South Dakota v. Wayfair – Sweeping Changes to Multi State Sales Tax and How They Affect Your Small Business

The United States Supreme Court's ruling in South Dakota v. Wayfair Inc. (17-494) marks a major turning point in the debate over whether online sellers should be forced to collect and remit sales tax in States in which they have no physical presence (nexus).

The ruling overturned Quill Corp. v. North Dakota, and National Bellas Hess, Inc. v. Department of Revenue of Ill., —which held that a State cannot require an out-of-state seller with no physical presence in the State to collect and remit sales taxes on goods the seller ships to consumers in the State.

Bottom line - The Supreme Court ruled that States have the right to collect sales tax from out-of-State sellers.

The decision was a victory for brick-and-mortar businesses that have long complained they are put at a disadvantage by having to charge sales taxes while many online competitors do not. And it was also a victory for states that have said that they are missing out on tens of billions of dollars in annual revenue.

But, what does this mean for you?

The first thing to keep in mind is Sales Tax laws regarding which products are taxable have not changed. If you did not previously sell products that were taxable in a given state, then nothing will change for you, business as usual. For example, in most states, professional services and digital products are not taxable.  This has not changed. 

What has changed is what defines physical presence in a state.  And if you have physical presence, you have nexus which is a fancy way of saying you have to remit and pay sales tax in that state.  For each state in which you have sales, you’ll need to assess whether your business meets the threshold for collection in each state, and prior year would serve as a good measure for this. In South Dakota this is either $100,00 in gross revenue from delivery of products or services into South Dakota; or 200 or more separate transactions. Other states have quickly followed suit and have enacted similar economic nexus laws.  

So, what’s next?

At this point you have a few options…

• Wait and see–Given that states are clearly still in the midst of deciding what to do, South Dakota still needs to officially give the green light on the law, Congress may act but we’re not sure which stance they will take, and  there could be lots of pending state guidance post-Wayfair, one option is to hold off until the rules are clear.
• Tackle economic nexus states –You could be aggressive and tackle multi state reporting head on.  Register in those states that have already enacted economic nexus laws, regardless of whether they are “official” yet. It is doubtful that any of these states would impose retroactivity. Consider voluntary disclosure/amnesty programs if retroactive worries. And then wait to see what happens everywhere else.
• The “Overstock Approach” – Overstock.com is one of the larger online retailers that will be impacted by this new legislation.  They have elected to “turn it on everywhere and be done with all this stuff”!  This means that they collect sales tax on every item they sell regardless of the state.  This also means that for every dollar collected, the sales tax must be reported and remitted to the related state.  Even if you do not have economic nexus within a state – if you collect it, you must file and remit it. 

The important take away is DON’T PANIC! Your team at VAST is dedicated to keeping you on the right side of the law and are on hand to make suggestions and recommendations. If you would like to schedule a time to discuss the implications of this ruling for your business, please give us a call 775-359-7600.

September – A Time for Looking Back

We’re closing in on fall maybe faster than you’d like, but it’s coming nonetheless. The kids are back in school, sweater weather is coming, pumpkin spice everything is on its way and shorter days are here prime for reflecting on your year so far. At VAST, we like to make September a time for mid-year tax planning moves.

I know you aren’t thinking about the 2018 tax season yet nor do you probably want to, but I promise with a little looking back now — you can save yourself and your pocketbook unnecessary headaches come April 15th next year.

What exactly should you be looking for?

1.       Estimated taxes! I can’t stress this enough.

Have you made your estimated tax payments for 2017? If the answer is no, then it’s time to start (like yesterday). If the answer is yes, give yourself a big pat on the back- seriously! But there’s still some work to be done. We need to make sure those tax payments still make sense in relation to your income. Are you making more money this year? Do you expect to have a record breaking fourth quarter? Let’s make adjustments to those payments now, so you don’t get hit with a huge tax bill later.

2.       What type of business entity are you? It might make sense to convert.

Believe it or not, the type of business entity you are has a big effect on how you are taxed. Are you a Sole Proprietorship, LLC, S-Corp or C-Corp? Different entity structures mean two primary things: legal responsibility and tax structure. At VAST, we can pop the hood to evaluate whether converting to a new entity classification will have tax benefits for your company.

3.       Are you a shareholder in an S-Corp? Let’s look at your salary.

As the shareholder of an S-Corporation, you are required to take a salary that is “reasonable” in relation to your businesses’ income. It’s very important we make sure your salary and distributions stand up in the eyes of the IRS so we may avoid any unnecessary penalties.

4.       Profitable an understatement? Now is the time to strategize.

We’ve had clients in the past who (without our guidance) decide to buy up loads of inventory before year end to help reduce their tax liability. Please don’t do this, at least for that purpose, because that’s not how it works. You can only write off the cost of goods sold (keyword = sold). If you don’t sell it, your tax preparer cannot write it off as an expense on your tax return. However, we can strategize smart moves like buying equipment or setting up a new retirement plan for your business that will actually save you on taxes!

September is for looking back, and we would love to look back with you for some mid-year tax planning. You can avoid the stress of big tax bills and tax season surprises with just an hour of time with your CPA. Call us to book an appointment with our tax team today! We’re here to help.

Stay tuned for our next blog post on the joys of strategic budgeting and how we recommend planning for your next big steps! Because October is for looking forward.

Hope Is Not A Strategy

This weekend we planned a much needed vacation!  We want to go to Costa Rica and so we got to work planning – the dates, the flights, the specific airline and hotel.  We talked through every last detail. How warm will it be?  Will it rain a lot?  What did we want to do once we got there?  What did we want to learn about the culture and people?  If you want to go on a specific trip, you prepare a plan.  Our plan was Costa Rica.    

