Finances

Are you setting the right pace for business growth? 6 mistakes that can cost you

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The market is great. Orders are coming in. Customers are happy. As we head toward Q2 of 2020, it may be an opportune time for you to focus on business growth.

But not so fast. Literally.

According to a recent study, two-thirds of the companies on the Inc 5,000 fastest-growing companies list have gotten smaller, been sold or closed their doors indefinitely, just five to eight years after earning the publication’s distinction.Business growth is good — if you’re managing it properly. As you’re planning for an expansion, be sure you’re making decisions that’ll support your business for the long haul.

From overestimating sales to hasty hiring missteps, the wrong moves can create disasters that you never saw coming.

  • Letting quality suffer. As your business becomes fixated on quantity — whether it’s servicing more customers or increasing product production — it’s easy to let quality slip. Keep in mind that first and foremost, you’re in business to provide superior products and services. If buyers lose faith in your brand, you may have a hard time repairing the damage.
  • Sluggish cash flow. Businesses need (a lot of) money to operate. As you’re growing, you may find that spending starts to outweigh revenue. Just because money is coming in the door doesn’t mean you can sidestep cash flow growing pains. It’s important to remain strategic and conservative, so you don’t end up in the hole.
  • Hasty hiring decisions. You’re expanding fast, and that means you may also need to expand your team. When time is of the essence and you’re rushing to fill a need, you may not allocate the necessary time or resources to find the best fit for critical positions. Remember that you want top-notch employees working on your behalf, and that process deserves careful time and consideration, as well as a comprehensive onboarding strategy.
  • Dropping the ball on service. Customer service demands will continue to increase with your business. If you don’t have the staff to handle the volume of product-related calls, orders or inquiries, your customers will feel the loss of customer care and personal attention, which may be perceived as poor management.
  • Putting all your eggs in one basket. Growing companies can set themselves up for failure by depending on one particular customer, vendor or employee for the majority of their success. The truth is, even the most loyal customers and vendors can jump ship and go elsewhere, and your employee of the month may be one job offer away from working for the competition.
  • Not scaling your technology. Every growing business needs technology that can grow along with it, ensuring your systems and processes are running efficiently. From data storage solutions to cloud-based applications, what does your business need now, and what technology might it require down the line? Don’t invest in solutions that aren’t going to serve your size, goals and budget for the future.

The tortoise or the hare?
Sometimes, in the race to grow, it’s better to step back and take your time to the finish line, so you can avoid costly mistakes that can hurt your business. If you need objective guidance mapping out a plan for long-term success, let us know how we can help.

Tackling your own business tax issues? Bad idea

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Running a small business means wearing multiple hats — from salesperson to HR manager to collection agent. But should you add tax expert to your growing list of duties?

You may think preparing tax returns for your small business is no big deal. After all, there’s no shortage of tax software options and apps on the market that can help simplify the do-it-yourself route. But before you fill out the endless forms and scan a mountain of receipts, consider these three compelling reasons to leave your taxes to the professionals:

  1. It’s too easy to make a mistake. Even a small business tax return can span dozens of pages. And with so many figures and numbers, there are literally thousands of opportunities for an error to occur. Inadvertent blunders could mean hefty overpayments. Or worse, they could trigger an audit and tie your up business for months.
  2. If there’s an audit, you’re left to fend for yourself. The IRS is increasingly setting its sights on the small business community, and that means you have a target on your back. As an individual taxpayer, your chances of being audited are less than 1%. But as business owner who’s filing a Schedule C, the odds are far higher. Would you know how to proceed without the knowledge of a trusted tax professional?
  3. The tax laws are always changing. Even if you’re an expert on the current tax code, that expertise will not last long. Every new year brings a slew of changes, and many directly impact small businesses. If you rely on your own knowledge, you could miss a vital update that could save your firm money or get hit with a penalty that you didn’t know existed.

Putting a price tag on peace of mind
 Having your taxes professionally prepared can be one of the best investments you make this year. If you don’t already have a trusted tax professional on your team, give Magone & Company a call at (973) 301-2300.

