In this fast paced small business world we live in time flies! As the sheet s fly off the calendar a small business owner and team should pause and reflect (financially) on a Monthly or Quarterly basis. If that did not happen for your business so far in 2013, now is a good time for a half-yearly Business Plan Review.
A Business Plan is a great stake in the ground, which will allow us to measure our expectations against actual results. To do that, we need to get our books in order, whether we do them ourselves or leverage a trusted partner. Here are 3 tips to prepare for the half-yearly business plan review:
1. Balance to 2012 Tax Return and prepare for Quarterly Estimated Taxes
Adjustments – Often overlooked, there are a few adjustments to the company books that are required to account for book to tax adjustments from the most recent tax return, including things like asset depreciation, non deductible expenses (ie 50% of meals & entertainment), and equity adjustments.
For Sole Proprietors, Partnerships or S Corporations, 2013 Estimated Taxes – are due April 15th 2013 for the 1st Quarter, June 17th for the 2nd Quarter, September 16th for the 3rd Quarter and January 15 2014 for the 4th Quarter. These payments are the key to avoiding a large tax bill later in the year.
2. Review Year-to-date Business Income and Expenses
Complete Bank, Credit Card, Loan or Line of Credit Reconciliations – The various bank statements relative to your business are the critical baseline to account for all business income (deposits) and deductions (expenses). We are not just talking about Checking or Savings accounts but any other Credit obligations as well.
Account Distribution – Print out a summary Profit & Loss and Balance Sheet per the review period timing. Take a look at each account listed and determine if the balances look reasonable, too high or too low based on your expectation. Do you see any accounts that are negative in either the income or expense category? These could be appropriate but also may be due to errors in the account classification. Your bookkeeper or accountant should be consulted.
3. Execute Tax Planning Strategies
Special Depreciation Allowance – The special “bonus depreciation” allowance is available to all businesses and applies to most types of tangible personal property (i.e. autos) and computer software acquired and placed in service in 2013. It allows small businesses to deduct 50 percent of the cost of qualifying property in addition to the regular depreciation allowance that is normally available.
Employee Benefits and Health Care – A small business can increase business expenses, therefore reducing taxable income by making certain employee benefits available with the added benefit of employee retention.
Simple IRA – A SIMPLE IRA plan provides you and your employees with a simplified way to contribute toward retirement. It reduces taxes and, at the same time, attracts and retains quality employees. And compared to other types of retirement plans, SIMPLE IRA plans offer lower start-up and annual costs … they are just simpler to operate.
Health Care Affordability Act – While businesses with 50 or more full time employees will have to pay a $2,000 penalty per worker if they do not offer health insurance, there is no penalty for smaller businesses.
Nonrefundable tax credits are available for qualified small business employers (no more than 25 full time equivalents with annual wages averaging no more than $50,000) for contributions make on behalf of its employees for premiums for qualified health plans. If you’re a small business owner who has been offering health insurance at any point since 2010, you may qualify for a tax credit. You can file a revised tax return to collect it.
Steve Abrew is the accounting genius behind Cascade Business Support. He is a results-oriented, detailed professional with comprehensive accounting, bookkeeping, payroll, and tax experience. His broad-cased business background and partnership approach provides a virtual controller or valuable back-office resource for your business. His extensive corporate experience and skills translate well into a passion of supporting and providing both personal and small business services. Outside of work, Steve and his wife Lauren are active “destination marathoners.”