Sure, we could say one day, “We need a vacation!” and just walk out the front door without an idea of where we want to go or how we plan to get there.  We might end up in Costa Rica, and we might not.  But, without a plan, we have no assurance we will end up where we want to be.  It would be a much different experience. 

Running your small business is the same, but many entrepreneurs approach their business without a specific plan.  They may not know exactly what they want from their company and they may not have a resolute idea of what they want their company to become.  They hope their business is profitable.  They hope they can work a reasonable number of hours.  They hope their employees will perform their jobs without complacency or drama.  But, hope is not a strategy and in the words of Antoine de Saint-Exupery, “A goal without a plan is just a wish”. 

Get organized about your plan for your company with these 3 tips: 

1. Understand where you have been. Having accurate and timely financial statements for your company is critical to your company’s success.  You need to be receiving and reviewing these monthly so that you can gauge profitability, use of cash and much more.  As you grow, you’ll want to work with an advisor that can give you historical results that are tailored to your small business.  Ask questions so that you make sure you understand what makes your company tick. 
2. Understand what you want. Establish goals within your company for net profit and what you want to make for yourself.  A growth company is much different than a lifestyle company.  Think about what you see in your company’s future and how that will affect you and your personal income.
3. Understand what it takes to get there. Develop detailed, well thought out budgets for your company.  If you want to grow, that will most likely take additional employees, equipment, inventory, coffee – you name it.  The pieces of your plan need to fit together to give you the resources you need to meet your company’s goals. 

At VAST, we work with small business owners that want to take their business to the next level.  If you need help developing your plan for your business, check out our planning package VAST:Perform.  You’ll be glad you did! 

Make The Shot

In watching the Warriors and Cavs play on Friday night, I was surrounded by a rabid household of boys questioning calls and generally freaking out over the performance of the refs in the game.

What became crystal clear in the second half was that if the Warriors would have just made their shots, the refs wouldn't have mattered at all. While the Cavaliers magically made shot after shot—from the paint to 35 feet away—the Warriors were consistently denied. Shot after shot for the Warriors made that horrific thunk as they bounced off the rim in an unfruitful attempt to advance the score.

My advice to you...

Make the shot.

The game of basketball is no different than the game of business. If all of the shots you attempt go in, you enjoy the fruits of your labor. If they do not, you struggle to get ahead.  And when you're behind—maybe with lenders or vendors—it can be easy to blame the circumstances for the result.

Take a struggling startup or a business turnaround for example.  Cash can be tight and paying for everything an insurmountable task. You may find yourself in a situation of fighting the terms, feeling indignant, trying to fend off the debt collectors and getting nasty calls. But if you increase sales and bring in the cash to make the payments to satisfy the debt, you'll find you're in a much different situation. Or said differently— a situation where the refs calls don't matter quite as much.

My advice to you is this: make the shot.

Sure. My team and I can help you with triage cashflow, vendor negotiations, debt restructure and more. But the reality at the end of the day is that sales in and of themselves solve most of those problems.

How are you ensuring that you're making that shot and growing as you should be?  Here are three tips to staying focused and precise in measuring your performance:

1. If you find yourself in survival mode, is it short term and is there a light at the end of the tunnel?  The best example of survival mode would be the days where you were living on Top Ramen in college. You were scraping by; but you knew it was temporary, and you would be a gainfully employed adult once you graduated. How does this translate to your business?  Is there a light at the end of the cashflow tunnel?  If there's not a yes in there somewhere, it may be time to re-evaluate.
2. Are you keenly focused on metrics in your business that effect sales?  There are types of variance analyses in business that can help you dissect why and how your revenue changed. If revenue changed between two periods of time there are two possible reasons: price and volume. For example, let's say you own a restaurant and sales are up this month over prior year. Part of that change will be due to a change in the number of people that walked through the door and part of it will be due to a change in the average price they paid. You need to know the breakdown in order to evaluate the change properly.
3. Are you setting clear goals and sharing them with your core team?  You can't hit a target you can't see. Get really specific about your goals. Don't set general goals like "I want to make lotsa money". No one knows what a "lotsa" is. Get specific and enlist your team to help.

Looking at how you can improve sales volumes and staying focused on your overarching goals will give you the ability to change the cadence of the game.  You will insulate yourself from minor setbacks and have much more control over the outcome for your business. 

If you need help with setting goals and managing cash in your small business, call us at 775.359.7600!  We want to help!

Plateaus to Growth

"I was taught that the way of progress was neither swift nor easy." Madame Curie

The life of an entrepreneur comes with ups and downs. You'll have times of fast growth and consistent wins at white knuckle pace. And then you'll have setbacks, challenges and projects that take so long to get over the finish line it's like watching paint dry. 

By their very nature and propensity to boredom, entrepreneurs prefer fast paced rock ‘n’ roll progress: double digit growth, new location(s), myriad of products, new team members, you name it. 

If you find you've hit a lull or plateau in your company's growth, here are some questions to ask yourself to determine if it's a natural part of the growth cycle or something to be concerned about. 

1. Have you shifted your focus?  As a boot strapped company grows, the breadth of what only you can handle changes. If you are the star sales person and you've taken your foot off of the sales throttle to focus on infrastructure (anything from branding to systems to training a new employee), chances are you saw a slowdown in growth.  Is a temporary change in your focus so you may build better infrastructure  going to mean you can grow even more rapidly in the future?

2. Have you hit capacity?  You need to have your finger on the pulse of what maximum productivity means in your company. The matrix of employees, equipment, inventory and working capital has to fit in relation to the sales you would like to see. If sales have slowed and every resource in your company is at its absolute limit, you need to invest in more resources in order to continue on the path of growth. 

