Tag Archives: vendors

Preparing for Taxes

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Image provided by Shutterstock http://www.shutterstock.com

Preparing your expenses and sales receipts for filing your taxes can be a nightmare. Do you have your company related papers filed in a shoe box? Or, are you organized and enter your information in bookkeeping software like QuickBooks or Peachtree?

Whatever your preferred method of filing your information is, you have to assemble it for the tax preparer or accountant. What do you have to give him? Here is a list of the documentation:

1. Receipts for the purchase of equipment. These are your assets, and assets are depreciated over time. Various types of equipment have different rates of depreciation. Your accountant will know what those rates are, and he will be able to calculate your depreciation expense. Additionally, certain purchases of capital equipment will give you a tax credit. So it is worthwhile to have your accountant review this information.

2. Payroll information is important. Providing a summary of Social Security and Medicare taxes, health benefits, if any, Federal, state and city taxes for each employee and the Treasury payments made are necessary to ascertain your payroll expenses for the year. Any payments made to independent contractors should be reported on Form 1099.

3. Any draws that you have taken from the business and any estimated taxes you have paid will assist the accountant in preparing your tax liability.

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Image provided by Shutterstock http://www.shutterstock.com

4. You will need to give the accountant a list of accounts receivable that have remained outstanding at the end of 2012. He may ask you about the probability of collection of these accounts and may want to indicate whether these are probable or noncollectable leading to a bad debt expense. He may also want to know whether you have “earned” the revenue you have collected in the year. This refers to the Matching Principle in accounting – if you haven’t earned the revenues but have collected it, you will have an accrual on moneys collected but not earned.

5. In this vein, you will also need to give the accountant a list of those accounts payable that you have not paid at the end of the year. The numbers in 4 and 5 will have an impact on your Working Capital.

6. It will be necessary to also keep an eye on your inventory. How frequently do you replenish your inventory? Inventory Turnover is critical to learning whether you will need to reduce the selling price or if you will have a write-off of obsolete inventory.

7. If you have entered into any contracts with vendors or suppliers and independent contractors it would be wise to provide the accountant with a copy of those contracts so that he can see any anticipated revenues or costs associated with them.

Image provided by Shutterstock http://www.shutterstock.com

Image provided by Shutterstock http://www.shutterstock.com

8. Before providing you with the completed tax returns, the accountant will want to review them with you before finalization to make sure that he has included everything. Take this conference seriously. He should offer you advice on the conduct of your operation and indicate whether you need to do more to mitigate your tax liability or improve the way you are running your business.

By the way, if you are using a software package and your accountant uses the same program, you can provide him with a download of your files so that he can manipulate the information as he needs to. This will save him a lot of time in preparing your information.

 

Margo Moore teaches BE 261 Starting a Small Business, CEO 001 Setting a Course for Your Business, CEO 002 Knowing Your Market, and CEO 003 Formulating Your Financial Strategy.

Avoid the lying agency or vendor syndrome

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Image provided by Shutterstock http://www.shutterstock.com

How to detect if your agency is lying was one of the topics of a recent iMedia post  (http://www.imediaconnection.com/content/33398.asp).  The telltale signs and circumstances are often different for large agencies and the large clients they serve than they are for a small startup.  Money, time and expertise on the part of the entrepreneur are much more limited when hiring a vendor.  So, while the list in the post is informative to read, you, as an entrepreneur and small business owner have to use additional skills and methods to choose an agency or vendor that will eliminate the environment for “lies” to exist in from the get-go.

The bottom line in choosing a vendor to work with is trust your gut.  There are three parts to a good fit. If you feel the chemistry is right between you and the person or people you will be working with, that is 1/3 of the equation. The next 1/3 is that there is good and continuing communication between you and your vendor – neither party is doing all the talking and each person is building on what the other is saying (this is referred to as keeping the communication loop closed).  The final 1/3 of the equation (and at this point if you’ve achieved the first 2/3, this will be a no-brainer) is that your vendor ceases to become a vendor and becomes a partner in that they are just as concerned as you are about your customers, your marketing, your success (yes I know I’m leaving out the part about references and experience in your industry but I think these three qualities often trump the others).

One of the nicest compliments ever paid to me was by Margaret Shumel (http://www.opex-ny.com/) when she was working at Pfizer. She said she liked working with me because I would talk her out of project ideas that I didn’t think would work – without regard for selling more services for myself. I’m in it for the long-term relationship not the quick sale. And you and your vendors should be in it for the same reason.

 

Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.