Minggu, 28 Februari 2010
21 Money-Saving IT Tips
- Purchase & Support: If you plan to replace PCs, consider doing as many as possible in the same year. Computer sellers are much more flexible on prices right now, and you’ll be able to negotiate deeper discounts.
- Look for bundles of hardware, software and support services that can save you substantial sums.
- Energy Efficiency: New versions of Uninterrupible Power Supply (UPS) units are much more energy efficient than the old ones. Upgrading can cut energy use and save money.
- Place in-house servers in a “cooling closet” or other enclosed area where they can be “spot cooled” rather than relying on general office air conditioning to cool this hot-running equipment.
- Systems Management: Have your IT vendor pre-configure and asset-tag products before they are delivered. Use free tools such as Microsoft’s Software Update Services (SUS) patch management to keep systems up to date.
- Security: Use a Unified Threat Management (UTM) appliance instead of purchasing a bunch of separate security solutions such as firewalls, antivirus software, email filters and others.
- Desktop PCs & Notebooks: Use desktops, rather than notebooks, for office-based employees. They’ll deliver more power and value for your IT dollar. Plus, at today’s prices, you canprobably buy three desktop PCs for what it would cost to purchase two laptops.
- In speed vs. RAM debate, RAM usually wins. Sacrificing some CPU speed while adding RAM can increase the value.
- Consider low-cost smartphones and portable digital assistants (PDAs) for people who don’t need all the power of a notebook.
- Monitors: Replace old CRT monitors with LCD models that use way less power (as much as 60%), and generate less heat.
- Buy the largest LCD monitor you can. Studies show that more screen space translates into greater productivity.
- Got multi-taskers? Consider getting them dual monitors to save time closing and reopening applications or switching between windows.
- Always set power-management and screesaver features so your PCs and monitors power down when not used for a specified amount of time.
- Software: Many small businesses waste money buying software for separate PCs when lower-cost liicenses are available for as few as 5 desktops.
- Consider using more “open source” software to cut costs.
- Networking: Stringing cables is expensive; and they get in the way. Instead, equip your business with a wireless network.
- Install anti-spam email software to save everyone the time and trouble of having to delete unwanted emails.
- Phone Systems: Switch to Voice over Internet Protocal (VoIP) save 40% on domestic calls; maybe 90% international.
- Use audio, video and web conferencing as an alternative to expensive travel. When appropriate, use Skype for conference calling, especially for international calls.
- Data Storage: Instead of file servers, use low-power, lower-cost Networked Attached Storage (NAS) appliances.
- If you have lots of files, consider using de-duplication software to reduce space demands.
Fixing Pooped-Out PCs takes Priority for Small Business
With budgets busted, small businesses are keeping computers longer, making PC tuneups more critical than ever. According to OnForce, a giant network of IT service pros, service calls to fix pooped-out PCs have skyrocketed 65% over 12 months as more companies opt to fix rather than buy. And OnForce projects a continuation of that trend.
Don’t wait until your PCs break or get clogged with digital goop — that’s both dangerous and expensive for your business. WhatWorks: Run PC tune-up software to clean out clutter, fix faulty settings and speed up systems. To do that, go with the leader. System Mechanic 8.5, from Iolo, is the best selling PC tune-up software and has garnered great reviews from computer magazines and websites. It can boost your PC speed and help eliminate slowdowns, crashes and freezes. Right now, What Works readers can get 50% off the regular $49.99 cost of System Mechanic with a special PC cleanout offer. (If you order elsewhere, enter “CLEANOUT” as the discount code at checkout.) The software is valid for three PCs. And while most features work forever, you can also sign up for yearly updates.
Here are five top System Mechanic PC cleanup tips:
1. Delete old or duplicate files, emails, email addresses, bookmarks and favorites. With System Mechanic’s “Remove Junk Files”, “Remove Internet Debris” or “Find Duplicate Files” tools, you can recover a lot of lost space .
2. Defragment your hard drive. This will speed up your access to files, again saving you time. A “Defragment Hard Drive” tool also defragments Windows system files, with further speed improvements.
3. Uninstall programs you no longer need or use. To make sure they are completely uninstalled and do not leave any residual clutter, use System Mechanic’s “Remove Installed Programs” to uninstall even the most stubborn components.
4. Once you’ve uninstalled unused programs, be sure to clean out your registry as well. Invalid or out-of-date registry settings can slow down your PC boot time. Use “Repair Registry Problems” and “Defragment and Compact Registry” featurs to lower your boot time.
5. You can improve start time further by removing unnecessary startup items. Many programs lodge themselves in startup without you knowing it. Remove them using System Mechanic’s “Optimize Windows Startup” tool.
Don’t wait until your PCs break or get clogged with digital goop — that’s both dangerous and expensive for your business. WhatWorks: Run PC tune-up software to clean out clutter, fix faulty settings and speed up systems. To do that, go with the leader. System Mechanic 8.5, from Iolo, is the best selling PC tune-up software and has garnered great reviews from computer magazines and websites. It can boost your PC speed and help eliminate slowdowns, crashes and freezes. Right now, What Works readers can get 50% off the regular $49.99 cost of System Mechanic with a special PC cleanout offer. (If you order elsewhere, enter “CLEANOUT” as the discount code at checkout.) The software is valid for three PCs. And while most features work forever, you can also sign up for yearly updates.
Here are five top System Mechanic PC cleanup tips:
1. Delete old or duplicate files, emails, email addresses, bookmarks and favorites. With System Mechanic’s “Remove Junk Files”, “Remove Internet Debris” or “Find Duplicate Files” tools, you can recover a lot of lost space .
2. Defragment your hard drive. This will speed up your access to files, again saving you time. A “Defragment Hard Drive” tool also defragments Windows system files, with further speed improvements.
3. Uninstall programs you no longer need or use. To make sure they are completely uninstalled and do not leave any residual clutter, use System Mechanic’s “Remove Installed Programs” to uninstall even the most stubborn components.
4. Once you’ve uninstalled unused programs, be sure to clean out your registry as well. Invalid or out-of-date registry settings can slow down your PC boot time. Use “Repair Registry Problems” and “Defragment and Compact Registry” featurs to lower your boot time.
5. You can improve start time further by removing unnecessary startup items. Many programs lodge themselves in startup without you knowing it. Remove them using System Mechanic’s “Optimize Windows Startup” tool.
Demand Drives Dell to Deepen Discount Deal
There’s something about 0% financing and one-dollar lease buyouts that small business owners seem to like. Dell recently offered just that on its EqualLogic storage devices. And strong demand has spurred Dell to expand the offer to include some of its Latitude laptops (E5500, E6400 and E6500) and PowerEdge 1950 and 2950 servers for tech totaling $25,000 or more. The deal is basically this: Lease for 36 months at 0% financing, and buy the equipment for $1 when the lease ends.