3. How do you spend your time, and how much of it is spent on things only you can do?  If your goal is to aggressively grow your business, you will need to get fiercely protective of your time.  Give up anything that doesn't require your attention. What fills your day that could be delegated?

Short term plateaus or dips in growth are very common for a company in growth mode. Paying close attention to the answers to these questions will help keep those slowdowns as short as possible. 

To your company's growth! 
 

Your Dream Job

I have the opportunity to meet with entrepreneurs from all over the country who want to startup or grow their company. The focus of my initial conversations with them is usually on how to get more. More sales growth, more profit, more time, more working capital, more locations. More. More. More.

After our initial conversation on "more", I turn them to the concept of "there."  Where is "there"?  Ask yourself what you would love your company to do or be. While being able to support yourself or make a certain amount of money can be on that list, that should be a basic requirement and not the ultimate goal. The answer to what you would love is an expansive, freer expression of the work you truly want to do in this world.

The dreams entrepreneurs have for their company are all very different. My dream is to make a meaningful impact on the entrepreneurial movement through VAST, because I truly believe that small business changes the world. I work with clients whose dream it is to impact the local food movement, medical technology, changing lives through coaching, naturopathic supplements, low income housing, geothermal plants in third world countries, schools in villages in Africa, software that improve small business efficiency, wellness retreats and much more. 

So, what is your "there"?

Here are three steps to ensure you're closer to living the dreams you have for your company:

1.  Identify your dream. Put together a solid description of why you do what you do and how it matters. What would you love for your company?

2. Build a financially strong company. If you are living a meager existence, you will not be free to be creative enough to deliver your gifts to the world. Your company needs to have a strong financial foundation to fuel you to follow the dream. What are your financial needs from your company?  And what would be the ultimate or highest amount you would love to make from your company?

3.  Measure progress along the way. Constant and never ending improvement within your company will make your dream more attainable than you think. How can you serve your dream on a daily basis to ensure you are making the right kind of progress?

You can't hit a target you can't see. By getting clear on where your "there" is both financially and within your dream for your company, you truly can change the world.

The Art of the Turnaround

I love a good turnaround.  Now, don’t get me wrong – I don’t love it when a company gets to the point of needing a turnaround.  But, let’s face it.  It happens.  And when it does, I love being able to come in and help them right the ship and excel. 

For those of you fortunate to have avoided this delicate state, a turnaround is when a company has gotten into dire straits financially and/or operationally and needs some triage to get them back to efficient, effective and profitable.  Sometimes a turnaround is quick and sometimes it can takes several months or maybe a year. 

If you find yourself in the position of not knowing how to get your business on track or feeling the crunch of impossible to cover bills or worse – the thought that you may not be able to save it, there are some key questions to ask yourself before deciding the best course of action. 

1.     Is your business viable?  I have a profound belief in small businesses.  My team has done turnovers in even the most dire of situations.  But, unfortunately, there are those businesses once in awhile that don’t make it.  You need to ask yourself (or even better, do some analysis with an unbiased outside party) whether the fundamentals of the business are sound.  Can you get to profitability with your current product mix, cost structure and team? 

2.     Is it worth it?  Once you decide that it is possible to get your company to a profitable state, is there enough left over to make it worth it for you?  If at the end of the day, the profit that is left over for you is negligible, are you sure that you are not just buying yourself a low paying job? 

3.     Do you love it?  Being a small business owner, can be one of the hardest jobs on earth.  But at the same time, the most rewarding.  You have to love it and be willing to do what it takes to make it.  Are you passionate about your small business?

If the answer to all three of the above questions is a resounding YES, then you are a great candidate to take the steps to turning around your company and making it the massive success you always knew it could be.  Not sure about the answers to these questions?  Give us a call.  We can help walk you through the decision making and analysis to decide the best course of action.  And if turning it around happens to be the answer, VAST will be with you every step of the way!

Simplicity In Numbers

Not a finance person?  It's ok. As an entrepreneur, the key to the numbers that will drive your business usually lies in the simplest of measuring sticks. You don't need a green visor and a Ph.D. In economic theory to get your finger on the pulse of your company's results.  

I am the product of entrepreneurship. One day, when I was a toddler, my dad came home and announced to my mom that he was quitting his job and starting a business. My father is one of the most dedicated entrepreneurs I know. His customer service is nothing less than an obsession and our livelihood as I grew up benefitted from his willingness to take that leap from the corporate world and venture out on his own. 

But his entrepreneurial journey in turn created a position for my mom too. She was now the head accountant for the business. The one that made sure all the clients were billed and all the bills and employees got paid. My mom's approach to accounting has always been very low tech but incredibly straightforward. In the mid eighties, as I was old enough, my job was to stamp the company letterhead onto the Deluxe brand generic client statements. As I got older, I was entrusted with labeling the columnar pads. (For those of you too young to have any idea what I'm talking about, I've included pictures). 

These are Statements and columnar pads that my mom uses to this day. I'm still not sure who she found who could possibly fill the shoes of my stamping and labeling prowess when I moved out, but I digress...

Every year she closes her books in an old school fashion. She reconciles the bank account, prepares an accounts payable aging, a balance sheet and all of the basic accounting reports that a company needs. But the difference is she does it manually. By hand. Written out, with a good old fashioned pen on yellow sheets of lined paper. I often refer to my mom as the most organized client I have.  There is brilliance in simplicity but I didn't always appreciate this. 

