• 8 Financial Tips to Help Save Money While Building Your Startup

    20 April 2017
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    Starting a new business or startup can be both an exciting and tough time. At Dagley & Co. we’ve compiled a list of eight tips you can use to save money while building your startup company:

    1. Be careful with perks.

    As a new business, you want to attract the best employees to your company. However, trying to offer the same perks as a venture capital can put you in debt quickly. Many successful businesses started in a garage, and there is no shame in keeping things simple at first. Once you’ve made it, you can start thinking about adding cappuccino machines, ping pong tables, and other perks to your office environment.

    1. Use free software programs.

    As you begin building your new business, resist the urge to invest in the latest, most expensive software programs. Instead, look for inexpensive software programs, or find programs that offer a lengthy free trial period. For example, instead of investing in Microsoft Office, you may consider using the free software programs offered by Google or Trello.

    1. Make the most of your credit cards.

    If you already have credit cards, make sure you are getting the most out of any perks they offer, such as frequent flyer miles or cash back. If you are planning to apply for a business credit card, research your options carefully, and choose the card that will give you the best benefits.

    1. Hire interns from local colleges.

    Instead of looking to the open market to find all of your employees, consider hiring interns from a local college instead. These individuals work for much less than a seasoned professional would, and they are often eager to prove themselves in the workplace.

    1. Barter for services.

    As you work to grow your business, you may need a variety of services from independent contractors or other companies. Instead of offering to pay cash for the services you receive, try to offer a different type of benefit that won’t impact your bottom line as much. For example, you may offer some of your own products or services, or you may allow the other party to collect a small amount of the profits you earn because of their services.

    1. Minimize your personal expenses.

    Because you will likely be investing a lot of your own money into your startup, you can increase profitability by reducing your personal expenses. Be careful about how you spend money, especially when you start bringing in revenue. Avoid making large purchases, such as a new house or car, unless they are absolutely necessary. Consider working with your accountant to keep track of all of your expenses so you can identify opportunities to cut back.

    1. Outsource some of your projects.

    To save more money while your business is getting off the ground, consider outsourcing some of your smaller projects, such as building or updating your website. Outsourcing one-time projects to independent contractors or consulting companies can be much more cost-effective than trying to hire a full-time employee to handle the job.

    1. Use LinkedIn for recruitment.

    Recruiting new employees can be expensive, especially if you are determined to find the best people. To cut down on these costs, consider using LinkedIn to recruit new people for your startup. Although you will have to do some of the legwork, you won’t spend as much as you would with other recruiting strategies.

    Regardless of the steps you take to save money as your business grows, you will still need to manage your funds carefully to ensure that your financial situation is improving over time. A professional accountant can help you set up a realistic budget and cash flow forecast to keep you on the right track. Contact Dagley & Co. today to learn more.

     

     

     

     

     

     

     

     

     

     

     

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  • Ten Questions to Ask Your Financial Team When Starting Up

    11 January 2017
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    Starting your own business or service can be an exciting, yet confusing time. To make it easier, we recommend working with us, as well as a financial planning team, to get off to a good start. We also recommend asking these ten questions to a professional:

    #1: What should be in a basic business plan?

    A business plan should outline each detail of your company including who will run it, how much you’ll charge, and what you expect to earn. Putting time into creating a thorough business plan is important. Work with your team to ensure your plan is accurate and represents your business well.

    #2: Who will you need to pay taxes to?

    Your local jurisdiction and state have specific taxation requirements. You’ll likely have to pay taxes on sales, but also costs associated with payroll. Ensure your accountant not only talks to you about who you need to pay, but payment deadlines as well.

    #3: What is a projected cash flow for the business?

    How much cash does your company need to keep on hand? The key here is to be able to anticipate how much it will cost you to operate your business. Most companies should not expect to have positive cash flow for at least a year, often longer. Your professionals can help you decide what your cash flow projections are.

    #4: How much of an investment do you need to put into your company right now?

    Your financial team can help you project the cost of setting up your new business. This will include costs related to establishing the physical business and paying for supplies. Your initial investment generally will be the highest amount put into the company by the founder, but it changes significantly from one company to the next.

    #5: What is your break-even analysis?

    This may be an important question to ask early on. How much do you need to make to break even? You’ll want to talk to your financial team about the timeline for this and what can be done to help ensure you break even as soon as possible.

    #6: What liability insurance do you need?

