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Cash Management

4 Posts authored by: Ebong Eka

As the end of 2017 nears, small business owners should consider strategies to maximize tax savings while increasing cash flow. Used wisely, these five tax strategies will help small business owners save on taxes, minimize tax liability and increase deductions.

 

1. Defer Income. Most small businesses are taxed on what’s known as a cash basis. A “cash basis” means when you receive cash or money from your customers, it's taxable in the year you received it. You also receive a deduction in the year expenses are paid. One way to minimize the income that comes in this year is to defer receipt of that income until the next year. For example, if you perform services for somebody in December, encourage your customer to pay you in January. That way you can defer income to 2018 and pay taxes on that income the following year.63623641_s.jpg

 

2. Invest for the Future. Pay for expenses in advance for things you plan on using in future years. For example, purchase new vehicles for your fleet, computers, furniture or other major items you considered making next year now, so you can get the deduction for them. Additionally, if you have a depreciable asset like a car, furniture and fixtures, you may be eligible to take a full deduction using IRC Section 179. That allows you to deduct the complete amount you paid for an asset the year in which you purchased it. Finally, consider purchasing additional inventory – especially if you know that you're going to use that inventory, the inventory is going to be sold, or you have a client who will want to buy it. Accelerate your expenses in the current year to defer the benefit for future years.

 

3. Accelerate Retirement Contributions. If you and your employees have a retirement plan for your business, encourage your employees to accelerate what they will do to contribute before year end. If you have a matching program, you may have the ability to take a deduction for the amount you match. Also, if you offer bonuses or incentive pay and you're not an accrual base tax payer, consider paying the bonus before year end, so you can take the deduction on your business return. Note that an “accrual basis” means income is taxable when an income event has occurred but cash hasn’t been received yet. Expenses are deducted when they have been incurred or when they are owed.

 

4. Pay State Taxes Now. If you are taxed on a cash basis, you can get a deduction on state taxes paid before the year’s end. If you know you have a state tax liability for 2017 to be paid in 2018, make the payment before December 31 so you can take the deduction.

 

5. Be Charitable. Ever wonder why there's a line of people at Goodwill stores days before the end of the year? The simple reason is many people want to be able to take a tax deduction for items donated to charities.  Make sure you talk to your tax advisor or CPA-enrolled agent to find out your eligibility and to determine how much you'll be able to deduct on your tax return.

 

Implementing the right tax strategies at the end of the year can put you in greater control of your cash flow – always a good plan when heading into a new year.

 

About Ebong EkaEbong+Eka+Headshot.png

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective on small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

     

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Over 2.4 million small businesses are owned by military veterans, according to the Small Business Administration. In fact, a recent SBA study found military service has a significant impact on self-employment: Veterans are 45 percent more likely than non-veterans to be self-employed.

 

For the self-employed, finding the right business and tax deductions to lower liabilities is important for proper cash flow. With this in mind, here are the top four tax breaks and strategies for veteran-owned small businesses:

 

1. Moving Expense Deduction: If you have unreimbursed moving costs to a new location, you may be able to deduct some of those costs on Form 3903. Speak with your CPA or Enrolled Agent to get more information, ensure your eligibility, and determine how much you may be able to deduct.62488489_s.jpg

 

2. Reservists’ Travel Deduction: If you’re a reservist whose reserve-related duties take you more than 100 miles away from home, you can deduct your unreimbursed travel expenses – even if you don’t itemize your deductions.

 

3. Uniform Deduction: You can deduct the costs of certain uniforms you can’t wear while off duty. This includes the costs of purchase and upkeep. You are also required to reduce your deduction by any allowance you receive for these costs.

 

4. Work Opportunity Tax Credit (WOTC) for unemployed people and veterans: Hiring veterans also provides tax advantages and the credits can be sizable. But look closely at your situation, because there are a number of variables to consider:

 

    • Qualified Long-term Unemployment: If you hire a veteran that begins work between January 1, 2016 and December 31, 2019 – and the individual is employed for 27 consecutive weeks or more and works at least 120 hours – you can claim 25 percent of first-year wages paid up to $6,000 for a maximum income tax credit of up to $1,500.

 

Additionally, if your new hires work 400 hours or more, you can claim 40 percent of first-year wages up to $6,000 for a maximum income tax credit of up to $2,400.

 

    • Short-term Unemployment: You may be eligible to receive a credit of 40 percent of the first $6,000 of wages (up to $2,400) if you hire veterans who have received unemployment benefits for at least 4 weeks.

 

    • Long-term Unemployment: You may be eligible to receive a credit of 40 percent of the first $14,000 of wages (up to $5,600) if you hire veterans who have received unemployment benefits for longer than 6 months.

 

    • Veterans with Services-Connected Disabilities: This is part of the existing Work Opportunity Tax Credit for veterans with service-connected disabilities who are hired within one year of being discharged from the military. The credit is 40 percent of the first $12,000 of wages (up to $4,800).

 

    • Long-Term Unemployed Veterans with Services-Connected Disabilities: There’s also a new credit of 40 percent of the first $24,000 of wages (up to $9,600) for companies that hire veterans with service-connected disabilities who have received unemployment benefits for longer than 6 months. The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations.

 

By using the right tax strategy, you can lower your taxes as small business owner. Make sure you speak with your CPA, enrolled agent, or tax advisor to check if you and your business are eligible for any of these tax credits and deductions.

 

    CLICK HERE TO READ ARTICLES MORE FROM SMALL BUSINESS EXPERT EBONG EKA

 

Related Article: Service Members & Veterans

Related Article: 7 Resources for Military Veteran Small Business Owners

Related Article: Why Veterans Make Great Entrepreneurs

 

 

About Ebong EkaEbong+Eka+Headshot.png

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

      

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Cash is King.

