional IRA accounts to Roth IRAs. In the past, taxpayers who had adjusted gross income (AGI) above $100,000 were precluded from converting a traditional IRA to a Roth IRA. Beginning with the 2010 tax year, however, this limitation is lifted, thereby allowing many more taxpayers the opportunity to convert to a Roth IRA. The amount that you convert would be added to your taxable income this year and you would have to pay the additional tax, but amounts that you withdraw in retirement would be tax free. Additionally, a special provision may allow you to postpone reporting the income until the two following years.
Traditional IRAs allow you to fund a retirement account with pre-tax dollars. You pay tax on the money that you withdraw, presumably during retirement. You fund Roth IRAs with earnings on which tax has already been paid, but you do not have to pay tax when you withdraw the funds. Choosing which type of IRA best suits your personal situation involves a number of considerations, including projections of what your tax rate will be when you withdraw the money.
The rules governing IRAs are complicated. You should seek competent advice before making any decisions.
Traditional IRAs allow you to fund a retirement account with pre-tax dollars. You pay tax on the money that you withdraw, presumably during retirement. You fund Roth IRAs with earnings on which tax has already been paid, but you do not have to pay tax when you withdraw the funds. Choosing which type of IRA best suits your personal situation involves a number of considerations, including projections of what your tax rate will be when you withdraw the money.
The rules governing IRAs are complicated. You should seek competent advice before making any decisions.
Monday, January 18, 2010
How Quickly Can Your Business Grow?
As a business grows, it needs more resources and therefore more capital. It is important to understand another fact. The availability of capital for any business is limited, and it therefore follows that the growth rate a business can sustain and still survive is also limited. In other words, a business that grows too quickly will fail. A business that grows too slowly will deny its owners potential returns.
The fundamental issues which determine how quickly a business can grow are:
To learn more about projecting your cash flow and planning your growth, please attend our free, interactive workshop entitled "New Year: New Business Plan." For more information and to RSVP, visit www.simonsbitzer.com.
The fundamental issues which determine how quickly a business can grow are:
- The magnitude of its net profit and hence, market demand and cost structure.
- The willingness of the owners to reinvest after tax profit to finance additional resources.
- The availability of debt finance, which depends on the capacity of the business to service and the security that can be offered to lenders.
To learn more about projecting your cash flow and planning your growth, please attend our free, interactive workshop entitled "New Year: New Business Plan." For more information and to RSVP, visit www.simonsbitzer.com.
Tuesday, January 12, 2010
Common Mistakes Made During Business Planning
The performance of your business depends on whether or not you have a vision and more importantly a plan to realize that vision. At the end of the day, your business plan can be reduced to a couple of pages. During the planning process, however, there are some common mistakes that can be made.
If you are experiencing any of the above, please join us for our upcoming interactive workshop entitled "New Year: New Business Plan". Visit www.simonsbitzer.com for more information about this complimentary event!
- Many owners rely on a gut feeling rather than analyzing what is really happening.
- Few actually examine external factors affecting the business, such as completing a competitor analysis.
- Many owners are excited by their business and fail to have their plan reviewed by a neutral sounding board.
- Sometimes the plans are too lengthy and full of good ideas that may not get implemented.
- Tasks can be assigned to the wrong manager.
- Profit and cash flow forecasts based on actual activities are not used to plan the financial side of the business. They may be the result of guesswork (last year + 5% for example.)
If you are experiencing any of the above, please join us for our upcoming interactive workshop entitled "New Year: New Business Plan". Visit www.simonsbitzer.com for more information about this complimentary event!
Monday, January 4, 2010
New Year: New Business Plan
Every business should have a plan – yet few actually do. There are many reasons why you should plan properly. A focused business plan can provide you with direction. It sets, if you will, a lighthouse-something for which to aim.
A business plan can also help you make the right decisions about where you should allocate your resources and what actions should be prioritized. You cannot do everything at once (whew), so having a vision and a plan keeps you very focused.
Your business plan will also help you identify where the gaps are in your business model. If you follow the plan, it will be very clear where you need to take action first to address any areas of weakness.
Once you have your plan in place, share it with your team to ensure everyone is aligned with your vision and understands the strategies you are putting in place. Finally, it is important to measure everything, which is why Key Performance Indicators play such an important role in the business planning process.
If having a vision for your business is one of your resolutions for 2010, please join us for our upcoming interactive workshop where we will help you create a short form business plan that will keep you focused on your business performance!
Thursday, January 21st, 11:30-1:00, catered lunch included in this complimentary event. Please visit www.simonsbitzer.com for location and directions. RSVP by January 19th to rpotter@simonsbitzer.com.
A business plan can also help you make the right decisions about where you should allocate your resources and what actions should be prioritized. You cannot do everything at once (whew), so having a vision and a plan keeps you very focused.
Your business plan will also help you identify where the gaps are in your business model. If you follow the plan, it will be very clear where you need to take action first to address any areas of weakness.
Once you have your plan in place, share it with your team to ensure everyone is aligned with your vision and understands the strategies you are putting in place. Finally, it is important to measure everything, which is why Key Performance Indicators play such an important role in the business planning process.
If having a vision for your business is one of your resolutions for 2010, please join us for our upcoming interactive workshop where we will help you create a short form business plan that will keep you focused on your business performance!
Thursday, January 21st, 11:30-1:00, catered lunch included in this complimentary event. Please visit www.simonsbitzer.com for location and directions. RSVP by January 19th to rpotter@simonsbitzer.com.
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