Brightclaim, an Atlanta-based biz that provides claims services to insurance companies, needed more computer storage, but wanted to conserve capital. It used the 0% deal to land the storage solutions it needed to keep growing.
The 0%, 1 buck-buyout deal can be a good choice for small and mid-size businesses looking to “refresh” their tech to improve performance and lower maintenance costs. The 36-month lease terms make for low monthly payments, and Dell will also do quarterly billing, rather than monthly, so you’ll have less paperwork.
And btw, if your biz needs a credit line, Dell Business Credit might oblige, with rates around 10% for qualified businesses.
Dell is offering 0% lease financing on the Latitude E6500 laptop
Brightclaim, an Atlanta-based biz that provides claims services to insurance companies, needed more computer storage, but wanted to conserve capital. It used the 0% deal to land the storage solutions it needed to keep growing.The 0%, 1 buck-buyout deal can be a good choice for small and mid-size businesses looking to “refresh” their tech to improve performance and lower maintenance costs. The 36-month lease terms make for low monthly payments, and Dell will also do quarterly billing, rather than monthly, so you’ll have less paperwork.
And btw, if your biz needs a credit line, Dell Business Credit might oblige, with rates around 10% for qualified businesses.
New Screen Recording Service is a Game-Changer
Here’s a new “screen casting” service I already love, and I’ve only had a brief test drive. It could change how you think about presentations. On the What Works for Business usefulness scale, it’s a winner.
It’s called GoView and it’s a super-cool new all-in-one screen recording, editing and sharing service just launched by the same innovative folks at Citrix Online who brought us the popular GoToMeeting, GoToMyPC and other services. GoView’s simplicity is stunning, surpassed only by its versatility and potential as a tool for business owners and entrepreneurs. And (for now at least) it’s free.
GoView will record whatever is happening on your PC screen, along with sound (you talking, for example). Show files, maps, images, product specs — you name it. Pause or stop recording at will. You can edit the recording with incredibly easy-to-use click-and-drag editing and formatting tools that also let you insert titles and a variety of formatting. GoView’s simple sophistication makes it a pleasure to use…and this is just the beta version.
Your recording is given its very own URL and stored at the GoView site. To share it, just give out the URL. You can password protect it if you want, although GoView does not publish the material or URLs, and does not offer a way to search for content created by others. Recordings are saved until you delete them. You can also download them if you like for viewing on a VLC Media Player or Apple’s Quicktime Player.
The business possibilities for sales, marketing, how-to tutorials, training and other purposes are mind-boggling. When it comes to content sharing and on-the-fly presentations, this is next generation stuff that you can access anywhere.
It’s called GoView and it’s a super-cool new all-in-one screen recording, editing and sharing service just launched by the same innovative folks at Citrix Online who brought us the popular GoToMeeting, GoToMyPC and other services. GoView’s simplicity is stunning, surpassed only by its versatility and potential as a tool for business owners and entrepreneurs. And (for now at least) it’s free.
GoView will record whatever is happening on your PC screen, along with sound (you talking, for example). Show files, maps, images, product specs — you name it. Pause or stop recording at will. You can edit the recording with incredibly easy-to-use click-and-drag editing and formatting tools that also let you insert titles and a variety of formatting. GoView’s simple sophistication makes it a pleasure to use…and this is just the beta version.
Your recording is given its very own URL and stored at the GoView site. To share it, just give out the URL. You can password protect it if you want, although GoView does not publish the material or URLs, and does not offer a way to search for content created by others. Recordings are saved until you delete them. You can also download them if you like for viewing on a VLC Media Player or Apple’s Quicktime Player.
The business possibilities for sales, marketing, how-to tutorials, training and other purposes are mind-boggling. When it comes to content sharing and on-the-fly presentations, this is next generation stuff that you can access anywhere.
Avoid Awkward Phone Calls with Slydial Voicemail
The Slydial service connects you directly to the voicemail of any U.S. mobile user, regardless of their carrier or location. And it works from any phone, land line or mobile (but it doesn’t connect to land line voicemail). It’s free if you don’t mind listening to a brief (but annoying) ad each time you use it. Or buy the service for $29.95 per year and skip the advertising aggravation.
But Slydial isn’t foolproof. When I tried it, the system said it was unable to connect me to voicemail. But moments later I received a return call from the person I was trying to leave a message for, saying his phone rang once and my number showed up. So be aware this might happen.
Here’s how it works, plus some user tips and “Slydial Situations” where you might find it handy for your business:
In most cases the person you’re slydialing simply receives a new voicemail alert a minute or so after you leave a message. However, with some mobile phones, the recipient may hear a brief “half ring” before it goes to voicemail. And with some mobile carriers, you may hear a ring while you are waiting to be connected to the recipient’s voicemail. Slydial says this is not the recipient’s phone ringing. Rather it’s the mobile carrier playing a ring tone while it tries to locate the recipient.
No signup is required to use Slydial Just dial 267-SLY-DIAL (267-759-3425) and you are ready to go. However, you need the MYslydial paid service to get advanced features including Slydial Apps for iPhone, BlackBerry and Windows Mobile smart phones, as well as fast connection to voicemail with no ads. Voices are limited to 90 seconds with the free service; but there’s no time limit if you pay.
You can download the Sydial application of your choice on your smart phone by visiting the Sydial applications page.
Slydial business scenarios:
- Your business partner is on vacation. You need to give her an update on what is going on in the office but you don’t want to disrupt her R&R. Too much info to text? Instead leave a voicemail with all she needs to know.
- You are working on a dozen different projects and have as many calls to return. Instead of being stuck on the phone with just one, leave each a voicemail with an update.
- You need to call a client but he’s a notorious talker and you don’t want to spend an hour on the phone because you have an entire business to run.
- Your client or colleague is in a different time zone and you need to leave a message but don’t want to bother them too early, or too late by having the phone ring. Now you can just leave a voicemail
- You have several meetings scheduled for the afternoon. You want to call to confirm but you don’t want to disturb them or give them the opportunity to reschedule. Being able to just leave them a voicemail is not only polite, but advantageous.
- You just gave an awesome pitch to a potential client. You want to call him and thank him for the opportunity, but you know he is in another meeting and don’t want to disturb him. Leave him a voicemail and this personal touch may just tip the scales in your favor.
Quick and Easy Support for Windows 7 Migration
But most business owners find the prospect of migrating to a new operating system daunting. If you are considering an upgrade to Windows 7, but want to avoid turning a migration into a migraine, the PC techies at Support.com have a new hand-holding service that might help.
