Gabrielle M. Luoma, CPA, PLLC

2009 has been a year of serious contemplation by most business owners. I see this past year as a year of repositioning. Repositioning in business can mean different things to different people. Here are some different areas that businesses have been reviewing:

1.  Do you have the best clients?

Reevaluating your client list is probably the first thing to look at when planning your future year. Your marketing plan should focus on the best client fit for you. If the current client list does not fit your focus, think about whether or not you should keep particular clients. Follow the 80/20 rule in these matters. If 80% of your stress comes from 20% of a particular client then reevaluate whether keeping them is worth the trouble. You will need room for the new clients coming in 2010.

2. Are your products and services the best out there? If not, what should you do to improve?

Take a step back and ask a few of your valued customers. They are sure to be honest and will give you some insight into your business. Look at the services that produce the most return on their investment and focus on those. How do you know which products and services are doing the best? Financial analysis or reviewing your books for that information is the easiest and most efficient way.

3.  Are you losing time on different projects? Are we missing critical moments that are costing the company money and time?

Review current systems to see if there are inefficiencies. Flowchart them or put them on a piece of paper and then tear the system apart. Bring your team in to evaluate them with you. You never know what ideas will come out of this analysis that could save you thousands of dollars.

4.  Have you evaluated your strengths and weaknesses, opportunity and threats?

It’s called a SWOT analysis. This analysis can help you decide on which areas need to be focused on most. This should be done at least once a year.

5.  Are you totally lost at this point and feeling all alone? Do you have so many issues you don’t know where to begin?

You need a business coach to help you get through the hard stuff. Business or Executive Coaching is a great way to keep business owners motivated and moving. They keep you accountable for making progress and can give you tons of helpful hints, ideas and development opportunities.

In 2010, businesses that do the hard work now will definitely reap the benefits and will be more successful. Ultimately, you will have to ask a lot of questions of yourself and others before you can have a realistic view of the future. Your bookkeeping and financial records can answer the important ones that matter most. If you’re confused how they can help or don’t know where to begin, please give us a call. We can help.

Believe it or not, the New Year is just around the corner, leaving many business owners scrambling to create a business plan for 2010. A sound budget is one of the cornerstones of any enterprise, large or small, and taking the time to plan ahead makes all the difference in crafting a realistic plan that will help your business grow stronger and more profitable.

If you’re a small business owner tasked with budgeting your resources for next year, keep the following tips in mind:

• Budget conservatively: It can be difficult to accurately predict income or expenses, so err on the side of caution. Assume that costs will be higher than anticipated and that income may be lower, and then craft a budget tailored to those pessimistic figures. You’ll be prepared for the worst, and if business in 2010 is as good as (or better than) you hope, it will come as a happy surprise.
• Be flexible: A budget is a plan, but it’s never set in stone. You may need to adapt or even rewrite your budget after the first quarter or half of the year. It’s important to factor in safety margins on spending. Set aside some money in an emergency fund, and try to assess each unexpected cost on an individual basis.
• Consider projected cash flow: Cash flow is the focus of your budget, and can usually be broken down into three categories:
  • Projected sales: How much income you expect to see this year
  • Direct cost of sales: The cost of each sale in terms of shipping, customer service, materials, and/or labor in production.
  • Fixed costs or overhead: These are costs that exist regardless of your sales, ranging from administrative expenses to office supplies and utilities.
• Use last year’s numbers as a basis: Last year’s figures can provide a rough scale for your 2010 budget estimates. Don’t get too attached to them, however, since costs and sales can vary widely from year to year.
• Involve the right people: Depending on the size of your company, it may be necessary to create or request budgets from each department. Even if you’re creating only one budget for the entire business, ask essential team members to contribute their thoughts and expertise. Getting the advice of a CPA or other financial expert can also help make your budget more realistic and viable.
• Be realistic: As you consider the advice of your department heads and your CPA, as well as last year’s figures, do your best to be realistic. It might be nice to assume that sales will rise by 50% next year, but it’s prudent to assume that’s not going to happen. If the unexpected occurs, either good or bad, will your business be prepared to sell more product or spend a little more than you had anticipated? Plan for as many contingencies as possible and do your best to use all the expertise and information available to you.

As we approach the end of another calendar year, it can be tempting to clear out all those backlogged tax files and start fresh for 2010. But don’t start feeding all those old records to the shredder just yet—first, consider the following.

As a general rule, CPAs recommend hanging onto the past three years’ worth of tax records. That’s equivalent to the federal government’s statute of limitations for questioning or auditing your tax information. There are a few exceptions—some states have up to four years to examine your return, and the statute can be extended or removed in cases of fraud, significant income omission, or tax evasion. But taxpayers who have filed in a timely manner and paid any outstanding taxes by the due date can confidently purge any records three years after the date the return was filed.

It’s important to note that the three-year rule only applies to supporting documents and information related to your tax return. Other records, specifically those that detail capital assets, should be kept until the end of the statute period following their liquidation. Below are some examples:

• Tax returns: Although supporting documentation can usually be purged after the three-year mark, it’s wise to keep the actual returns themselves. These can prove invaluable in securing a loan or applying for insurance.
• Income and expenses: Hang onto any and all documents that verify your income for at least three years after you file. These include W-2s, 1099s, bank statements, and brokerage statements. Records of business-related expenses should also be kept.
• IRA contributions: Retain records of non-deductible contributions until the money is withdrawn, to avoid getting taxed twice on those funds.
• Stock information: Keep all records of stock ownership for at least four years after the sale of your shares. In the event of an audit, you’ll need these to verify any profit or loss resulting from the sale.
• Stock and mutual fund statements: Any stock dividends that are reinvested will reduce the amount of capital gain, thus lowering your taxable income. These statements should also be kept for at least four years after the sale, to provide a record of reinvested dividends.
• Home purchase and renovation receipts: If you’ve purchased a home or made significant improvements to a property you own, hang onto these records for at least four years after the sale of the property.

When in doubt as to whether to get rid of tax records, it’s best to give your CPA a call. He or she can help you determine the importance of the document and whether you’ll need to reference it down the road.