After I graduated from college in all of my twenty some odd years (still young enough to think I knew better than my parents), I took all of the numbers from my parents books and told my mom "Don't worry. This will be much better in an accounting system. You need software. Upgrades. Systems. Processes."  My view at the time being that things needed to be more complicated to be effective. I stand corrected. In my two plus decades of a career as an entrepreneur and accountant since I've learned to appreciate and embrace simplicity in numbers.  

The reality is that the most important characteristic that your numbers need to have in order to be valuable to you is that you need to understand them. If the numbers make no sense to you or you can't seem to get to accurate information, you need to change things up and get your hands on it. Do what you need to do to get the information you need to run your company. 

Your measurement of your results does not have to be complicated. It needs to make sense. There is no right or wrong answer of what you should be measuring. I have very different metrics that I use to manage my firm versus other firms like mine that are out there. But that works for me. Just like my moms straightforward accounting works for her. 

Focus on getting the information you need and that makes sense to you. Your company and your sanity will benefit in the process. 

The Most Important Thing

What's the most important factor to consider, measure and focus on in your company?  

That new office space? No. The design of the website? No. A great sales team? No. A viciously re-negotiated postage meter lease?  No.  A good attorney?  No. 

All of these things are just parts of the puzzle. The most important thing to focus on in business is profitability. Period. 

And you can't be profitable (even with a good amount of luck) if you can't see what's going on in your business.  

Now I know what many of you are thinking... But I care about my customers!  It's not about the profit!  It's about my passion for what I'm doing!  Yeah. I'm sure it is. I feel the same way about my clients, employees and business. 

But riddle me this- how effective will you be if you're company is bankrupt?  If you get behind in your taxes in order to cover rent?  If your waking up at two in the morning with a panic attack because you can't cover payroll?

I promise you- I've been there. You will be a much more effective and passionate entrepreneur if your venture is profitable. Profitability begets flexibility. It buys freedom. Not freedom to fly off to Cayman and live on the beach....that's a different post. 

I'm talking about freedom to take your dream in the direction you want. To be relaxed and real in your dealings with clients. Freedom that fills you up and makes you love what you are doing. Freedom to allow you to give back in all the ways you dreamed. 

Focus on profitability first and all of your hopes and dreams of flexibility, contribution, passion and impact will follow!

Happy New Year!

Too Soon...?

It's not too soon to be thinking about the new year if you're an entrepreneur!  Fall is the perfect time to be planning, strategizing and setting your systems up to meet your goals for next year!  Here are some ways to maximize fourth quarter for a strong 2016!

1.      Tax Planning – whether you did your taxes on time and April 15th is a distant memory or you're cramming to get your taxes filed by the last few minutes before the extension deadlines in September and October, tax planning in fourth quarter is always a good idea.  Take a look at your financial statement for 2015 to date.  Are you tracking at the same level of net income as in 2014?  If not, working with your tax planner to adjust what you are paying in estimated taxes or in withholding will pay off come tax time. 

There are also many things to do at year end that will effect your total tax bill.  been thinking about buying that new piece of equipment?  maybe bump that up to this year.  The tax advantages of purchasing property and equipment were extended for 2015. 

Making certain tax elections can also have a big impact – look at whether your company could benefit from being a cash basis taxpayer if you are currently an accrual basis taxpayer or vice versa.  Look at related party transactions to make sure your agreements are tax efficient such as in cases where you lease property from one of your entities to another.  These transactions are only counted for tax purposes if they are paid and received by year end. 

Wanting to make additional contributions through payroll to your company’s 401k?  employee contributions must be made by year end too.  You do have some additional time to contribute to IRA’s or to make employer contributions. 

2.      Budgeting – you’ve no doubt heard me talk about the importance of budgeting in a small business.  If not, click here to check out one of my posts to guide you through the process.  But it's equally important that you prepare your budgets far enough in advance to make them useful.  Preparing budgets in the year they are for is like having your football team show up in the second quarter of the game to play.  You lose your ability to effect the beginning of the year. 

Having a well thought out budget in place for next year prior to the end of this year allows you to make hiring and purchasing decisions to get the right team and inventory on hand to meet your goals.  It also allows you look at your company’s capacity.  Do you need more office space or equipment to handle any growth you see in your company’s future? 

Use this last quarter of 2015 to get your team invested in the plan too.  Henry Kissinger said “the task of the leader is to get his people from where they are to where they have not been.”  Maybe your goal for your company is a material surge in growth in the coming year.  Without the buy-in and commitment of your team as well as a common understanding of the goal, you will have a very hard time getting there.  Fourth quarter is a great opportunity to do the work of getting your team on board with your vision which is great for everyone in the long run.

3.      Cashflow Forecasting - one of the biggest urban myths in business is that cashflow is great when you’re growing.  It will be.  Eventually.  But in the first phases of growth, cash is going to be tight as you pay for more stuff to keep up with the increased demand.  That “stuff” comes in the form of everything from inventory to employees to equipment.  Then, when you do start to show profit, or more profit depending on where you are in your company’s life, you will shell out cash for more taxes or make payments to tax deferred plans to reduce the taxes.  All of which sap your liquidity.  It can seem like a vicious cycle. 

The best way to keep your sanity when juggling cashflow demands is a cashflow forecast.  We put these in place with many of our clients so they have a cashflow roadmap for anywhere from six months to three years out.  The forecast doesn't have to be complex but make sure you're looking out into the future when planning your cashflow needs and not just at the current balance in your checkbook. 

By spending some time in fourth quarter thinking about the coming year, you can hit the ground running come January and be that much closer to meeting your company’s goals for the coming year.  So, again I say, Happy New Year! 

Not sure where to start?  Need help getting these practices in place?  VAST loves proactive planning!  If you’re not feeling sure about your fourth quarter plan, call us!  We can help! 