Support.com’s Windows 7 Online Migration Service offers real-time, one-on-one tech guidance for people who need help switching from Windows XP or Vista. Experienced tech gurus will use remote connections to help you make the transition without having to copy all of your data to another computer during the process. The cost is $49 if purchased with one of the Support.com monthly subscription plans (starting at $20/month), or $149 separately.
Support.com also offers a variety of premium support for small business that let you speak to a live agent and get immediate help with your computer problems. Services are delivered over the Internet while you watch the agent do the work for you. No need to bring your computer in to a store or wait for a technician to show up.
Commercial Auto Insurance: When You Need it; When You Don’t
Our special blog guest offers his commercial auto insurance advice
Sure, sure, I know. Your typical tropical or sub-tropical lizard isn’t generally known for insurance expertise. But the Gecko is a real go-getter in the field, and happens to represent one of America’s top three private passenger auto insurers. In case you’re wondering, by the way, the Gecko first went to GEICO in ‘99 because people kept confusing the name “GEICO” with “Gecko.” (He’s mum on how he gets along with Caveman.)
He does have a particular penchant for clams, however (check out his personal bio), so with the promise of a few, he cheerfully offers up these tips about commercial auto insurance, and when you need it.
Who’s the registered owner?: The Gecko says this is a slam dunk in at least one case: “When the vehicle is registered in the name of the business, you definitely need commercial auto insurance.” But don’t assume the reverse. If it’s registered in your name, “it does not automatically mean that you should get personal auto insurance on it,” says the Gecko. “A lot of times a solely owned business will have a vehicle registered in the name of the owner. If the vehicle is being used primarily for the business though, you will need commercial insurance. ”
Who drives?: Another sign that you need a commercial policy is if other employees at your company are driving the car. Commercial insurance policies allow you to list employees as drivers.
Business Use: The next question the GEICO Gecko says to ask is this: “Is the vehicle getting regular business use?” Regular business use is defined as use for commercial purposes, on average, more than 3 times in a 1 month period. If your answer is “Yes,” then commercial insurance is right for you.
Those are the basics, but there’s more to know so you can also see GEICO Gecko’s complete and uncensored guide to knowing when you need commercial auto insurance at Business.com. It includes key examples of business vs. personal usage for real estate agents, lawyers, home health care workers and others.
Health Insurance Basics for Small Business
Here are your basic options, from full-featured major medical plans, to HMOs, PPOs, health savings accounts (HSAs) and more — plus what you can expect to pay right now for a small group plan, and some of the best ways to control the costs of providing health coverage at your business:
Indemnity plans – These major medical plans typically have a deductible – the amount you pay before the insurance company begins paying benefits. After covered expenses exceed the deductible, benefits usually are paid as a percentage of actual expenses, often 80 percent. These plans offer the most flexibility in choosing where to receive care.
Health Maintenance Organization (HMO) - HMOs make you choose a primary care physician (PCP) from a list of network providers. Your PCP is responsible for managing all of your health care. If you need care from any network provider other than your PCP, you may need a referral. Insured employees must receive care from a network provider in order to have the claim paid through the HMO. Treatment received outside the network may be covered at a reduced level or not at all.
Preferred Provider Organization (PPO) - Under these medical plans, the insurance company enters into contracts with selected hospitals and doctors to furnish services at a discount. As a member of a PPO, you may be able to seek care from a doctor or hospital that is not a preferred provider, but you will probably pay a higher deductible or co-payment.
Point of Service (POS) plans- These are a hybrid of the PPO and HMO models. They are more flexible than HMOs, but still require you to select a PCP. Like a PPO, you can go to an out-of-network provider and pay more of the cost. However, if the PCP refers you to an out-of-network doctor, the health plan will pay the cost.
Health Savings Accounts (HSA) and High Deductible Health Plans– A Health Savings Account is not health insurance by itself. Rather, it is a savings plan that offers an alternate way to pay for health care. HSAs let you pay for current health expenses and save for future medical and retiree health expenses on a tax-free basis.
In order to open an HSA, an individual must be covered by a High Deductible Health Plan (HDHP). Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is low-cost coverage that only kicks in after the first several thousand dollars or more of expenses.
Controlling Costs
The average premium for small group health insurance is around $350 per month ($4,200 per year) per employee, and $880 per month ($10,55 annually) for family coverage.
Before selecting a health plan, survey your employees to find out what kind of coverage is important to them. Small business plans are not standardized, and benefits vary greatly. In some states, group health insurance must cover childhood immunizations, mammograms, pap smears, prostate screening and diabetic supplies. In other states, these may not be mandated.
The rates an insurer can charge a small business are typically set in a range by state law for employers offering plans with the same benefits design and which have similar “case characteristics” such as employee age and gender and business location.
Some cost factors are outside of your control while others can be managed. For example, HMOs are typically less expensive than PPOs; both are less expensive than indemnity plans.
As a rule of thumb: the higher the deductible, the lower the premium. Typical deductibles range from $50 to $250, though “catastrophic” policies come with much higher deductibles in the $1,000 to $5,000 range.
Maximum out-of-pocket limit is also a factor. Many plans have a cap – a maximum limit on the amount of out-of-pocket expense that an employee is expected to pay for health care in each calendar year.
The NAIC has a super helpful website called Insurance University that offers detailed information on a variety of small business insurance topics.
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Tax Break Helps Small Business, Startups Raise Money
But suddenly it looks like that tax break could grow from merely good to downright golden under an Obama proposal just issued. Obama aims to completely eliminate capital gains taxes on qualified small business stock held at least five years. Yes, that’s right. Zero. It’s a game-changing shift. Startups are already salivating at the prospect of putting together stock deals where individuals (but not corporations) who invest — owners, employees, angels, etc. — can exit and pay no capital gain taxes. Here’s what’s already changed, what may soon change, and what types of businesses and investors qualify:
What’s already changed: Under new stimulus law provisions, individuals who buy stock in a small business from now through 2010 get a bulked-up break on capital gains taxes later on. If the stock is held at least five years, 75 percent of any gain can be excluded — up from the previous 50 percent. The stock must be original issue stock held by a non-corporate investor in a C corporation with gross assets under $50 million. The company must also be actively engaged in a trade or business.
What may soon change: The Obama Administration’s budget proposal just issued provides for a complete capital gains tax exemption for qualified small business stock issued since February 17, 2009 and held five years. What’s more, the gains would not count toward calculating the alternative minimum tax (AMT).
Who qualifies: This tax break only applies to individuals who invest in a U.S.-based qualified small business C-corporation with less than $50 million in assets. S-corporation stock does NOT qualify, even if the business later switches to a C-corp. The biggest drawback is that many types of professional businesses are out. The basic rule is this: The company does not qualify if its principal asset is the reputation or skill of one or more employees, such as a doctor, lawyer or accountant. That rules out service firms in health care, law, accounting, architecture and consulting, among others. But most Internet, tech, retail and manufacturing businesses would qualify.
