Using credit cards instead of cash to make major purchases such as business equipment can produce significant bonuses. Consider using one or two bonus paying credit cards strictly for business. Note that it will be necessary to break down the items charged to the card into expense categories for record keeping. So, you may want to limit your use to major purchases and retain all credit card bills and receipts.
Many employees have cell phones. However, a liability question comes up if an employee gets so distracted while driving and an accident results. Employers have been held liable and required to pay substantial damages. We strongly suggest you adopt a cell phone policy and include it in your employee manual that prohibits employees from using cell phones while driving on company business.
Base your prices on profit goals, not on sales goals. Businesses tend to measure success by growth in sales. Instinctively, this leads to cutting prices to boost sales. Price your goods or services by trying to enhance profits rather than inflating sales. How much more must you sell to avoid losing profits when you cut prices? If you raise your prices, how much could sales fall without hurting profits? Intuition says you'll lose business and profits will fall if you raise prices. However, it's proven that higher prices usually will add to profits.
Think about this: If you have a 45% gross profit margin and you raise profits 5%, you could lose 10% of sales and still have the same profit. But, cutting prices by 5% means you must increase sales 13% to maintain the same profits. One way to "play" with different assumptions like the above is to use "breakeven analysis". If you would like us to prepare a break-even analysis worksheet and help you interpret its implications, please contact us.
Special rules apply to deductions for travel expenses, gifts, meals and entertainment, automobile, boat, airplane, cell phone and computer usage.
The IRS requires substantiation by adequate records or sufficient evidence corroborating the taxpayer's own statement of:
- The amount of business expenses
- The time and place of the expense
- Thebusiness purpose
- The business relationship of the persons involved
Contact us for specifics in your situation.
We have noted many small businesses spend too much time on matters that could best be performed by outside parties or eliminated through better planning. Simple changes will leave more time available to increase income. Planning can be used to reduce wasted time, such as employee driving time between jobs. Outsourcing bookkeeping and payroll often makes sense. Why spend hours trying to keep these records when we can provide this service with skilled staff? We're suggesting you look seriously at how you and your employees spend their time. They should focus their time on the tasks that make you the most money.
Please give us a call if you would like more information on the bookkeeping services we can provide.