Business location, location, location: The best and worst U.S. states to set up shop

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Whether you’re launching a business or expanding an existing one, location plays a critical role in the formula for success. Choosing where to open your doors can make or break your entire business plan — especially for smaller startups.

To give you a head start on identifying possible locations for your next venture, WalletHub recently published a study that ranks all U.S. states on the optimal conditions for new businesses. They compared all states across three elements: the overall business environment, access to resources and business costs.

How the states stack up
Texas claims the number one overall spot, also ranking number one in business environment, which includes the average length of the work week, five-year business survival rate and the number of startups per capita. While the Lone Star State earned a lackluster rating for costs from WalletHub, the Tax Foundation’s 2019 State Business Tax Climate Index reminded entrepreneurs that Texas doesn’t have an individual income tax or corporate income tax, lending to the state’s appeal for a startup.

Spending is a necessary part of building a business, but lower operating costs can of course help increase your profit margins and boost your bottom line. With costs in mind, Oklahoma and Mississippi were found to be the most affordable states for doing business, taking the number one and number two spots based on:

  • Office space affordability
  • Labor costs
  • Insurance premiums
  • Cost of living

Looking to stay in the New York tri-state area? New Jersey is 49th on the overall WalletHub list, ranking 50th in business costs and 44th in business environment. In terms of cost, New York clinches the 49th spot, but ranks 42nd overall. And thanks to New York City, it’s no surprise that the Empire State comes in at an impressive number six for access to business resources. Connecticut rounds out the tri-state, ranking 48th in business costs and 48th in overall business environment.

Choose wisely based on what matters to you
One survey isn’t going to dictate your business’s optimal location. Be sure to consider other factors that can play a pivotable role. Are competitors in the area? Is the location consistent with your brand’s style and image? Do the demographics match your ideal customer profile?

According to the Bureau of Labor Statistics’ Business Employment Dynamics, just 50% of businesses with employees make it to their fifth year in business. To increase your survival odds, do your research and pick a location that will work for your current and future needs.

Are you a business risk-taker? It could be hurting your company’s value

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Whether you’re looking to cash out now or planning a long-term exit strategy, a business valuation can offer an accurate calculation of your organization’s total worth. Like any business owner, you want to ensure you’re getting top dollar for your business and all of its assets when the time comes.

As with any company, you might discover there are risk factors that are contributing to financial loss or bringing your value down. While certain risks, such as the economy in which your business operates, are out of your hands, there are other factors that you can change to work in your favor.

Playing it safe with business risk
What are the risks in your business, and what can you do to reduce them? Before starting the valuation process, here are some ways your business can minimize risks to a potential buyer, improve finances and increase the overall value of your organization.

  • Stabilize your growth and earnings. Hefty fluctuations in year-over-year revenue are a sure-fire way to scare off buyers. Implement a plan to stabilize earnings and rate of growth over time to demonstrate your sustainability and staying power.
  • Diversify customers and suppliers. Does your business depend on much of its revenue from a single customer, or count on critical product components from a single vendor? To soften the blow of a major loss, develop your customer base and source alternative vendors for important purchases.
  • Ramp up your retention efforts. As key employees stay with your organization over a long period of time, your business can operate with less owner involvement, which can be attractive for potential buyers. To create a turnkey organization, you should incentivize your best employees to stick around.
  • Keep comprehensive accounting records. Your company’s books and records should be as thorough as possible to convey the full financial narrative of your business. This can help prevent any slip-ups or surprises that could come back to haunt you when your business is on the market. Consider an outsourced CAS solution to maximize your efficiency.
  • Carefully document policies and procedures. Documentation makes for a smooth transition for a new owner, and it’s also another way to maintain transparency. In the meantime, your business will benefit from increased efficiency and improved customer satisfaction, with standardized processes across the board.
  • Get patents and trademarks on your proprietary information. By legally safeguarding your intellectual properties, you can help ensure that your products and services can’t be replicated or stolen by the competition, instantly giving your business more value.

When you know the risks that are affecting your business, you can better understand their impact on its value. At NJ CPA firm Magone & Company, we can help uncover your risk areas, and determine what can be controlled or mitigated to your advantage. Contact us or call (973) 301-2300 to learn more.