To your company’s success!

They Fed Me Dates

Cartoon by Brad Diller

““Building revenue is art. Cutting expenses is mechanics.” ”

— Eric Siegel, Instructor at the Wharton School of Entrepreneurship

In the world of small business, cost control is king.  Sure, building revenue is fun and exciting, but at the end of the day if expenses just creep up to take your profit, you are spinning your wheels. 

I once sat on an advisory board for a large corporation and each month’s meeting was quite the affair.  There would be platters of food as well as wine and cocktails all served in a large auditorium.  Each month a different department of the organization would present to the advisory board some new, innovative undertaking they had dedicated their recent focus to.  At one of the last meetings I attended, I sat in the comfy overstuffed chairs contentedly munching on bacon wrapped dates and sipping Chardonnay while a committee of six people presented the massive progress they had made over the prior six months on improving a form that evaluated the forms used for customer intake.  That’s right.  Six people.  Six months.  A form to evaluate a form.  I slowly came to the realization that I had to get the Hell off of this board.  Even if they fed me dates. 

Small businesses need to get more done with less.  Entrepreneurs don’t usually have six people to evaluate anything – much less a form for a six month period of time.  Give an entrepreneur six bodies, and they will create a team to do the work of twelve.  Entrepreneurs have much less funding, less access to financing and tighter budgets.  This is why it is just as important to look at keeping expenses efficient while you continue to grow the top line of your empire. 

1.       It takes money to take money.  I know what you’re saying – “Yeah, yeah.  I’ve heard that one a million times.”  But look at it this way – in many businesses there is such a tight stranglehold on spending, that the things the team needs to actually improve productivity and happiness aren’t invested in and the company falters.  I went through a period of VERY tight cashflow in 2011 after buying out a partner.  My team was actually afraid to buy coffee.  But this is not a way to reward the team for hard work.  My focus now is on keeping the candy bowls filled, keeping drinks and snacks in the fridge and, yes, always making sure there is plenty of coffee.  Invest in the things you need to ensure you team is operating at peak performance. 

2.       Running a business is frigging expensive!  Building the foundation that will allow your company to grow is going to cost you a pretty penny.  It is very common that a company in growth mode will see shrinking profit margin percentages before they start to increase.  This is a part of the process so try not to panic.  Instead focus on having an intimate understanding of what caused the decreased profit margin.  Did you spend additional funds developing a new product?  Did you hire new people because you wanted to train them before an explosion in growth next quarter?  These are sound and justifiable reasons for increasing your overhead prior to revenue catching up.  If you see the trend continue and can’t explain it, then you need to take a serious look at the numbers and understand what is happening. 

3.       Budget. Budget. Budget. Enough Said. Your budget is your windshield. If you don't have it, you can't see where you're going. Understand your company's burn rate (meaning everything you need to spend each and every week or month) and how that integrates with your revenue. Budgeting for revenue will show you what you need to bring in to break even - but more importantly what you need to gross to meet your goals as the CEO of your company.

Small businesses and big businesses operate very differently.  Small businesses need a strong positive trajectory, more internal bandwidth and financial stability for the initial stakeholders.  Big businesses need shareholder approval, multi-level committees and legal departments.  The nimble small business has the opportunity to grow and prosper while staying lean and mean.  Keep your expenses in check and you will no doubt succeed. 

 

Absence Does Not Make The IRS' Heart Grow Fonder

No one wants to pay taxes.  I guess I should clarify – everyone wants to make money but doesn’t want to pay more taxes than they have to.  This is true in good financial times and bad.  Being tax efficient in today’s business climate is just as important as the other financial checkups you run on your company like reviewing the profitability of product lines or scrutinizing renewal of expenses. 

An often overlooked aspect of being tax efficient is also being tax responsive.  Too many businesses let their taxes get behind and rather than stepping up to the plate, bury their heads in the sand saying “I’ll deal with THAT later.”  This is bad for a number of reasons and will not give you good graces in the watchful eye of the IRS.  As we approach the 2015 extension season, here are some things to keep in mind if you’re procrastinating on getting those returns done. 

1. You can accrue penalties even if you don’t owe taxes.  Didn’t file your taxes on time this year?  No problem – if you filed an extension and it’s still within that extended time frame.  But once you pass that extended date, you will get hit with a per shareholder penalty per month for every month you are late – regardless of whether you showed income. 

Currently, this penalty is $195 per month, per shareholder that you file your return late.  For example, if your corporation has four shareholders and you were super busy in the fourth quarter and didn’t file your extended S corporation tax return until the following February there will be a penalty of over $3,000 plus penalties and interest on top of it. 

LLC’s and Partnerships come with the same stiff penalties.  Although these returns are a little more lenient since the max penalty is for twelve months.  Also, if you have an experienced CPA and less than twenty managing members, you can usually qualify for an automatic abatement of those penalties.  But don’t use that as an excuse to be late!

 2. Once you have been late, forget ever being forgiven.  The IRS has a very good memory when it comes to repeat offenders.  Meaning, if your return is late one year and then again the following year, they will very rarely abate any penalties that you accrue after that first time relief.  This is a great excuse to stay on your best behavior.  File and pay on time.  You never know when you will need a favor (in the form of a penalty abatement) from your friendly neighborhood IRS office.

3. All taxes are not created equal.  A business owner faces the onslaught of many different forms of taxes – corporate income taxes, personal income taxes, payroll taxes, state taxes -  and each comes with a different regulating body looking over your shoulder. 

