| Dear Mark,
Have you
heard the media reports about the slowing
economy? It seems as if fear is beginning to
flow through some of our veins again!
Especially since the last three quarters of GDP
have all been reduced from the original
estimate. We urge you to stop listening to
every news report (usually "bad" news anyway) and
focus more on solutions for your family and
business. While the economy may still be in
challenging times, there are also opportunities
ahead.
Taking
advantage of these opportunities means that change
will be necessary. Small businesses will need to
be more efficient, creative and innovative to
succeed. This month's edition of Proactive
Updates provides guidelines on how your business
can succeed!
Please feel
free to contact us if you have any
questions.
As always best
wishes,
Mark Wyssbrod,
CPA |
|
Needed: Working Capital!
Keeping Your Business in
Good Health |
 Small
businesses have their backs against the
wall! They feel ill. The symptoms are
cash flow problems, and the issue is working
capital. Prior business model short-falls
have caught up with many small businesses
resulting in too much debt. The crumbling
financial positions of these troubled companies
will create a high rate of bankruptcy during Fall
2010 through Spring 2011. Rebuilding working
capital and perpetual fine-tuning of daily
operations is what will be needed in order to
survive.
Companies
understand cash flow because it is easy to tell if
more money is coming in than going out.
However, a better judge of your business position
is working capital.
What is
Working Capital?
Working capital are your Current
Assets (cash, accounts receivable and inventory)
minus Current Payables (accounts payable, credit
card payable, line of credit). A small business
wants as much working capital as possible. A
neutral or negative amount is a warning sign of
potential trouble ahead.
Ways to
Increase Working Capital
There are a
number of ways working capital can be
increased:
- Increase profitability through
increasing revenues and reducing costs and
overhead expenditures
- Become more efficient with your
production cycle
- Review overhead expenses and
determine what can be eliminated
- Cut costs (in $) and time without
losing value
- Use new profits to rebuild current
assets, then reduce short-term liabilities and
ultimately begin reducing long-term
liabilities
An additional option to
increase working capital is to raise long-term
Debt or Equity. This may sound counterintuitive to
the recommendations above; however, the net result
is that it will increase the amount of cash (a
current asset). Be mindful, however, that an
increase in long-term debt will increase your
mandatory monthly cash outflow and an increase in
equity will dilute ownership
interest.
Poor cash flow may be one
symptom of an unhealthy amount of working capital.
The solutions might be more than just sell
more! To learn more about working capital
and your business position please contact
us. |
| Deadline
Reminders
Tax
Estimates are
Due |
 With each
new month comes more deadlines. The following are
a few you should keep in mind:
- 9/15/2010 - 3rd
Quarter 2010 Tax Estimates are due - contact us
if you would like us to calculate for you or if
you would like to have any tax planning services
provided
- 9/15/2010 - Final
tax deadline for annual year end corporations (C
or S), partnerships and trusts
- 10/15/2010 -
Final tax deadline for individuals
|
Do I Have To 1099 Everyone in
2011?
Keeping Up with the New
Requirements |
|
The Health Care Act of
2010 has a host of new compliance and
regulations. One of the rules is the
requirement beginning in 2011 for businesses to
issue a 1099-MISC to all businesses which it wrote
checks, cash or had credit card charges
with. As you can imagine the paperwork and
time would be enormous.
The following are our
thoughts on the matter:
Reduces Fraudulent
Expenses
Congress is
not only worried about businesses accurately
reporting revenue, they are also concerned with
fraudulent expenses. This new rule will require
you to issue a 1099 if it was really an expense,
thus cutting down on the amount of falsified
expenses. You will also need to show a
reconciliation of 1099s you receive vs. revenues
you report due to timing differences.
What You Need from Your
Vendors
Have
contracts with all of your vendors and a W-9 Form
on file for each of them. You can download a W-9
form here:
http://www.irs.gov/pub/irs-pdf/fw9.pdf.
Additionally, you may want to have each of your
vendors provide a copy of their Worker's
Compensation insurance policy for your
records.
Possible
Exceptions?
Congress
is working on an exception for credit card
charges. Instead of a business issuing 1099s for
credit card charges, a business would 1099 the
credit card company. The credit card company would
then 1099 the respective business.
Who Can
Help
Bookkeping and
Tax Preparation firms will be able to assist in
issuing the 1099s in addition to banks. Many
businesses migrating to online banking.
Banks may be the biggest winners in the new 1099
rules. Since banks know who you write your
checks to and have most of the 1099 information,
believe banks may charge a fee,to issue the
1099s.
Please contact us to
discuss other ways the Health Care Act of 2010 may
affect your
business. |
|
| 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 | | |
|
Financial Ratio of the Month
- Accounts Receivable
Days
Accounts Receivable
Days (ARD) reflects the average length of time
between sales and receipt of payment. It is
different than Accounts Receivable Aging Summary
which indicates the time an invoice is
outstanding.
ARD = (Accounts
Receivable / Sales) x 365
ARD can be a barometer of
your overall liquidity. The lower the ratio
the
better! |
| Contact Information
11770 Haynes Bridge
Road
Alpharetta, Georgia
30009
phone:
(770)
664-8583
fax:
(678)
762-9413
|
| |