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Being a small business owner, having enough cash is really important while cash flow is paramount. If you want to stay in business and be successful, cash is one of the areas you must remain laser focused. Many small business owners focus on sales, which is good, but if you don't collect the cash from those sales, you may quickly go out of business.

 

I'm going to share the four cash flow management mistakes that may cause your small businesses to fail and why you must avoid them.

 

1. Poor due diligence on accounts receivable

 

In other words, poor credit granting procedures. If you give credit to people without doing the proper due diligence, collecting on those receivables may become a big problem. Imagine getting a mortgage and the mortgage company doesn’t check your credit history and credit report – that’s similar to not evaluating the credit histories of the customers you offer credit. There are several services that can provide this service for you as well as check your customers’ Dun and Bradstreet report. Not doing your due diligence is a huge problem to the success of your business, especially if you plan to offer credit to your customers.

 

CLICK HERE TO READ ARTICLES MORE FROM SMALL BUSINESS EXPERT EBONG EKA

 

2. Not negotiating with your creditors

 

Speak with your vendors about opportunities for different terms and pricing based on your credit history before purchasing products from them.  Some small business owners may not be used to negotiating the terms of purchase but if you don’t ask you will never know. Depending on the size of what you're buying, you may have flexibility in negotiating when you pay them back, how you pay them back, and a lower interest rate associated with paying them back. For example, there are a lot of situations where small businesses will buy inventory up front and not realize that they had the opportunity to pay later - therefore restricting cash on hand and less cash flow to manage operations.


3. Buying inventory too soon

 

Buying too much inventory before you have a proven sales channel is a waste of cash. If you buy too much inventory hoping you'll sell the products without knowing exactly how is one of the biggest problems small businesses face. If your product is susceptible to seasonality, changes in market sentiment or consumer behavior, you are running the risk of having tremendous amounts of inventory with no ability to sell them.

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10 CASH FLOW TIPS FOR SMALL BUSINESSES

 

4. Not collecting on your accounts receivable

 

As a small business owner, asking your customers to pay you on a timely basis may be difficult. In my experience, when a small business I have worked with in the past has a sizeable number of accounts receivable on their balance sheet, I'll ask them, "How long have your accounts receivable been outstanding and do you have a schedule of collections?” Remember, this is your money and you have to be relentless in collection because you've already performed the services or shipped the product – the cash owed to you is necessary to grow.

 

As the saying goes “Cash is King!” and without the cash, it becomes extremely difficult to stay in business – let alone grow your business.

 

About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

           

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

What is the first thing you think of when you hear the word “budget?” If you are like many small businesses I work with, you probably cringed.

 

Well, don’t cringe anymore. You don’t have to be a certified public accountant, financial wizard or Microsoft Excel genius to create a useful budget for your small business. Budgets are not foolproof but necessary if you want to scale your business.

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So why are budgets important to the success of your small business?

 

A budget is a financial forecast to help you estimate your income and expenses for a given period of time. Your budget also allows you to plan for necessary expenses to run your business. Budgets help you estimate the taxes you will owe the Federal and state government, determine your business cash flow needs, and evaluate whether you can buy new equipment or new office space.


As you plan for 2017, here are seven budgeting tips to consider:

 

1. Plan large purchases by order of importance

Think about what large purchases – from equipment such as computers to new office space – you may need this year and set aside funds. Doing this exercise is a major component of good cash flow management.

 

2. Revisit the relationship between expenses and sales

In other words, review your largest expenses to understand how they contribute to sales. If you purchase new equipment, ask yourself how using it will add to your bottom line. Doing this will help you justify and prioritize purchases.

 

3. Effectively communicate to employees

Make sure your employees are aware of how expenses impact the bottom line – favorably and unfavorably. If you need to decide between purchasing new laptops (that everyone would want) or expensive office equipment such as furniture, it is important for your people to know how such decisions impact the bottom line. Employees who understand the goals can help the business achieve them.

 

Click here to read more articles on budgeting

 

4. Monitor your budgets

Revisit your budget on a monthly basis to determine whether your business is on track to overspend or underspend this year.

                                                                                                                                                                                                  

5. Compare budgeted numbers to actual

There’s a saying that every small business owner should remember: “What gets measured gets accomplished!” Compare your year-to-date progress to what you budgeted to make sure your goals are on track. You will have some insight on the reasons if your numbers differ from the actual amounts.

 

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6. Cushion the pending fall

"No business plan survives the first contact with customers," says serial entrepreneur and Stanford University professor Steve Blank. In my experience, budgets generally don’t survive either – something always gets more expensive. It's imperative to create a cushion (room for overages) in the event you underestimated expenses for the year – and make it a given something unexpected will pop up.

 

Related article: Smarter Tax Moves for Small Businesses

 

7. How much will the largest expenditures really cost?

Get firm commitments or quotes from vendors for your large expenditures for the year. If necessary, sign contracts to ensure those costs. Budgets are important because it helps you determine how much cash is available and how much is available for new projects or expanded business goals.

 

Additionally, banks and investors may want to see your budget after they ask, “What will you do with the money we give you?” Investors want to know their funds will be put to good use and a budget will show how their funds will be maximized.

 

Whether you want to sign a new office lease, buy new equipment, hire employees, acquire a new business loan or estimate your business’ expected income and profits, budgets are not only important but necessary tools for a thriving and healthy business.

 

About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

 

Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.

 

Web: www.ebongeka.com or Twitter: @EbongEka.

 

Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 

Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

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