    While most tax professionals don’t offer recommendations here, having adequate policies to cover potential loss is important. Work with your team to ensure you have comprehensive protection to minimize risks against your company’s financial health.

    #7: What will interest cost you?

    Interest on loans is not something to overlook. You’ll want to ensure you have an accurate representation of how much you are paying in interest so you can make adjustments to pay off any borrowed debt sooner, make better decisions about borrowing, or factor in the cost.

    #8: How will you manage payroll?

    This is a very big component of starting up since it can be troublesome for most startups to actually know how to pay employees and meet all federal and state requirements. Working with a payroll provider is often the easiest option (and most financially secure since paying an employee to do this work tends to be more expensive).

    #9: How can you reduce your taxes?

    Tax professionals will work with you to determine if there are any routes to reducing taxation on your business including local incentives that may be available. You’ll also want to talk about projects taxes, investments that could reduce taxes, and having all possible deductions in place.

    #10: What’s the right profit margin?

    Working with a financial team often comes down to this question. How much should you charge to make the best profit possible while still ensuring your company can grow? It’s not a simple question, but having the right team by your side ensures it will be clarified as much as possible.

    Make an appointment with Dagley & Co. to get your business off to the right start. We are here for you for any tax, payroll or accounting questions or issues you may have for your new business.

     

     

     

     

     

     

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  • Launching A Startup? Those Expenses are Tax Deductible (Up To $5,000 The First Year)

    14 November 2014
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    As a CPA in Washington, D.C., I don’t have to look too hard to find someone with a startup. This is an area filled with innovated and connected people, but it also takes money to get startups going. The good news is at least some of that is tax deductible. Business owners, especially those operating small businesses, may deduct up to $5,000 of their start-up expenses in the first year of the business’s operation. This is in lieu of amortizing the expenses over 180 months (15 years).

    Generally, start-up expenses include all expenses incurred to investigate the formation or acquisition of a business or to engage in a for-profit activity in anticipation of that activity becoming an active business. To be eligible for the deduction, an expense also must be one that would be deductible if it were incurred after the business actually began. An example of a start-up expense is the cost of analyzing the potential market for a new product.

    As with most tax benefits, there is a catch: Congress put a cap on the amount of the start-up expenses that can be claimed as a deduction under this special election. Here’s how: If the expenses are $50,000 or less, you can elect to deduct up to $5,000 in the first year, plus you can amortize the balance over 180 months. If the expenses are more than $50,000, then the $5,000 first-year write-off is reduced dollar-for-dollar for every dollar start-up expenses exceed $50,000. For example, if start-up costs were $54,000, the first-year write-off would be limited to $1,000 ($5,000 – ($54,000 – $50,000)).

    The election to deduct start-up costs is made by claiming the deduction on the return for the year in which the active trade or business begins, and the return must be filed by the extended due date.

    On IRS Schedule C, Profit or Loss from Business (Sole Proprietorship), the deduction is taken as part of the “Other Expenses” in Part V. If the entire amount of start-up costs isn’t deductible in the business’s first year, use Form 4562 to amortize the excess amount over 180 months, beginning with the month that you start operating the business. For example, the $53,000 of start-up expenses in the prior example that couldn’t be deducted as an expense in the first year of business would be deductible at $294 per month ($53,000/180), beginning with the first month the business became operational.

    Qualifying Start-Up Costs – A qualifying start-up cost is one that would be deductible if it were paid or incurred to operate an existing active business in the same field as the new business, and the cost is paid or incurred before the day the active trade or business begins. Not includible are taxes, interest or research and experimental costs. Examples of qualified start-up costs include:

    • Advertisements related to opening the business;
    • Surveys/analyses of potential markets, labor supply, products, transportation facilities, etc.;
    • Wages paid to employees and their instructors while they are being trained;
    • Fees and salaries paid to consultants or others for professional services; and
    • Travel and other related costs to secure prospective customers, distributors, and suppliers.

    For the purchase of an active trade or business, only investigative costs incurred while conducting a general search for or preliminary investigation of the business (i.e., costs that help the taxpayer decide whether to purchase a new business and which one to purchase) are qualified start-up costs. Costs incurred while attempting to buy a specific business are capital expenses that aren’t treated as start-up costs.

    If you have any questions related to the start-up expenses election and whether it will benefit your business, please give us a call at Dagley & Co.

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