Monitor Your Accounts Receivable

Many business find themselves struggling with accounts receivables that stretch out as far as 60 to 90 days past due. Your inability to collect your accounts receivable in a timely manner could have a severe impact on your cash flow, leaving you strapped during a busy selling season.

Manage Your Debt Effectively

Credit cards finance a large portion of business debt. Therefore, it is important to always review your credit cards statements for interest rates that may have spiked. If they have, you need to try and refinance to a lower interest credit card. Also, make sure that you are making your payments on time. The fine print of some credit cards can slam you with hefty penalties and interest rates if you are even one day late.

Review Your Inventory

If your business carries any type of inventory, now is the time to take stock. Take a look at your existing inventory and re-think slow moving items before the end of the tax year. In order to take a deduction for slow moving inventory on your taxes, you must make an effort to reduce the inventory by discounting, special offers or even selling off items to another vendor. If discounting fails to generate sales, you can then take a deduction. If you are in doubt as to how to handle this issue, talk to a tax professional.

What are the benefits of establishing a company credit card? Consider:

1. The ability to separate personal and business finances.

2. Business discounts offered by many business suppliers.

3. Special introductory offers.

4. Business rewards.

5. Higher credit limits and the possibility of more easily securing additional credit lines and loans, if needed.

Advantages of a SBO 401(k) include:

· High contribution limits: 25% of compensation or 20% of modified net profit for unincorporated business owners.

· Potential loan source: you can borrow up to either 50% of your plan balance or $50,000, whichever is less.

· Contributions are deductible: these plans allow you to deduct plan contributions of up to 25% of eligible compensation up to $210,000 for 2005 and $220,000 for 2006.

Disadvantages:

· Employees other than business owners are not eligible to participate.

· If your business is incorporated and you earn W-2 wages of $176,000 or more. The benefit of a SBO 401(k) is being able to make the maximum amount of contribution possible. Since the dollar limit is $44,000 for 2006, adopting a SBO 401(k) would not be necessary if you receive W-2 wages of $176,000 or more from your business, since the $44,000 limits can be achieved with pure profit-sharing contributions.

For more information on a SBO 401(k), check out the article, “401(k) Plans For The Small-Business Owner”. It provides a great overview of the program.

Borrow Against Your Home – borrowing against the equity in your home is one of the most popular ways in which people raise the money to start their business.

Borrow Against Your Life Insurance – if you have a whole life insurance policy, chances are you can borrow against its value. Typically after three years most people have built up some level of cash value.

Borrow Against Your Investments – if you have a prior 401(k) plan or investments with a brokerage, you can borrow against those investments at a specific interest rate.

Family and Friends – another great source for funding as many people who know you and believe in you are more likely to lend you money.

Credit Cards – it may be a quick and easy way to pay for your business, but mind the interest that will add up if you only pay the minimum amount each month.

Of course, each of these financing options has their advantages and disadvantages. Be sure to research the pros and cons of each one before pursuing.

Not keeping track of all receipts…no matter how small

The IRS may not require that postage receipt for $4.20, but when you want to deduct it on our taxes, you will. Not only do these little receipts add up, but they also provide you with the required documentation you may need later.

Forgetting reimbursable expenses

Have you ever paid cash or used your personal credit card to pay for a business-related item? Chances are pretty good you have, and that you also forgot to turn it in to your company for reimbursement.

Failure to deduct sales tax

Retail businesses often fail to deduct the sales tax from the total sales. This results in a higher total sales amount and does not lower the amount of taxes due.

These are just a few of many common errors that business owners make. If you aren’t comfortable doing the required bookkeeping, then investing in an experienced bookkeeper may be of great benefit to you.