Archives for October 2012

Have You Prepared a Production Budget for the Goods You Sell?

Business PlanYou don’t need to be a large manufacturer to use a production budget. If you produce goods, a production budget is essential. It is a management accounting tool that presents the units of items already manufactured and the units that must be manufactured to meet sales goals and therefore, income goals. No standardization exists for production budgets, so you can present it in such a way that works for your organization. For example, you can include cost elements as well as present values in units of currency.

Purpose and Use

A production budget shows the quantity of finished goods that your organization must manufacture to meet the sales goals or product demand. Hence, it contains two key underlying workings; one is the forecasted demand or sales of the product and second is the expected holding of finished goods in the stocks. Both forecasts are crucial because you don’t want to expend more on preparing un-demanded goods than is necessary. You also don’t want to lock your finances in the form of a higher than necessary quantities of finished goods. Clearly the production budget is useful for all kinds of manufacturing businesses where units can be rightly measured, such as cars and computers. It is also useful for small businesses whether you produce a few handmade items or hundreds of trinkets.

Components

A production budget starts off with the “planned number of units of sales,” and then goes on to add the “planned number of units of finished goods” to give the “total number of units to be produced.” From this total, you subtract the “beginning number of units available in inventory” to show the number of units that your company must produce. If you produce more than one item, you will need to create a budget for each. Remember, the idea is to figure out how much of each item you need to produce. So, your budget must be quite specific. Based on these numbers, you can lay out your various budgets to set targets for costs and reduction of inefficiencies. You also can then finalize your manufacturing accounts, detailing the costs incurred and gains obtained.

Management

If your organization relies on its marketing department for the sale of products, you can more effectively manage your production lines by making flexible production budgets. This means that you should constantly monitor demand levels and adjust production and inventory. You should at the very least do this every quarter. You also can rely on market forces and studies of market variables to forecast demand for your products. In this case, your analyses will determine at which level of demand your company will reach its maximum production capacity. You can then decide on alternative options, such as outsourcing or hiring more labor or machinery.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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What The Healthcare Tax Credit Means To Small Businesses

Pamela HalloranThe Small Business Healthcare Tax Credit was first introduced in 2010 to encourage small businesses and tax-exempt organizations to offer healthcare benefits to employees. The qualifying small business is allowed to claim this healthcare tax credit that could help reduce the yearly tax bill.

The healthcare tax credit is available to employers who are providing healthcare for employees on a continual basis as well as to employers who are first-time healthcare insurance providers.

Business Size Matters

In order to qualify for this healthcare tax credit, the tax-exempt organization or small business should have a minimum of 25 full-time employees who earn not more than, on an average, of $50,000 per year. A larger business will not qualify for this credit. According to the Department of Labor, an employee who works at least 30 hours per week for the same employer is considered a full-time employee.

How Much Credit Can Be Claimed

For tax years 2010 through 2013, a qualifying tax exempt organization can claim up to 25 percent of the employees healthcare cost. A qualifying small business can claim up to 35 percent of the health premiums paid for employees.

For 2014 and after, that credit will increase to 50 percent of those premiums for small businesses and 35 percent for tax-exempt organizations, creating a significant tax credit that is a win-win for both employer and employee.

Healthcare Tax Credit Stipulations

The Small Business Healthcare Credit is non-refundable, meaning that it can only be applied to the taxes due for that year. There is no refund check for this credit. However, if the small business or organization does not use all of the qualifying credit for that particular year, it will carry forward to the next year, through 2016.

In order to claim the Healthcare Tax Credit, a small business or organization must file Form 8941, known as the Credit for Small Employer Health Insurance Premiums. This enables them to list all employees, premiums paid, and will calculate the credit for which they qualify and are able to claim for that particular tax year. The amount should also be filed on Form 3800, a General Business Credit form as part of the business credits for that year.

In case of audit, all employers or organizations should have all supporting documentation on file, including receipts of healthcare premiums paid, copies of employee healthcare statements from insurance providers and all employee names, ages and dates of healthcare enrollment.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tax Advantages of Working from Home

When you are self-employed and working from home, it provides you with the freedom to accept the type of clients you want and work when and where you want. However, with owning your own home business, you will need to take control of any tax situations that would otherwise be taken care of by an employer. The following are some of the tax advantages you can utilize with a home business. Keep in mind some of these advantages do not apply to everyone and it is always recommended that you meet with a professional tax consultant to help you with choosing the best tax advantages for you and your business.

Business start-up costs: when you start a business, the amount of money you spend on business items such as membership kits, merchandizing and advertisements to promote your new business can often be used as a tax deduction.

  • Services used for the business: working from home means you will need a telephone, fax and internet services to conduct business. Many, if not all of these expenses can be used as a tax deduction.
  • Office supplies: all of the supplies such as paper, computers, pencils, desks, printers and fax machines are items that will be necessary for an efficient office and they can be used as tax deductions.
  • Advertising: this is often one of the most expensive costs for a business, but it is a necessary cost. Any advertisements you use including websites, advertisements, business cards and etc. can typically be used as a tax deduction.
  • Gas and automobile maintenance: if you use your vehicle to conduct business such as going to business appointments, luncheons or seminars your gas and maintenance bills can be used as a tax deduction.
  • Mortgage or rent: working from home means you will not be paying a separate rent fee for an office, however, you can deduct a percentage of your homes rent or the mortgage as a business expense for tax deductions.

There are several rules that apply to using items as tax deductions that are typically used for the household. For example, when using a percentage of the rent or mortgage as a tax deduction, you must use one designated part of the home on a regular basis and only for business purposes. The area that you claim for business purposes must be the place where you meet with customers and conduct daily business. Examples include a garage or spare bedroom that has been converted into a home office and the area should have a separate entrance.

These are only a few of the deductions that a home business owner can take advantage of, there are several more deductions that you can utilize during tax time. Keep in mind that a professional tax advisor will be able to guide you through what you will need to get through tax time.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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