 

The future of cybercrime — and what it could mean for your business

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By 2024, the cost of data breeches will reach an estimated $5 trillion. A huge reason for the hefty price tag is a 70% rise in cybercrime. Cybercrime is among the world’s fastest growing criminal offenses, and it shows no signs of slowing down.

Today’s cybercrimes can present themselves in various forms — from malware and phishing to denial-of-service (DoS) attacks. Here in NJ, ransomware attacks have crippled the state’s largest hospital system, an Essex County public school district and even a respected regional theater company.

Over the next 20 years, experts say cybercrime will evolve into one of greatest challenges faced by humanity, using increasingly sophisticated means to put your livelihood and your business at risk.

Here’s a glimpse at what the future of cybercrime may entail:

Email threats will be more advanced. Remember the Yahoo data breach of 2013 that affected over one billion email accounts? Email is no stranger to phishing techniques. But as hackers develop more crafty ways to steal information, it’s critical that you educate your front-line employees on what to watch out for.

Social engineering crimes will skyrocket. Carefully planned attacks via social media channels will continue to target users with “friendly” tactics, like posing as a friend, relative or fellow employee. These types of phishing schemes aim to gain access to passwords and other sensitive information that can bring your business to its knees.

Cryptocurrencies will become more commonplace. Cybercriminals will have more inventive means to mine your digital currency. And once the information tied to a digital coin is hijacked, the information can easily be released and multiplied in the marketplace.

Too much connectivity will create a playground for hackers. We’re not far off from a world where every product will be embedded with a computer or a sensor, wirelessly monitoring and controlling everything you own — from lights and appliances to routers. In the future, businesses will only have more of these types of equipment and devices synched, opening the door to advanced attacks and threats.

Putting cybercrime safeguards in place
As more businesses expand the use of AI-enabled and cloud-based technology solutions, the risk of becoming victimized grows. It’s up to your business to implement smarter cybersecurity procedures to prevent these occurrences or stop them in their tracks, including:

  • Developing in-depth knowledge of your risk factors, so you know exactly what you need to protect.
  • Carrying out periodic risk assessments, as risk management is a key factor in keeping key business insights protected.
  • Requiring employees to use two-factor identifications to access company accounts.
  • Investing in regular audits performed by cybersecurity consultants who are experts at data protection.

Take a step back and rethink your strategy beyond the solutions of today, and prepare your business for what the future may bring.

4 income tax filing mistakes that could land you in tax trouble

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Thinking of preparing your own income tax return  this April? You might want to reconsider. Even the slightest oversights might mean hefty fines and penalties that could have been avoided. Watch out for these four mistakes before hitting the “submit” button.

#1 Neglecting to report all of your income.
Whether it’s your regular paycheck, a side gig, gains that you’ve made on the stock market or interest earned from deposits in the bank, you need to account for all of it in your tax return. If you don’t, the IRS may come knocking. Every time you make at least $600 in income working as an employee of any description, you get a 1099 form stating what you’ve made. Technically, you should also record smaller chunks of income for which you don’t get a 1099.

#2 Guessing what your deductions are.
Back up every attempt at a deduction with documentation like receipts or logs. If you attempt a rough estimate at what your deductions should be, you could trigger suspicion — especially if the sum you claim is high for your income level, or if it’s a convenient round figure.

#3 Automatically rejecting the idea of itemizing.
Most tax filers choose to take the standard deduction, rather than itemize. But, this doesn’t mean that you shouldn’t itemize — it really depends on your specific circumstances. If you have many legitimate deductions to make because you pay a great deal of mortgage interest, for example, itemizing may work in your favor.

#4 Procrastinating filing your return.
Preparing your taxes is a complex process. If you’re self-employed, or if you need to itemize, it man only get worse. Don’t rush through the process, as mistakes can be costly. Take the time to file your taxes well ahead of the deadline. If you need extra time, you can always file for an extension and avoid the late filing penalty, which can add up to a whopping 25% of the original tax amount.

Whatever you do, don’t skip filing altogether! At Magone & Company, we’re here to help. Give us a call at (973) 301-2300 for assistance in resolving any tax issues that come your way.