Tuesday, April 30, 2013

Managing Your Business

Regardless of the type of business you’re running – whether it’s selling electronics, making furniture, or servicing automobiles – monitoring a few key financial indicators is often all that’s needed to keep your company growing and prosperous. On the other hand, neglecting a company’s vital signs can lead to management by crisis and corrective action that’s too little, too late.


A prudent business owner won’t wait until the end of the year (or even the end of the quarter) to learn that revenues are declining, inventories are shrinking, or payroll expenses are spiraling out of control. Although annual financial statements provide historical perspective and a wealth of data for long-term planning, correcting current problems is a matter of timely insight and informed analysis. You want to know whether your business is losing money or growing – now, not later.


A company’s key financial indicators often fall into one or more of the following categories:


* Orders and returns. Are you selling more units over time? To find out, look at your sales figures by units. Tracking revenues alone may present a false picture. After all, revenues may be growing because prices have increased. If unit sales are declining, you might be losing market share. Are customers returning more and more of your products? Are complaints increasing? If so, it may be time to examine your quality control process or return policy.


* Breakeven point:  If you need $100,000 this month to cover fixed and variable costs, are you selling enough products or providing enough services to break even? If you’re dipping into reserves to cover revenue shortfalls, adjustments may be required. Expenses may need to be slashed, a new advertising campaign launched, or a new and cheaper supplier procured.


* Liquidity:  Knowing the availability of cash is vital to every business. That’s why reconciling the company’s bank statements shouldn’t be an afterthought. Every month your accountant or bookkeeper should ensure that your general ledger agrees with the bank’s records of deposits and withdrawals. If a company is “bleeding cash,” the bank statements should tell the story.


* Inventory:  Controlling the stuff that’s weighing down your retail shelves or accumulating in your warehouse is often a key to profitability. Buying too many items may lead to excessive storage costs; buying too little may lead to burgeoning backorders and lost sales.


* Payroll:  Staff size should be commensurate with revenues. Medium-sized companies, especially, can find that labor expenses grow too rapidly. A decline in orders may signal a need to reduce payroll costs.


By carefully analyzing your business’s operations, you’ll be able to identify the indicators that provide the clearest view of your company’s ongoing profitability.


Over time your business’s key numbers may change. The key is to know your company, identify changing conditions, and adapt. A brief but timely report that presents the numbers that really matter will help to keep your company on the right track.

Call us at (219) 769-3616 with your questions, or email them to rzondor@swartz-retson.com.

Health Care Reform Changes Effective in 2013

A number of provisions in the 2010 health care reform legislation go into effect this year. Here are some of the changes that could affect you.


Medical expense itemized deduction. The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for taxpayers under age 65. Those 65 and older may continue to use the 7.5% threshold through the year 2016.


FSA contributions. The limit on contributions to health care flexible spending accounts (FSAs) is lowered to $2,500.


Medicare tax on earned income. A 0.9% Medicare surtax will be imposed on wages and self-employment income exceeding $200,000 for singles and $250,000 for married taxpayers filing a joint return.


New Medicare tax on unearned income. A new 3.8% Medicare tax will be imposed on unearned income (investment income such as interest, dividends, and capital gains) for single taxpayers with adjusted gross income exceeding $200,000 and for couples with adjusted gross income exceeding $250,000.


These changes may affect your 2013 withholding or quarterly estimated tax payments. Take the changes into account as you do your 2013 tax planning. For more information and planning assistance, contact our office.




Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.