If there is anything that 11 years of building successful companies has taught me is that GROWTH ALWAYS COSTS MONEY!

Today I want to share with you three quick tips on getting that funding to grow.

Okay, now here goes those 3 tips to fund your growth…

Funding Tip 1: Shorten your collection cycle.

By far the most important law of managing cash flow is shortening your collection cycle.

Just what is your collection cycle?  It’s the time it takes from the moment you have to pay “Cost of goods sold” (aka: COGS) and the time you actually collect on your receivable.

The longer your collection cycle the more money you’ll need to grow.  Why?  Because it means you’ll have to wait longer to get paid back for your cost of producing your product or service.

For example, if you are selling a service and you have $5,000 of costs (staff time, materials, etc) to do a job that you bill your client $14,000 for, but you pay out the costs (payroll, materials, etc.) on day 1, and don’t invoice until the job is complete on day 45, and don’t get paid for 45-60 days after that, you may have a collection cycle of 90-105 days.  That is a long time to float your costs.

Hence as a business owner, to make it easier to fund growth, you’ve got to do all you can to shorten your collection cycle.

Can you collect a deposit in advance?  Or even get paid up front?  Or get progress payments?  Or collect right at final delivery?  Or…  You get the idea.

Funding Tip #2:  Get better terms with your vendors.

Can you get 30-60-90 day payment terms with your vendors?

How about getting a payment plan with your vendors versus paying cash up front?  Often you can make them payments over 6 months with ZERO interest.

Funding Tip #3:  Turn fixed expenses into VARIABLE expenses.

Can you take something like “payroll” (a fixed expense) for your team to do the work and turn part of that into a pay for work performed or pay for results basis (a variable expense)?

Take the example of Aaron, one of our business clients who owns a consulting company.  He took one of his biggest expenses in his “COGS” – the labor of his technicians – and shifted that from a fixed hourly cost to a “piece work” contract basis.

The result?  His tech makes more money, but now Aaron doesn’t have to pay him unless and until he has a job he has completed.  Funny enough, this motivates his tech to finishes the work much faster so Aaron has increased his capacity without having to hire another tech!

So there you have a quick list of these three funding growth tips.

Now let me ask you, and be honest with yourself. Do you have a clear, concrete road map to build a business? Do you have a marketing/advertising system in place to grow your business? Do you have an automated system to capture leads and convert them into sales?

If your answer is no to anyone of these questions I strongly encourage you to contact my office right away and talk with one of our business consultants who can help give you the concrete guidance you need to build your business the smart way. (You can also email us at info@diamondtaxconsultants.com to setup a complimentary coaching session.)

Over the past 11 years we’ve helped over fifty business owners not only to grow but also find funds to grow their business.  Ironically, most of the funds are trapped in their business…

1. Adjust your withholding Why wait another year for a big refund? Now is a good time to review your withholding and make adjustments for next year, especially if you’d prefer more money in each paycheck this year. If you owed at tax time, perhaps you’d like next year’s tax payment to be smaller. Use IRS’s Withholding Calculator at www.irs.gov or Publication 919, How Do I Adjust My Tax Withholding?

2. Store your return in a safe place Put your 2011 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a helpful guide for next year’s return.

3. Organize your recordkeeping Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time.

4. Review your paycheck Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle.

5. Shop for a tax professional early If you use a tax professional to help you strategize, plan and make financial decisions throughout the year, then search now. You’ll have more time when you’re not up against a deadline or anxious for your refund. Choose a tax professional wisely. You are ultimately responsible for the accuracy of your own return regardless of who prepares it.

6. Prepare to itemize deductions If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2012 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. See the Schedule A instructions for expenses you can deduct if you’re itemizing and then prepare an approach that works best for you.

7. Strategize tuition payments The American Opportunity Tax Credit, which offsets higher education expenses, is set to expire after 2012. It may be beneficial to pay 2013 tuition in 2012 to take full advantage of this tax credit, up to $2,500, before it expires. For more information, see IRS Publication 970, Tax Benefits for Education.

8. Keep up with changes Be sure to read the tips we send through out the year, they contain information on recent tax law changes, helpful tips and IRS announcements all year.

One of the biggest obstacles to winning in business is that so many entrepreneurs and business owners don’t really know what’s going on with their cash flow.

The good news is you’re not alone. I’ve been there before. In fact, almost everyone in business has been there at some point.

My passion is helping you put the structure and tools in place so the accounting and financial side of your business is strong and provides the insights you need to make money, improve cash flow, get access to capital, and grow successfully.

I’m here to help you win in business.

1.888.456.0800

Tax Tips for the Self-employed 

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

Whether you’re new to a home-based business, had a home-based business for years or even not yet in a home-based business, we can help you.

Schedule an appointment with us:

http://diamondtaxconsultants.com
888.456.0800 (Office)

In this tough economy and the number of potential employees competing for jobs, making sure that you have a competitive edge that can help get your foot in the door is becoming more and more important. A number of job applicants don’t realize that their bad credit score can impact whether or not they get a job.

Wall Street Journal recently reported that:

“Some 47% of employers say they check the credit history of applicants for certain positions, according to a survey by the Society for Human Resource Management of more than 430 organizations in late 2009. That’s up from 42% of employers in 2006. Just 25% of employers in 1998 said they regularly or sometimes checked applicants’ credit histories.”