What to do:
- Startups in qualified business types should carefully consider C-corporation status, as opposed to LLC, S-Corp or others.
- Watch carefully what happens to this provision, which falls under Section 1202 of the tax code. Make sure potential investors are aware of the sweet tax benefits they stand to reap by investing in your qualified business.
- Re-evaluate business plans with an eye toward requirements of becoming a QSB entity.
- Beware of post-financing transactions that might jeopardize QSB status later down the road.
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Free SBA Bridge Loans Start June 15
ARC bridge loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that are suffering hardship right now and need short-term help to make principal and interest payments on existing debt. These loans are interest-free to the borrower (you), and 100 percent guaranteed by the SBA. Here’s how it works:
In addition to the loans being zero interest and fully guaranteed by the government, you don’t have to make any payments until a year after you receive the last of the funds, which will be disbursed within a period of up to six months. After the initial 12-month payment-free grace period, you’ll have five years to pay it off. As with all SBA financing programs, the ARC loans will be made by commercial lenders, not SBA directly. Banks and other commercial lenders who make small business loans should have information on the program available soon (although most aren’t even aware of it yet), and you can get updates at the SBA Recovery site as well.
Bridge loan funds to be used for payments of principal and interest on your existing business debt, which can include these things:
- Mortgages
- Term loans, both secured or unsecured
- Revolving lines of credit
- Capital leases
- Credit card debt
- Notes payable to vendors, suppliers and utilities
“A viable small business is one that has been profitable in the past, but is just beginning to struggle with making loan payments, and can reasonably project that it can get back on track with the infusion of ARC loan funds and the benefit of deferred payments.”
ARC loans will be available through SBA-approved lenders as long as the money holds out, or through September 30, 2010.Related posts
Venture Capital Business Must Shrink or Sink
Kauffman came out with guns blazing, ripping the VC industry for having become far too comfy with itself, its structure and compensation. And it debunks the myth that American entrepreneurship lives on VC support. In fact, only about 16 percent of the 900 unique companies that appeared on the Inc. 500 list of fastest-growing private companies over the last 10 years had venture capital backing.
And the report also reveals that only a tiny percentage — less than 1 percent — of the estimated 600,000 new “employer” businesses (more than 1 person) created yearly in the U.S. get VC money…
Despite venture capital’s reputation for backing icons such as Google, Genentech, Home Depot and Starbucks, today’s reality is different. Less than one in five of the fastest-growing, most successful young companies in the U.S. had venture capital backing,the Kauffman study says: Despite a rapid expansion of venture capital assets under management, the venture industry has been stagnating, and producing declining returns.
Study results argue that VC bloat has caused the industry to no longer produce competitive returns. “It’s inevitable,” says Paul Kedrosky, senior fellow at Kauffman and author of the study. “Whether it realizes it or not, whether it wants to or not, the venture capital industry has to change.” In order for VC to get back to producing competitive returns “it will have to fall by half to a $12 billion per year investing pace from its current $25 billion or higher rate,” the Kauffman study says.
That’s billions of dollars that would no longer be available to young companies seeking venture backing for growth and expansion. But that would presumably improve investment returns for successful companies, thus helping resuscitate the industry, notes Robert Litan, Kauffman’s VP of research and policy. Long-term returns on venture capital investments overall stink. The venture industry lags the usual measure of small company performance the Russell 2000 index by 10 percent on a 10-year time frame.
So what’s the big problem? The venture capital industry itself might be structurally flawed, says Kauffman. “The core markets that made it successful — information technol9ogy and telecommunications — are now mature and less capital intensive. In addition, exit markets (such as IPOs) are unwilling to take on young and unprofitable companies.
Given that, the real question for VC’s future becomes one of size. As opportunities shrink, the venture business may have to shrink as well — perhaps by 50 percent or more.
For more details check out the complete study called Right-Sizing the U.S. Venture Capital Industry.
5 Keys to Funding Future Business Growth
It starts with understanding the different options, and that alone can be challenging. When American Express surveyed a group of small business owners recently, it found that many were having trouble separating financial fact from fiction.
For example, Amex found that 34 percent of business owners surveyed believed, incorrectly, that a business “term loan” (funded immediately for a set term and amount) and a “line of credit” (which you open and tap as needed) are essentially the same. And nearly 40 percent believe it’s a good idea to apply to as many lenders as possible when seeking a loan, when the opposite is true. Multiple applications can tarnish your credit rating.
Here are five things you should know about financing that can help position your business for future growth:
1. Reinvested profits are perfect. The best source of “venture capital” for an existing business is money your company is already generating. Many entrepreneurs miss growth opportunities by spending profits in unproductive ways. Others take the opposite extreme, pumping every penny into the business while taking nothing for themselves. Both can backfire. If you do need to seek a loan, bankers will prefer that you pay yourself a reasonable salary. They want to know the business can be profitable even if those running it get paid.
Reinvesting profits in your business is a key to successful long-term growth. This is “patient” capital that builds value in your business without debt and without giving up shares to others. About 46 percent of business owners surveyed by American Express said they planned to finance their growth by reinvesting profits.
2. Tap into trade credit. “Trade credit” describes the process of delaying payment for goods and services your business purchases from various suppliers and vendors. You may find vendors more than willing to sell on credit to a growing business – and even to a startup – if you can strike a long-term deal to buy from them.
And from your perspective, trade credit is also one of the safest forms of business borrowing. Bank debt is dangerous because payments are still due even if sales drop. But if sales drop so will your orders, so your level of trade credit will drop too.
Right now, trade credit may be more readily available than bank or other types of loans. And it lets you spread payments over months or even years with little or no down payment and generally favorable rates.
3. Line up credit lines early. The time to establish a line of credit is when you have the ability to qualify for one – not later on when you need it. Having a line of credit can help you growing by providing ready financing when opportunities arise. A line of credit is also vastly preferable to using corporate credit cards that generally carry much higher interest rates and increasingly onerous terms. But avoid using a credit line to bail yourself out of trouble. Lines are meant to be tapped as needed, then paid off so they are available again the next time.
4. Expand banking relationships. If you have accounts with only one big bank, consider opening additional accounts at a regional or community bank. That will give you more options when it comes time to look for loans, lines or other credit to support your growth plan.
5. Consider alternative loan sources. A few options include credit unions you may be eligible to join, accounts receivable financing (also called factoring), and so-called “peer-to-peer” lending. Peer-to-peer (or person-to-person) lending has taken off in the recession as traditional loan sources have dried up and new Internet sites have made it easy to apply for and obtain this type of financing.
To explore P2P lending, check out these sites: Prosper (www.prosper.com); Lending Club (www.lendingclub.com); Virgin Money USA (www.virginmoneyus.com) and Loanio (www.loanio.com).