But not all taxes are the same and therefore not all taxes are collected in the same manner.  Usually, if you have a payment due with the IRS for federal income taxes, you can work out a payment plan at a very reasonable interest rate.  However, get behind in payroll taxes and you will face severe penalties.  Extreme cases of past due payroll taxes can even be assessed against you personally – regardless of what type of legal entity you have set up.  Payroll taxes are considered trust funds that belong to your employees and not you.  So, make sure you pay those payroll taxes on time!

Also, certain states have the habit of placing a lien on your account for what they think you will owe if you do not file.  I’ve seen Calfornia wipe out a checking account with a lien on their estimate of corporate income taxes and I’ve seen Florida take the balance in a checking account based on their estimate of sales taxes.  So, in following through on item one above, make sure you plan for paying the taxes but also make sure you stay on top of filing all of those state taxes as well.

Like anything in business, great tax planning just takes some proactive foresight.  By working with a seasoned and conscientious tax preparer you can mitigate the effect that taxes have on your cashflow and plan to file on time and with the least amount of taxes and penalties possible.  More importantly though, be versed in the various types of taxes that your business must file and pay to avoid unpleasant surprises that can take you off task in your company’s success. 

Be The Prophet In You

Not too long ago I came home after an exceptionally bad day. A day where you don’t know whether to tell the world to go to Hell or just sit down and cry. Every entrepreneur has days like this. A little while later, I was putting my four year old, Ashton, to bed. He leaned over to me with big blue eyes and tousled blond hair and out of the clear blue sky said “Mommy, did you know the good guy always wins?”

After choking back my tears and desire to scream, I realized that I certainly wasn’t feeling that way. But, in that light, this was just what I needed to put the dire circumstances of my horrible day in perspective.

Did you know that the reason a prophet is so successful or considered all-seeing is that, in almost every case, once they tell their student their fate, it becomes so? This is because that student believes it to be true. Think about it in a negative light – if a fortune teller read your fortune and told you that your fate was to be hit by a bus, would you not starting looking over your shoulder just a few times more to look out for careening motor coaches?

What if we use this theory to our advantage? How often have you needed to cover payroll only to find that exactly what you needed, after much work, was produced? What if you aimed for a higher amount? Say $5,000, $10,000 or $50,000 above what you believe you need? Then, covering payroll doesn’t sound so hard does it?

It reaches to other areas of your business as well. Raising capital, producing dividends, increasing sales, it all works the same way. You expand your outer boundaries and what you can accomplish as a business owner or in any other facet of your life expands as well. It is all in your perspective and belief in this to be true.

Whatever your goals are for 2015, sit back down with them and add ten or twenty percent. Add more if you want to. Are you projecting 20% growth in sales this year? Make it 25% and get out there and make it happen. A 10% increase in net income? Up it to 12% and go do it. You are the new vision that will make it so. I had let my bad day get the better of me. It beat me down. Instead, I needed to be my own prophet. Just like you, I felt I was a good guy and, damn it, come Hell or high-water, like the old saying tells us, I was going to win.

As a business owner or business leader, we are our own worst critics and sometimes our most staunch barriers. Break this cycle with a belief system of success. Because when you change your view, what you are looking at will most definitely change. Be the prophet in you.

Do What You Kick Ass At

You know what you kick as at doing. Deep down. Yeah, it's there. I recently watched one of those reality show where various contestants belt out notes that only our canine friends can hear and was reminded of an area I most decidedly do not kick ass at- singing.

I was not born with gifted vocal cords. Talk your ear off? That I can do (just ask my husband). Scream my head off at a baseball/football/basketball game? Sure. I am THAT crazy person. But singing? Not a chance. I even dread singing happy birthday at a kids birthday party (seriously). Always flat, sounding like some poor drowned animal. What can I say? Those girls (and guys) that belt out inhuman notes in front of audiences? Beyond my wildest imagination.

Numbers. Now, that's my thing. Not regurgitating sections of the Internal Revenue Code - although I can do that too. Numbers. I love them. I'm not talking about mental math - I can't tell you the square root of 925,444 on a dare. (I had to use my calculator. It's 962.)

But I can tell you whether I think a small business is going to make it - or if I don't, then what it would take to get them there. I can also tell you how much cash they are spinning off, what the net profit margin is, what their shareholders are making and what they should be making, how their AR is turning over, how aged their AP is, what it would take to turn their cashflow around, and whether their underwriter at their bank will most likely approve their line of credit. I can also tell them if their bookkeeper is incompetent, honest or just pissed off. And I can tell you all of this while taking into consideration the personal goals of the owners, their goal for their company and how much money they want to make.

I am not telling you all of this as part of my marketing. I am telling you this as a no nonsense, seriously aggressive nudge to inspire you to do what you love and what you are good at. The two miraculously intertwine and the planets align when you are there. If you do what you love, you will never work a day in your life. Get out there, do what you love and kick some ass!

What Does a Drop in Oil Prices Mean, Anyway?

Newspaper headlines, magazine covers and Internet homepages have been dominated recently by news of spiraling oil prices. Consumers are noticing the deflated prices at the pumps and enjoying keeping more money in their wallets after a fill-up. But, what is the greater impact of dropping oil prices? Because VAST is not invested in the energy sector and doesn’t profit from optimism or pessimism when it comes to oil prices, I’m hoping to provide an unbiased, simple look at these dropping oil prices and what the ripples might be.

Oil Prices are Low, Real Low

Since last June, the price of crude oil per barrel is down $60 (from $109 down to $49), according to the West Texas Intermediate, which is the market benchmark we generally use stateside. The reason behind the drop is multi-faceted, with the major causes being a spike in supply here in the U.S. and less consumption in major global players like Europe and China. It might seem impossible to have a dramatic rise in supply when talking about a finite resource like oil, but with the advent of new technology and practices, such as fracking, experts now are catapulting their estimates for how much extractable oil remains beneath us in major oil-field states like North Dakota and Texas. While fracking is making headlines because of the controversy surrounding the environmental soundness of the practice, it is currently one of the major reasons we are able to pull so much oil out of the ground--oil that was previously unattainable.

