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Volume 2 | Issue 6
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June 2010
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Dear Mark,
Which came
first the chicken or the egg? It seems as if many small
businesses are in similar situations right now when it comes to
business transactions. We are finding that small business
optimism is back in vogue right now. There is more chatter and
there is more business possibilities at the moment compared to the
past 18 months. However, small businesses are still slow with
commitment to new projects. We urge you to take advantage of
the current business environment and positive attitudes before summer
vacations and other obstacles begin distracting your clients and
potential clients (i.e. do what it takes to close the deal).
If you are a buyer, we continue to urge you to have patience as
better deals in almost every category are around the table.
If you would like to discuss your individual situation in more detail
and how to prepare for it contact us at (770) 664-8583.
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Different Forecasts For Different
Small Business Climates
Six Ways to
Keep your Business in Business
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 The recession is over! Well, if you are a
mega-billion corporation it is. These large corporations have
stabilized revenues (and some are growing again) and access to debt
and capital markets. The cash on some of their balance sheets
is challenging management to make investments, repurchase share
and\or to issue dividends.
Small businesses which depend on large corporate clients are
stabilized and looking to grow their business as well. Even
though they do not have access to debt and capital markets, they do
have revenue and margin growth as well as collectible accounts
receivable on their side.
However, small businesses which
depend on other small businesses or the retail consumer are facing
continued challenges once again. The positive attitude is back
on their side and revenues are up slightly, but direct costs are up
even more. The result is gross profit and net profits are flat
or down compared to a year ago. This group is also facing
fierce competition from businesses that might not be playing by the
rules. For example sign and print shops are losing very
competitive bids not by 1% or 2% or even 5%, but by 30% to 50%.
How can someone sell an item at such below market? Not paying
rent? Vendors? Taxes? Who knows, but the purchaser doesn't seem
to care, they are just happy they "got a deal".
Here are some solutions to
help position your business:
- Close
Deals Fast - go ahead and give
your client the extra incentive to close the deal today (i.e.
discount or grouping services for a discount).
- Prepare
for stable or lower revenues - Build cash balances aggressively
and reduce short-term debts and accounts payable balances.
- Increase
your Gross Profit (revenues less direct costs) - Improve work-line
efficiencies and receive discounts from vendors.
- Increase
Operational Efficiency (new equipment and processes)
- Work smarter, not harder and identify wasteful practices
and correct.
- Increase
Overhead Efficiency (reduce rents and expenses without
losing value) - Review and potentially reduce employee count.
Discuss with land lord rent reductions or move locations to
reduce overhead. Merge with competitor or like-kind business to
increase revenues and reduce total overhead (including employee
count) for combined business
- Prepare
for monthly revenue volatility - The consumer may still be volatile
with purchases - in "good" months build cash positions
to help with more challenging months.
If you would
like help positioning your business in these areas please contact
your Pro@ctive CPA team at (770) 664-8583.
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2nd Quarter Estimated Tax Payments
Due 6/15
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 Be certain remit your estimated tax payments and
vouchers by June 15th. Additionally, please keep a copy of your
checks and vouchers for your records and forward a copy to Pro@ctive
CPA for our records.
Remember
your Pro@ctive CPAs offer year end tax planning which allows us to
make the most of the tax rules and regulations depending on your
goals and we can re-calculate your estimated tax payments to allow
for a more breakeven scenario.
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IRS Circular
230 disclosure: To ensure compliance with requirements imposed
by the IRS, we inform you that any U.S. federal tax advice contained
in this communication (including any attachments) is not intended or
written to be used, and cannot be used, for the purpose of (i)
avoiding penalties under the Internal Revenue Code or (ii) promoting,
marketing or recommending to another party any transaction or matter
addressed herein
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Financial Ratio of the Month - Quick Ratio
The Quick Ratio equals cash plus
accounts receivable divided by total current assets.
QR = (Cash + Accounts Receivable) /
Total Current Liabilities
The Quick Ratio is an indicator of
liquidity. The higher the ratio, the more liquid the business
is positioned, which is generally a good statistic. Although be
wary of uncollectible accounts receivable.
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Contact Information
11770 Haynes
Bridge Road
Suite 205
Alpharetta,
Georgia 30009
phone:
(770) 664-8583
fax:
(678) 762-9413
web:
www.pro-active-cpa.com
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