Sabtu, 27 Februari 2010
A New Way to Rate Customers with no Credit History
This group of potential customers is heavy on students, senior citizens and recent immigrants, so the scoring model is based on non-traditional credit data such as subscription memberships, bank deposit account activity and utility histories. The resulting scores use the same 300-850 scoring range as the traditional FICO and can also be used in combination with the traditional score when making credit decisions. The new scoring system can help identify responsible, credit-worthy customers who can meet their obligations but simply haven’t had an opportunity to establish a traditional credit history.
MicroBilt Corp., which provides risk manaement services to small and mid-sized businesses, has an exclusive license to use the FICO scoring model in the U.S. and sell FICO Expansion scores to lenders and businesses. MicroBuilt has direct links to the three major credit bureaus, which means businesses checking customer credit can get both the traditional FICO score and the FICO Expansion score from a single source. For more information on obtaining a FICO Expansion score you can fill out a MicroBuilt inquiry form or call 800-884-4397.
According to its creators, the FICO Expansion score accurately predicts the likelihood that a consumer will become seriously delinquent within the next two years, using the same caliber of highly predictive, objective risk evaluation that other FICO scores are known for.
FACTA Fright is FTC Halloween Red Flags Trick
The problem is this: Despite an FTC effort to educate small businesses and other entities about FACTA red flags requirements, confusion still reigns over what businesses are covered. Even FTC Chairman Jon Leibowitz himself has suggested that Congress may simply have written the law too broadly. Leibowitz ordered his staff to beef up its efforts to educate businesses about compliance and provide more clarity on which businesses are covered, and what they must do to comply. BUT NOTE THIS INSIDE INFO: FTC insiders say the Commission is highly unlikely to take enforcement action against businesses that know their customers or clients individually, or if they perform services in or around their customers’ homes, or if they operate in sectors where identity theft is rare and they have not themselves been the target of identity theft.
The Red Flags Rule is an anti-fraud regulation requiring “creditors” and “financial institutions” to identify, detect and respond to the warning signs, or “red flags” that could indicate identity theft. The new requirements were mandated by the Fair and Accurate Credit Transactions Act (FACTA) – hence the name. The FTC’s Red Flags Web site, www.ftc.gov/redflagsrule, can help you determine if your business is covered, and what you’ll have to do to comply. It includes an online compliance template that lets you design your own Identity Theft Prevention Program through a fairly easy online form, as well as articles directed to specific businesses and industries, guidance manuals, and a FACTA Red Flags FAQ.
FACTA’s definition of “creditor” includes any business that regularly extends or renews credit – or arranges for others to do so – and includes all businesses that regularly permit deferred payments for goods or services. Accepting credit cards as a form of payment, however, does not, by itself, make you a creditor. “Financial institutions” include entities that offer accounts that enable consumers to write checks or make payments to third parties through other means, such as other negotiable instruments or telephone transfers.
One type of covered business is car dealerships where FACTA rules have already created new layers of red tape and even customer conflicts. Some dealerships have interpreted the rules to mean they have to run credit checks on car-buying customers even when they are not financing any part of the vehicle. That, in turn, has irked some cash-paying customers who object to being forced into providing personal details such as a Social Security number and be subjected to yet another credit check that can negatively impact their future credit score — even when they are not requesting any credit.
Although many covered businesses have already developed and implemented FACTA compliance programs, some – particularly small businesses – remain uncertain about their obligations. Be sure to check the special link for small business on the Red Flags Rule website for further guidance.
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10 Ways to Avoid Merchant Account Chargebacks
Chargebacks are not the same as refunds which are initiated on your end when, for example, a customer returns a product. Rather, chargebacks are initiated through the credit card issuer because the customer has challenged the charge or filed some kind of complaint. It amounts to a reversal of the original transaction, and the merchant gets stuck paying a chargeback fee to boot.
The burden of proof usually falls to the merchant – to you. Credit card companies want to keep their customers happy, so they generally give them the benefit of any doubt on chargebacks. But not only do you lose the sale, you might lose the merchandise as well (or the time and expense providing a service) – plus pay a penalty (chargeback fee).
The consumer’s right to file for a chargeback is created under Federal Law and is meant to protect customers from unscrupulous merchants, shoddy goods and suspect services. Chargebacks are also caused by fraud, processing errors or problems with card authorization.
Brien Heideman, President of BadCustomer.com, calls it “friendly fraud” and says it cost U.S. retailers $11.8 billion last year. “People return used or even different items, they return items to different stores or take advantage of lenient return policies,” says Heideman, who says his site maintains the Internet’s largest shared database of people considered high chargeback risks – over 6 million records. The site also offers services to help small business owners avoid chargebacks.
Here are 10 things you can do:
1. Identify yourself clearly: Make absolutely sure that a company or product name the buyer will recognize appears as the “descriptor” on the customer’s credit card statement. Customers will dispute charges from entities they don’t recognize. For example, if your store is Harry’s Hardware, but the charge comes through under your corporate name Harold Jones LLC, you’re asking for trouble.
2. Seek feedback: Encourage customers to contact you first with any question or dispute. That means making it easy for them to find your phone number, email address, website or other contact information. The idea is to prevent calls going to the credit card issuer which could lead to a chargeback.
3. Verify by email: For online or phone orders, always send a confirming email to the customer to verify. If the email bounces, or the customer won’t provide an email address, that’s a red flag. Confirming emails further reinforce your business name in the customer’s mind, helping prevent chargebacks.
4. Be nimble, be quick: Whatever you do, do it fast. Send notices immediately, ship goods on time, perform authorizations and process credit cards on the spot and respond to any and all dispute posthaste. The longer you wait, the higher your chargeback risks.
5. Follow procedures: If a credit card is expired, an address doesn’t match or authorization is declined, don’t complete the sale. Make sure information on receipts is accurate and legible. Incomplete information triggers chargebacks. Establish a policy of asking to see customer identification to ensure it matches the name on the card.
6. Safeguard against duplicates: Be sure transactions are entered only once – a duplicate could trigger a chargeback. Ask your merchant account provider to enable duplicate-checking safeguards on your account, if this service is offered.
7. Display your return policies: Make your return, exchange and cancellation policies are made clear on your website, in your store, on receipts, in confirmation emails – and anywhere else you can think of. This discourages chargebacks and can also help you win disputes.
8. Request signatures: One crooked customer tactic is to claim goods were never received. To discourage this, consider using signature-required delivery services from FedEx, UPS or the Postal Service. This still isn’t foolproof, but improves your odds.
9. Challenge the chargeback: You don’t have to take chargebacks lying down. You can still salvage the sale by providing detailed information to your merchant bank documenting the transaction and all actions taken to resolve any dispute.