For more on the “why” behind the current drop in oil prices, check out this short video explanation on low oil prices published by CNN Money.

Low Oil Prices: Good or Bad for the U.S. Economy?

Arguments can easily be made to favor both sides of the low-oil-price coin. On one hand, a significant drop in oil prices hurts energy companies like Schlumberger Ltd. and Halliburton, which causes a dip in their stock prices and leads to layoffs. There are major-player corporations--such as Exxon Mobil--that primarily rely on pulling oil out of the ground and selling it for a significant profit. Therefore, when the profit margin is razor-thin, major oil corps have to cut jobs to stop the bleeding. A boost in lost jobs in a short period of time is a major hit to state economies with large oil dependence, like Texas.

On the other hand, a drop in oil prices benefits consumers at the pump. In fact, a report published by Citigroup “showed that a family will save more than $1,100 a year with today’s gasoline prices averaging $2.14 a gallon--about $1 lower per gallon than in early 2014. This is important because consumer spending accounts for two-thirds of the nation’s economic output.” To offer a comparison, production of oil and gas in our country accounts for less than 2% of our GDP, while almost 70% comes from consumer spending. So, by looking at the impact of low oil prices from this perspective, more money in the pockets of U.S. consumers is a good thing--both for consumers and for our national GDP. The impact of low oil prices goes a lot deeper and broader than this post can cover. However, with all the hub-bub out there about low oil prices, the team at VAST wanted to publish an easy-to-digest, unbiased look at the general implications of dropping oil prices. Experts believe oil prices are now close to the lowest they will go per barrel. However, when a rebound will happen is unknown--it could be quite some time before we see the $100+ barrel prices that were common throughout 2014.

Let's Have a Look Back: 2014, The Financial Year in Review

With 2014 all wrapped up, and 2015 in its infancy, we decided to take a look back at the calendar year that just passed and see how the U.S. economy (as a whole) did in some major areas. After looking through the numbers, 2014 was a significant year, helping our country continue to rebound from the Great Recession and set us up for a promising 2015 (and hopefully well beyond).

The Market

Stock and bond markets in the United States proved to perform better than was anticipated in late 2013 as 2014 approached. We saw quite a drop in October, but outside of that jolt, 2014 brought with it only “modest” periods of ups and downs.

• At year’s end, the S&P 500 was up about 13 percent.
• According to the Bloomberg U.S. Treasury Bond Index, U.S. Treasuries returned about 5.5 percent, which is the best in 3 years.

The big surprize in this area was the dramatic plunge in crude oil prices, which is good for consumers, but costly to the oil and gas industry, which will likely be cutting jobs soon as 2015 continues and prices likely stay put. The U.S. saw an increase in oil production, thanks to new technology, but this increase made for a larger supply without a jump in demand. Other markets, like China and Europe, dropped in demand, which also helped the price of crude oil drop. From an average high of $3.70 per gallon down to an average of around $2.40 at the year’s end, consumers were excited to fill up their tanks for less in 2014.

The Jobs

It’s an understatement to say 2014 was “good” for jobs ... if you compare the numbers to prior years. In fact, according to CNN, in terms of job creation, 2014 was the best year for our country since the turn of the century (1999 is the most recent year to have been better in this category). Other notes:

• Our economy added more than 2.6 million payroll jobs throughout the year.
• Our country’s unemployment rate dropped almost a full percent since the end of 2013.

The Growth

While it was a less than favorable start to the year--with the first quarter actually shrinking at an annualized rate of over 2 percent--2014 proved to show resilience and bounce back rather heartedly. Both the second and third quarters of the year grew at a pace of right around 5 percent. According to most predictions, the fourth quarter grew by around 3 percent (official numbers will come out late this month). Overall, our economy looks to have grown around 2.5 percent, which is a welcome change to the dreary numbers clocked in over the past few years.

All in all, 2014 gave us reasons to be optimistic as our economy showed promising signs of growth throughout the year. Now, after looking in the past this whole post, let’s get back to the present; it’s a new year! Here’s to 2015 everybody.

The Beauty of the Subscription Box Trend

Whether you live in a large city or a rural farm, you get mail. For most people nowadays, the mail is pretty lame, right? It includes underwhelming items like useless advertisements that nobody cares to look at (that are equally as wasteful for the environment), bills, bills and not-so-much more (including bills).

However, there is one part of the mail system that can really brighten anyone’s day: the part where you get something you like. Whether it’s a birthday card, a present for graduation or something you purchased for yourself, receiving gifts and goodies in the mail is wonderful, like a blast from the way it once was. It’s like Christmas, but delivered from a man in a van wearing a brown suit or a blue hat (depending on your carrier). And, now it's a business model that's not only genius but incredibly profitable.

What’s really impressive about the entire subscription box trend has to be how quickly it has expanded. For years we’ve had wine of the month and other “of the month” clubs, but it wasn’t until just a few years ago that the concept was applied to consumer goods that we use on a consistent basis (like razor blades).

The idea is genius, and the trend has caught fire over the past year. Although there is yet to be a credible estimation of businesses operating under the subscription-box business model, estimates are well into the thousands.

So, what’s so great about them anyway? Well, let’s see. Their valuable, often offering discounts for subscribing to a service. Their fun, delivering new products that most of us often haven’t heard of. And, they support smaller companies, often ones we didn’t know existed.

