Planning for Business $uccess By Harold J. Dischino, CPA As we begin the new millennium, businesses are faced with more challenges than ever before. Rising costs, changes in tax laws, a complex legal environment, an ever-increasing pace of technology are only a few of the issues that must be addressed in order to successfully compete in a global economy. The following tips can get you organized and help you achieve your business goals. $ Begin with Proper Planning Successfully addressing the above issues begins with proper planning. One of the first steps is developing an effective, realistic budget. You'd be surprised at how many businesses operate without a budget. Many small business owners keep this sort of information in their heads. They know how much their products costs to produce and how much they can charge to sell it. This approach becomes more dificult as a buisness expands and as external factors have a greater impact on operations. Developing a formal operating and capital budget enables management to effectively plan for the future. Used properly, a well-developed budget can help the company set goals, monitor operations, and increase efficiency. $ Develop a Budget This isn't as difficult as you might think. Most companies have the necessary information right at their fingertips. Sit down with your accountant and go over the amounts and disclosures contained in your financial statements. Identify trends and fluctuations in comparative financial information. Use the financial information to determine if certain product lines or service programs are profitable. Management can then use this information as a blueprint for developing an effective budget. $ Find Innovative Ways to Reduce Operating Costs Your initial hard work now provides a platform for addressing specific issues. The most common complaint of businesses today is the rising cost of operating their businesses. This is especially apparent concerning payroll and payroll-related costs which are difficult problems for employers. The initial response to this issue has been to downsize. Nobody takes enjoyment in laying off their employees, but that has been the unfortunate trend in the past several years. By the same token employees have felt the effects of lower wages and reduced benefits. Consider some innovative but simple methods of reducing costs. Can your employees work from their homes? A home office can be as simple as a laptop computer, a telephone, and a fax machine. Are your health insurance costs too high? Look into a 'cafeteria plan' whereby your employees contribute to their benefits on a pre-tax basis. $ Consider "Outsourcing" Certain Business Functions A popular trend is the "outsourcing" of functions previously performed in-house. Are you using an in-house payroll department? Why not consider a payroll service? They can usually do the same job as an accountant, but at a lower cost. You can also free personnel and financial resources for other purposes. $ Hire Independent Contractors Many employers have decided to "reclassify" employees as independent contractors. Hiring former employees as independent contractors results in substantial savings in payroll-related costs, such as payroll taxes and benefits. The downside is that the IRS has strict guidelines concerning independent contractor status. You should consult your tax advisor if you are considering this option. $ Identify Ways to Control Costs As we stated earlier, using your financial statements is invaluable, not only in developing an effective budget, but in identifying opportunities for controlling costs. Compare financial information with prior periods. An old accounting axiom states "in lieu of evidence to the contrary, relationships that exist at a point in time should be expected to remain consistent." If something doesn't look right, it's probably wrong! Once you have discovered possible problem areas, the difficult part starts. How does management reduce its costs, if possible? The best answer is usually the simplest: shop around! Don't feel locked in to a particular vendor. Look at your insurance coverage, for example. If you have the same carrier year after year, you may be missing an opportunity for real savings. Instruct your business manager or insurance agent to shop your policies around. Review any retirement plans you have. Are there other options which may not have required annual contributions and expensive administration? Look at budget plans offered by local utilities. Controlling costs is a full-time proposition. There is no "right" solution. You should he working closely with your accountant to determine which methods are appropriate for your specific needs. $ Review Your Marketing Methods An initial reaction in times of increasing costs is to reduce your company's advertising budget. In fact, this may be the worst time to scale back your advertising expenditures. The objective should be to spend your advertising dollars more effectively. Start tracking inquiries from potential new customers. Find out how they heard about your company and really analyze that data. It will tell you which advertising program is generating results. Concentrate on that area, and consider scaling hack those methods that aren't working. $ Encourage Employee Involvement At All Levels It is relatively inexpensive to provide business cards to all employees, including secretaries. Train them to hand out their cards at every opportunity. If an employee hasn't ordered new cards in awhile, find out why. A full box of business cards is a box full of missed opportunities. Instruct your employees to make themselves visible. Allow them the opportunity to participate in civic and community organizations. An involved, motivated staff is a great marketing tool. $ Use Consultants To Organize or Set Up Policies and Procedures An ancient proverb says 'may you live in interesting times'. How better to describe the legal and tax environment facing businesses today. Employers are required to comply with an ever-increasing and complex body of laws and regulations. Many employers are not even aware of their responsibilities and obligations under the law. Consider bringing in a consultant to review, update or if necessary, prepare your employee manuals and policies. Establish and maintain employee files with all required forms, such. as W-4 and 1-9. Be aware of federal and state laws. Discrimination, sexual harassment, and employee rights regulations often differ from state to state. Once your policies are established, make sure ea.ch employee is aware of them. $ Take Advantage of Changes in the Tax Code For example, the Section 179 (expense deduction for trade or business property) allowances will increase annually, beginning in 1997 to a maximum of $25,000 by 2003. Certain credits (including the research and experimentation tax credit) scheduled to expire at the end of 1996 have been extended throughout parts of 1997. Consult your tax advisor to see if your company can take advantage of these and other opportunities. I appreciate your help and if you have any questions please do not hesitate to email or call the office. What works for you may not: work for the folks next door, The word "proactive" is sometimes overused. In business, however, the reality is that identifying problem developing solutions, and implementing corrective action before a situation becomes unmanageable will allow the "proactive" company to compete and succeed well into the next century. Harold J. Dischino, CPA is the founder of Dischino & Associates, P.C.. He was recently named in "Who's Who of America." He can be reached at 973-808-5700. 2007 Dischino & Associates, P.C. All rights reserved.