10. Get bad: If chargeback woes have you at wit’s end, consider the “BadCustomer” approach. Check the BadCustomer.com database for potential chargeback risks, and warn customers you’ll report them to the site for unwarranted disputes.
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Small Loans to Start or Grow a Business
Keep in mind, however, that you’ll need to qualify for the money, submit an application, have a sound business plan or idea, and – gulp – will have to pay back the money. Still, opportunities to secure micro financing for a business startup have broadened.
Here’s where you’ll find the money:
ACCION USA is a private non-profit that offers startup and expansion microloans of up to $50,000 to small business owners in the U.S., along with credit and business advice to small business owners who cannot access traditional credit. ACCION specializes in working with qualified small business owners who do not meet bank lending standards and offers loans for startups as well as loans for established businesses. The Web site has an online application and other helpful resources.
In addition to serving U.S. micro-entrepreneurs through ACCION USA, Boston-based ACCION partners with microfinance organizations throughout Latin America, the Caribbean, Asia and Africa. Since 1998, ACCION has made over $17.4 billion in microbusiness loans to over 6 million people worldwide.
Community Development Financial Institutions: About 1,000 CDFIs in all 50 states make microloans for business startups in low-wealth, low-income communities, serving both rural and urban areas. Use the handy CDFI State Locator at the non-profit CDFI Coalition website to find one near you. Some CDFI examples:
- The Utah Microenterprise Loan Fund, a certified CDFI, is making loans of up to $25,000. Their motto is ”Building brighter futures through small business.” A $10,000 micro enterprise loan from the Utah fund helped Somer Gardiner get her Salt Lake City yarn store, Soul Spun Yarn, off the ground.
- Enterprise Corporation of the Delta, a CDFI in Jackson, MS, has helped train or fund thousands of entrepreneurs in the Mississippi Delta region it serves. It helped back Computers, Inc., a small business owned by three women. Computers, Inc. installs custom equipment for schools and businesses.
- Self-Help, a CDFI in North Carolina, provides small business loans in several southeastern states and elsewhere around the country. Loans range from a few thousand dollars and up to start, buy or expand a business or non-profit.
Valley Economic Development Center (VEDC) runs one such SBA microloan program that in late 2009 received a $2 million capital injection from U.S. Bank to expand its micro lending services in Southern California. In addition to providing loans, VEDC provides technical assistance to small companies. VEDC works with SCORE, the SBA and U.S. Bank branches to identify potential borrowers. Check the SBA’s list of 165 micro lenders nationwide for one in your area.
Person-to-Person lending: This is also called peer-to-peer lending and thanks to tight-fisted traditional lenders and a group of websites that back it, it’s a booming alternative to traditional loan sources. Several P2P lending websites have grown rapidly, connecting people who have money with people who need it, while helping structure and manage loans between them. The average loan made through a P2P site is about $5,000.
Top P2P lending sites include Prosper.com, Virgin Money US, Lending Club and RaiseCapital.com. Individual lender/investors compete with each to make loans to borrower’s who have posted a loan request on the site. The better your credit rating and proposal, the lower you rate is likely to be. Here’s a description of how it works at Prosper.com.
Count Me In, a non-profit organization, makes microloans to women entrepreneurs in all 50 states through its Micro to Millions Award program.
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How to Cash in on Your Excess Inventory
And you probably have little patience for continuing to carry the extra load. But there are several tactics that can either net you a cash return on your items, or a nifty tax write-off. And some of those services are places you can buy as well as sell excess inventory. Your five basic choices are:
- Sign up to sell in bulk in a business-to-business inventory liquidation marketplace.
- Sell everything at once to an “instant” liquidator.
- Sell small quantities at sites targeting consumer volume sales.
- Launch an online sales channel for your business on eBay.
- Donate qualified items to a charity and earn a tax deduction of up to twice the cost of the goods.
Unload in bulk, business-to-business: Retailers, wholesalers, manufacturers, distributors and others can sell goods via centralized liquidation auctions. For example, Liquidation.com is a b2b bulk marketplace where companies sell all kinds of excess goods. Liquidation.com welcomes inventory from small businesses to sell on this auction marketplace, and has a track record of providing returns higher than other liquidation methods.
Net instant cash on your excess inventory: You can avoid the bother of auctions by selling to a surplus inventory liquidator. InstantLiquidators.com, MerchandiseUSA.com and Power Retailing (www.retailing.com) all buy a wide range of customer-returned and excess inventory. Excess Technologies (www.excessi.com) is a professional surplus inventory liquidator.
Open a sales channel for your business on eBay: Opening a business selling account on eBay can be a great way to sell some of your excess inventory at competitive prices. Setting up your business sellers account is free and simple. Be sure to download the 25-page New Business Seller Guide (PDF) which walks you through the process with tips and advice. Visit www.ebay.com/sellerinformation to get started.
Donate your goods for a juicy tax deduction: Your incorporated business can earn an above-cost, federal income tax deduction, clear out warehouse space, avoid liquidation nightmares and help schools and nonprofits at the same time. The National Association for the Exchange of Industrial Resources (www.naeir.org) takes donations of new, overstock or discontinued product and redistributes it to schools and nonprofit groups nationwide.
Donor companies can receive an enhanced income tax deduction of up to twice the cost of the goods, courtesy of Internal Revenue Tax Code Section 170 (e)(3). NAEIR takes donations of general, consumer goods such as school and office supplies, toys, games, building materials, clothing, tools, and much more. NAEIR also provides the paperwork to aid in filing taxes.
You can deduct cost, as carried on your books, plus half the difference between cost (basis) and the fair market value, except that the tax deduction cannot exceed twice the cost. For example, items carried on the books at a cost of $100 that have an established fair market value of $200 may be donated and a deduction of $150 may be taken. If however, those items carried at a $100 cost have an established fair market value of $300, they may be donated and a deduction of $200 may be taken.
Plan Ahead: To avoid this problem in the future, consider using inventory management software to keep better track of your goods. Fishbowl Inventory is the best-selling inventory solution for small business that integrates easily with QuickBooks.
Fishbowl Inventory was designed to provide inventory control for wholesalers, distributors, manufacturers and retailers that use QuickBooks. Fishbowl provides advanced features including multi-location inventory control, order management, expiration dates, serial and lot number tracking and point of sale functions. It’s available directly from Fishbowl (www.fishbowlinventory.com) or through software resellers.
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New ExpenseWatch.com Release Helps Manage Payables
Put a lock on your spending
But more importantly than seeing what you’ve already spent, this system helps you anticipate future spending before it happens. Such expenses can include committed purchases, invoices, unpaid T&E costs and other requests in process that — if approved — could bust your budget.