In the case of your credit report, what you don’t know can hurt you. If you are currently in the job market you may want to make sure that you have a clean credit report. If you don’t, you may want to look into credit report repair and learn other ways to help improve your credit.

Lexington is a law firm specializing in repairing credit reports. They have helped over 200,000 Americans repair their credit reports by removing inaccurate, misleading, or unverifiable information. From bankruptcies to charge-offs to tax liens, we have challenged virtually every credit problem under the sun – and deleted over 500,000 items last year alone.

Click link above to learn more, or call Lexington directly at 1-800-636-0268. Use our affiliate ID # 12957

The IRS releases revised publication for Innocent Spouse Relief

A joint filer who wants relief from responsibility for the tax on a joint return must file a request for innocent spouse relief. This is done by submitting Form 8857, Request for Innocent Spouse Relief. Usually, the request must be made no later than 2 years after the IRS begins collections of the tax owed. However, the new publication reflects an exception to this rule for equitable innocent spouse relief. In line with a change in IRS policy earlier this year, the publication notes that the amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both:

• Balance due. Generally, you must file your request within the time period the IRS has to collect the tax. The IRS usually has 10 years from the date the tax liability was assessed to collect the tax; in certain cases, the 10-year period is suspended. The amount of time the suspension is in effect will extend the time the IRS has to collect the tax.
• Credit or refund. Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs.
• Both a balance due and a credit or refund. If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made. The time period for collection of a balance due amount will apply to any unpaid liability.

Unless you work for the IRS or have a degree in accounting, taxes may be a bit of a mystery to you, and taxes are even more confusing when you work as an independent contractor. Here are some answers to common tax questions confronting independent contractors. This information will help demystify the tax system, and give you a leg up by the time April comes around.

1. What’s the Difference Between an Independent Contractor and an Employee?

As an employee, you work for a particular organization and that company has the authority to dictate what you do and the way in which you do it. As an independent contractor, the person contracting your services pays for the results of your labor only. The contracting party does not manage or direct the manner in which the work gets done.

2. How Much Money Do I Have to Make in Order to Be Taxed?

If you make under $600 a year for any particular company, they are not required to report it to the IRS. However, once your earnings exceed $600, companies are obligated to send a 1099 form to both the contractor and the IRS.

3. Are There Any Other Taxes – Besides Income and Social Security Tax – That I Have to Worry About as an Independent Contractor?

Yes. You should contact your local government to find out what local and state taxes you may be responsible for. If your net earnings exceed $400, you will most likely be required to pay a self employment tax. You can calculate this tax using the Schedule SE of the 1040 form.

4. I Heard I Need to File My Taxes Quarterly. Is That True?

Most independent contractors are required to file their taxes on a quarterly basis. However, there are a few exceptions to this rule. If your total tax liability is less than $1000, or if you have pre-paid 90% of your tax liability, you aren’t required to file quarterly. If you are employed by a company or corporation in addition to your contract work, you can have your other employer withhold enough to cover 90% of your tax liability. You can also have your spouse make the appropriate adjustments to cover your tax liability, and avoid the hassle of filing quarterly taxes.

5. How Do I File My 1099 Contractor Income?

You can file by using a 1040 form, Schedule C. As an independent contract, you are considered a sole proprietor of your own business. The Schedule C allows you to record your income and your expenses. You can use the 1040, Schedule C-EZ if your expenses did not exceed $2500 and you meet other specific requirements.

6. What Kind of Deductions Can I Claim?

As a sole proprietor, you can deduct anything that is used for your business. You can deduct office supplies and travel expenses. You can even deduct a portion of your rent or mortgage if you work from a home office. Basically, you can deduct any expenses necessary to generate income from your home based business.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

• The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

• The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

• The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

• Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

• The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

• No cap exists on the amount of credit available except for fuel cell property.

• Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

The IRS plans to implement CADE 2 in January 2012. Under this initiative, up to 75% of all returns are expected to be processed under this new system, up to double the number processed under CADE last year. This change will finally set the stage for all returns to be moved to this new system.

Bank products released under the CADE system are typically released in as few as 5 to 7 business days of the IRS receiving the tax return. This is down from the traditional 9 to 14 days.

As a result of the shortened time it takes to receive a refund, taxpayers find even more value in bank products as a way to provide a secure mechanism to receive their refund proceeds and easily pay for tax preparation services.

Staying on top of tax planning throughout the year can help you make tax-savvy decisions at every turn. For example, should you buy or own your business car? Should you buy or lease equipment? Should you hire new employees or use independent contractors? Understanding the tax ramifications to your daily business decisions and planning accordingly throughout the year can save you money at tax time.

Employ tax strategies for:

• Income and deductions planning
• Opening or closing a business
• Running a sideline business
• Running multiple businesses

Also understand the impact that the alternative minimum tax (AMT) can have on your tax bill. This “shadow” tax system kicks in when business write-offs and other deductions help you lower your regular tax bill. Planning for regular taxes without factoring in the AMT can undermine your expected tax results.

Finally, face the fact that there are other taxes to deal with beyond federal income taxes. These include:

• State income taxes
• Employment taxes for staff
• Self-employment taxes for yourself
• Sales and use taxes
• Excise taxes

The scope of your tax responsibilities may seem great, but understanding is the first step to ensuring that you’ll do what’s needed to save money and stay out of trouble.

Final Word:  If  you want to grow your business or minimize your tax liability, visit us online to schedule a free consultation.