While we don’t have an exact financial analysis for exactly how the subscription box has affected the online economy, we’re tipping our Team VAST hats to the subscription box for delivering everything from kitty litter to snacks to pet food to medication to razors right to our doorsteps (or offices) each month and for being a newish fantastic business model.

In the spirit of Christmas, check out Buzzfeed’s 20 Fantastic Subscription boxes, perfect for anyone on your list this year.

3 Popular SBA Loans: What You Need to Know

Funding your small business or startup raises the lifelong question, how do I do it? Whether you’re in your first year operations or reaching a long-sought after landmark of one, three, five years or more, you’ll still need to continue funding your operations. While retained earnings drive your business to profits, everything from expanding your company to buying new property and technology to handle that growth, loans are one of the most commonly used ways to fund small-business projects.

How to Fund Your Small Business with Three SBA Loans

Small, or Micro Loans

When it comes to borrowing a small amount of money up to $35,000 (this is considered a relatively small amount of money compared to other larger business loans) many people find the 7(m) Microloan program to suit them best.

While the loan itself is currently being quite heatedly debated due to its direct sourcing from the SBA, this loan is perfect for startups. The funds, which max out at $35,000, can be used for pretty much any expense, keeping the loan easy-to-use with little restriction.

However, this loan requires its borrowers to enroll in financial responsibility classes that some find useful while others find to be a waste of their already-strained time as small-business owners. Regardless, this loan has a lot to offer its borrowers with relatively little cramping regulations.

Larger Loan Programs

Unlike the 7(m) Microloan program, programs such as the 7(a) or 504 Loan programs offer much larger amounts of money to companies. These loans can be borrowed in amounts between $250,000 and $1 million offered through subcontracted lenders to reduce the risk of the SBA’s offer to borrowers.

The 7(a) loan is actually one of the most popular loan programs offered, and is offered in many different forms to fit the needs of the borrower. Meanwhile, the 504 program allows small business owners the opportunity to borrow up to $1 million for new assets such as land and equipment. However, this loan is more difficult for many service companies to acquire.

Each of these loans have much more regulated spending and qualification requirements alongside a significant portion of borrower-responsibility when backing the loan.

For more information about small business loans, visit the US Small Business Administration's website. Or, drop us a line with your questions to see how Team VAST can help you decide which loan is best for you.

What is Small Business Saturday?

Thanksgiving is close, real close. Before we know it, we’ll be together with friends and family gathering over one of the largest meals of the year.

Thanksgiving in America has some surprisingly vast financial numbers, just think about the record year in 2010 when American consumed a staggering $4.6 billion worth of turkey, two thirds of which came from Thanksgiving alone. But, what is even more impressive are the shopping stats that come from the shopping days following Thanksgiving.

While you’re preparing to get down on some roasted turkey, cranberry sauce, stuffing and pumpkin pie, we want to remind you of a part of this holiday that many people happen to look over: Small Business Saturday--the brick and mortar version of Black Friday, the busiest corporate shopping day of the year.

What is Small Business Saturday?

Small Business Saturday was orignially created by American Express in 2010 as a campaign to urge consumers to support small businesses in contrast to the large spending at corporate stores on Black Friday and Cyber Monday.

At the time, American Express had accounts with Facebook, who in turn promoted the campaign to its merchants through rebates and online advertising efforts. These social media and PR strategies resulted in over 1 million Facebook likes and endorsements from at least 41 local politicians.

As a firm believer in empowering small businesses across the nation, VAST stands behind Small Business Saturday as a perfect opportunity for Americans to support small businesses.

So, this Saturday, when the malls are overflowing from the hustle and bustle of the holiday weekend, don’t forget to stop by the local small businesses in your community with your support.

Happy Thanksgiving from Team VAST!

VAST is an ambitious, cutting-edge virtual accounting firm based in Reno, Nevada ... with clients worldwide. 

4 Habits of Highly Successful Entrepreneurs

Viewing the success of entrepreneurs from any generation in life often causes us to ask ourselves, what exactly did they do?

While The Seven Habits of Highly Effective People written by Stephen R. Covey was all the rage through the early 2000s, our focus goes beyond being effective: what we want to be successful.

From the traditional to the abstract, we’ve scanned our experience working with entrepreneurs (and the web) and compiled our top 4 Favorite Habits of Highly Successful Entrepreneurs.

4 Habits of Highly Successful Entrepreneurs

Rise with the Sun

Time is valuable, but just how far are you willing to go to make the most of one 24-hour day? For the successful entrepreneur, waking up early (sometimes really, really early) is common practice. Doing so not only gives you more control over your day, but you’ll have clearer insight to what you need to accomplish.

Shower Time

Everyone takes showers differently. You can use this time to reflect and project your day, clear your head or simply sing your favorite shower jam. New studies have shown that alternating between hot and cold water in your shower helps wake your body and energize your mind. And, to no surprise, the trend is catching on with young and successful entrepreneurs.

Be Punctual

If you can’t show up on time, what makes your future partner, investor or client believe that they can trust you? Being punctual not only requires you to take your time seriously, but it tells other people your time is worth their respect. Plus, many first impressions are based off of punctuality, and we mean it when we say the difference between a future client or a hard rejection can, and does, depend on your ability to be punctual.

Ask Yourself …

Before you go to bed, ask yourself this question: “If I lived every day of my life like I did today, would I be happy with the outcome of my future?” It’s as simple as that. You’ll be surprised at the impact this simple reflective question can have in your life.

The future rarely depends on one large decision; rather, it’s composed of small, habitual, everyday actions that eventually make up that big picture of our lives.

What habits do you have that make you a successful entrepreneur? Please share with us.