ExpenseWatch isn’t for really small firms. It’s sophisticated stuff that can help solve a variety of expense management problems — especially small and mid-sized businesses that still use manual or other paper-based ways of dealing with company expenses and accounts payable (AP). The newly-released AP Invoice Management module makes sure that invoices are matched to purchase orders and packing lists, helping to do away with duplication, overspending and paying for things you didn’t order.
Small Business Bags Stimulus Bill Tax Breaks
Got losses? File for refunds back to 2003!
Some tax goodies extend popular incentives that recently expired. Others expand tax write-offs for losses — which will generate quick cash for many business owners. Here’s a rundown of key business tax benefits included in the stimulus bill:
1) Longer operating loss carry-backs: If your small business had a “net operating loss” (NOL) in 2008, this provision could be a terrific way to generate cash by claiming refunds now of taxes paid in previous years when profits were flowing. Instead of the current two-year carry-back period, eligible businesses (those averaging less than $15 million in gross receipts) can now carry back 2008 losses to 2003, 2004 or 2005. And you don’t have to be a corporation or LLC. Even sole proprietors can qualify. If your business had a loss last year, CBIZ suggests filing your 2008 return early so you can then file amended returns for prior years and reclaim your cash.
2) Bonus depreciation extended: In a bid to boost new equipment purchases (computers, machinery, vehicles) “Bonus Depreciation” – a juicy tax tidbit that expired in 2008 – has been extended through 2009 for most property, and 2010 for longer-lived assets. Basically, this is a 50 percent “bonus” write-off for the cost of new equipment a business buys and starts using this year.
Say you spend $100,000 on new computers, software and other IT equipment. Under prior rules, your first year depreciation write-off would be 14 percent ($14,000). But now you can get a 50 percent “bonus depreciation” ($50,000), plus 14 percent of the remaining amount (another $7,000). Thus, you’d net a total first-year deduction of $57,000 on the $100,000 purchase. This applies to businesses of all sizes that invest in tangible property or computer software, as well as improvements to leased property.
3) Bigger expensing write-offs for depreciable property: Higher expensing limits for depreciable property that expired in ‘08 have also been extended through ‘09. This lets your business immediately write off up to $250,000 of tangible personal property placed in service this year.“The tax benefits of leveraging these two provisions can be tremendous” say CBIZ experts. You can quickly recover the cost of major asset purchases. But the provisions might not be around for long, so moving up equipment purchases to get the tax benefits now might make sense. Be sure to check with your tax advisor about state tax provisions since not all states conform to the federal bonus deprecation provisions.
4) Estimated tax relief: If you report income from a small business on your personal tax return, you’ll get a small break on the amount of estimated taxes required to avoid underpayment penalties. If at least 50 percent of your adjusted gross income is from the business, you’ll only need to cover 90 percent of your prior year’s taxes to avoid penalty, beginning with the 2009 tax year. Previously this was 100 percent to 110 percent, depending on your income.5) Small biz stock gains: Anyone who buys stock in a small business between the enactment date of the stimulus bill and 2011 gets a bulked-up break on capital gains taxes later on. If the stock is held at least five years, 75 percent of any gain can be excluded – up from the current 50 percent. According to CBIZ, the stock must be original issue stock held by a non-corporate investor in a C corporation with gross assets under $50 million. The company must also be actively engaged in a trade or business.
6) Tax breaks for hiring: The new law expands the Work Opportunity Tax Credit (WOTC) program to include two new targeted groups – unemployed vets and young people between 16 and 25 who haven’t been employed or attended school in the past six months. Businesses hiring such individuals can qualify for a $2,400 tax credit per worker.
Personal Finance Fixup for Entrepreneurs
When it comes to managing their personal finances, many entrepreneurs become notorious numskulls. Most are so caught up in business-building that their personal 
ledgers are lame. Software such as Quicken or Microsoft Money can save the day. But you’ve gotta buy, install, use, update and apply add-ons to these programs, which takes time, effort and a bit of cash. So many entrepreneurs stick to the old “envelope” filing system.
Mvelopes offers an alternative — a way to effectively manage personal finances online. It’s been around a while — launched in 2004 as an online subscription service — flying largely under the radar. But tough (an understatement?) economic times are spurring more biz owners to seek help budgeting, paying bills, reducing debt and generally taking better control of their personal bottom lines.
Here at What Works for Business, we love useful web-based apps, and this one has years of upgrades already under its belt. The $129 it costs annually ($189 for 2 years) is pocket change compared to the time, money and financial pain it could save you. Features you get:
ledgers are lame. Software such as Quicken or Microsoft Money can save the day. But you’ve gotta buy, install, use, update and apply add-ons to these programs, which takes time, effort and a bit of cash. So many entrepreneurs stick to the old “envelope” filing system.
Here at What Works for Business, we love useful web-based apps, and this one has years of upgrades already under its belt. The $129 it costs annually ($189 for 2 years) is pocket change compared to the time, money and financial pain it could save you. Features you get:
- View all of your transactions and balance info in one place. Plan and track purchases.
- Automatically retrieve, rename, and assign transactions from all your online accounts.
- Receive, view and pay your bills all online. Up to 15 payments per month are included in the cost.
- Track IRAs, 401(k), stocks, mutual funds, as well as your mortgage and auto loans.
- Unlimited live customer support and product coaching via chat or email, or view product tutorial videos, online help manuals, or the Member Forum to find answers and information.
Personal Finance Fixup for Entreprene
urs
03/10/2009 When it comes to managing their personal finances, many entrepreneurs become notorious numskulls. Most are so caught up in business-building that their personal ledgers are lame. Software such as Quicken or Microsoft Money can save the day. But you’ve gotta buy, install, use, update and apply add-ons to these programs, which takes time, effort and a bit of cash. So many entrepreneurs stick to the old “envelope” filing system.
Mvelopes offers an alternative — a way to effectively manage personal finances online. It’s been around a while — launched in 2004 as an online subscription service — flying largely under the radar. But tough (an understatement?) economic times are spurring more biz owners to seek help budgeting, paying bills, reducing debt and generally taking better control of their personal bottom lines.
Here at What Works for Business, we love useful web-based apps, and this one has years of upgrades already under its belt. The $129 it costs annually ($189 for 2 years) is pocket change compared to the time, money and financial pain it could save you. Features you get:
ledgers are lame. Software such as Quicken or Microsoft Money can save the day. But you’ve gotta buy, install, use, update and apply add-ons to these programs, which takes time, effort and a bit of cash. So many entrepreneurs stick to the old “envelope” filing system.Here at What Works for Business, we love useful web-based apps, and this one has years of upgrades already under its belt. The $129 it costs annually ($189 for 2 years) is pocket change compared to the time, money and financial pain it could save you. Features you get:
- View all of your transactions and balance info in one place. Plan and track purchases.
- Automatically retrieve, rename, and assign transactions from all your online accounts.
- Receive, view and pay your bills all online. Up to 15 payments per month are included in the cost.
- Track IRAs, 401(k), stocks, mutual funds, as well as your mortgage and auto loans.
- Unlimited live customer support and product coaching via chat or email, or view product tutorial videos, online help manuals, or the Member Forum to find answers and information.
How to Use the New Small Business Operating Loss Deductions
As you may know, the economic stimulus law passed in February includes key provisions that allow struggling small businesses to re-file their taxes to carry back net operating losses (NOLs) up to five years. Result: Qualifying small businesses with losses can get immediate refunds of income taxes paid in prior years.
But how, exactly, does it work? There are decisions and deadlines you have to make. For an expert view on how to take advantage of this stimulus bill tax break for small business, we’re including a guest post below from William Massey, Sr. Tax Analyst in the Tax & Accounting arm of Thomson Reuters, a top provider of tax info and solutions to accounting and tax professionals.
From William Massey, Senior Tax Analyst, Thomson Reuters:
Important decisions must be made for an eligible small business to achieve maximum tax savings from this provision. The IRS has issued favorable guidance on this provision and says that it will act quickly to get refunds to businesses carrying back losses under the new rule. But, in addition to making correct choices, a business must follow certain filing procedures to qualify for this important tax break and, in some cases, must do so before April 18, 2009.
Details of the new NOL carryback:In general, NOLs may be carried back two years and forward 20 years (different rules apply for certain specialized types of losses and the carryback period may be waived). For NOLs arising in a tax year beginning or ending in 2008, the Recovery Act permits eligible small businesses (ESBs) to elect to increase the NOL carryback period from two years to three, four, or five years. For calendar year businesses, the election is available only for 2008. A fiscal-year taxpayer whose year ends in 2008 can make the election either for its fiscal year ending in 2008 or its fiscal year beginning in 2008 and ending in 2009, but not both.
An ESB is a trade or business (including one conducted in or through a corporation, partnership, or sole proprietorship) with average annual gross receipts of $15 million or less for the three-tax-year period (or shorter period of existence) ending with (as clarified in the IRS guidance) the tax year in which the loss arose (as opposed to the tax year before the year of the loss, as some had read the statutory language). The IRS interpretation generally is more favorable to taxpayers because, for example, more calendar year taxpayers would qualify using 2008 receipts rather than 2005 receipts, when economic conditions were much better.
In determining whether a partnership or S corporation qualifies as an ESB, the gross receipts test applies at the partnership or S corporation level but the election is made by the partner or S shareholder, as the case may be.
Deadlines for making the election:A taxpayer who already filed a 2008 return may still make the election to use a three, four or five year carryback by the later of: (A) six months after the due date of the return (determined without extensions), or (B) April 17, 2009. A taxpayer who previously elected to waive the normal two-year carryback period may undo it and make a new election no later than April 17, 2009. A taxpayer who has not filed a return for the year of the loss, has until the later of: (A) the due date (with extensions) of the return for the year of the loss, or (B) April 17, 2009 to make the election.
Deciding which choice or choices to make:Small businesses with a qualifying NOL must decide whether to waive the carryback period or to use a two, three, four or five year carryback period. Fiscal year filers have the added choice of which year to use. These choices are quite complex and require a detailed examination of the tax picture of the business. The key factor in deciding whether to elect to carry an NOL back three, four, or five years should be which election will result in the largest tax savings. It is especially important to make the right choice because once made, the choice is irrevocable.
Getting a quick refund: Corporations making the election can get a quick refund by filing Form 1139. Individuals use Form 1045 to get a quick refund. The IRS has supplied detailed instructions as to what information must accompany these forms.
But how, exactly, does it work? There are decisions and deadlines you have to make. For an expert view on how to take advantage of this stimulus bill tax break for small business, we’re including a guest post below from William Massey, Sr. Tax Analyst in the Tax & Accounting arm of Thomson Reuters, a top provider of tax info and solutions to accounting and tax professionals.
From William Massey, Senior Tax Analyst, Thomson Reuters:
Important decisions must be made for an eligible small business to achieve maximum tax savings from this provision. The IRS has issued favorable guidance on this provision and says that it will act quickly to get refunds to businesses carrying back losses under the new rule. But, in addition to making correct choices, a business must follow certain filing procedures to qualify for this important tax break and, in some cases, must do so before April 18, 2009.
Details of the new NOL carryback:In general, NOLs may be carried back two years and forward 20 years (different rules apply for certain specialized types of losses and the carryback period may be waived). For NOLs arising in a tax year beginning or ending in 2008, the Recovery Act permits eligible small businesses (ESBs) to elect to increase the NOL carryback period from two years to three, four, or five years. For calendar year businesses, the election is available only for 2008. A fiscal-year taxpayer whose year ends in 2008 can make the election either for its fiscal year ending in 2008 or its fiscal year beginning in 2008 and ending in 2009, but not both.
An ESB is a trade or business (including one conducted in or through a corporation, partnership, or sole proprietorship) with average annual gross receipts of $15 million or less for the three-tax-year period (or shorter period of existence) ending with (as clarified in the IRS guidance) the tax year in which the loss arose (as opposed to the tax year before the year of the loss, as some had read the statutory language). The IRS interpretation generally is more favorable to taxpayers because, for example, more calendar year taxpayers would qualify using 2008 receipts rather than 2005 receipts, when economic conditions were much better.
In determining whether a partnership or S corporation qualifies as an ESB, the gross receipts test applies at the partnership or S corporation level but the election is made by the partner or S shareholder, as the case may be.
Deadlines for making the election:A taxpayer who already filed a 2008 return may still make the election to use a three, four or five year carryback by the later of: (A) six months after the due date of the return (determined without extensions), or (B) April 17, 2009. A taxpayer who previously elected to waive the normal two-year carryback period may undo it and make a new election no later than April 17, 2009. A taxpayer who has not filed a return for the year of the loss, has until the later of: (A) the due date (with extensions) of the return for the year of the loss, or (B) April 17, 2009 to make the election.
Deciding which choice or choices to make:Small businesses with a qualifying NOL must decide whether to waive the carryback period or to use a two, three, four or five year carryback period. Fiscal year filers have the added choice of which year to use. These choices are quite complex and require a detailed examination of the tax picture of the business. The key factor in deciding whether to elect to carry an NOL back three, four, or five years should be which election will result in the largest tax savings. It is especially important to make the right choice because once made, the choice is irrevocable.
Getting a quick refund: Corporations making the election can get a quick refund by filing Form 1139. Individuals use Form 1045 to get a quick refund. The IRS has supplied detailed instructions as to what information must accompany these forms.
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