Author Archives: CPAsteve

The New Tax Act – What It Means To Small Business

For the first time since 1986, the U.S. Congress passed major tax changes affecting both individuals and businesses across the country. The Tax Cuts and Job Act of 2017 (TCJA) has far-reaching impact for many business types and individuals.


Business Taxes

  • The corporate income tax rate is permanently lowered from 35 to 21 percent starting in January 1, 2018.
  • Pass through businesses – A new 20 percent deduction of qualifying business income from some pass-through businesses in industries such as sole proprietorships, partnerships and S Corporations will now be available. According to the Brookings Institute, pass-through businesses, those businesses who have their income ‘pass through’ to their owners, account for approximately 95 percent of U.S. businesses, while only 5 percent are C-corporations. Previously, income for pass-through businesses was charged at the highest personal tax income rate of 39.6 percent. The new law allows for 20 percent of the pass-through to be deductible while the remainder is subject to tax at the individual marginal income tax rates to a new lower maximum of 37 percent. There are exclusions including health, law, and professional services organizations except for households with taxable income below $157,500 for single filers and $315,000 for married filers. For these filers, there is a restriction to pass one of two tests:
    • 50 percent of the wages paid by the pass-through entity; or
    • 25 percent of the wages paid plus 2.5 percent of the “tangible, depreciable property used by the pass-through entity to make income. These pass-through provisions will expire at the end of 2025.
  • AMT – The TCJA eliminates the corporate alternative minimum tax (AMT) allowing for full expensing of capital investments for the next five years.
  • Craft Beverage Modernization and Tax Reform Act – Part of the larger TCJA law, this change provides excise relief in the next two calendar years of 2018 and 2019. Brewers that produce less than 2 million barrels annually will be taxed at a rate of $3.50 per barrel on the first 60,000 barrels of beer produced, and $16 per barrel on any further barrels produced up to 6 million. This change will help to provide additional capital that previously would have been sent to the government enabling additional growth and profitability. This reduction also impacts wineries and distillers.
  • Section 179 deductions- Used for expensing capital assets for small business, the deduction thresholds have been raised from $500,000 to $1 million. Odds are most small businesses won’t be able to reinvest such a large amount of $500,000 to $1 million in capital expenditures in a single year, but the offer is nice.



  • Individual tax brackets – The Tax Cuts and Jobs Act retains the current seven individual income tax brackets, but modifies both the width and tax rates. The new brackets are reduced to 10%, 12%,22%, 24%, 32%, 35% and 37% respectively. The downside is that while these tax changes are permanent for corporate tax payers, the individual tax changes are temporary, running out in 2025. Additionally, the Tax Policy Center found that “while the average household would get a big initial cut, by 2027 households in the $50,000 to $75,000 income range would see an average increase of $30 compared with today.  Secondly, the bill is expected to add $1.4 trillion to the deficit. How will this be paid?  As mentioned by Speaker of House Paul Ryan, healthcare entitlements such as Medicare, Medicaid, and Social Security are the best way to handle the growing deficit.
  • Child Tax Credit – There is an increase in the child tax credit amount to $2,000 from the current$1,000. Families making up to approximately $400,000 will get to take the credit and more of the tax credit is refundable, meaning that families that work but don’t earn enough to actually owe federal income taxes will get a check back from the government.
  • ACA Penalty – Repeal of the individual healthcare mandate penalty for not having health insurance starting in 2019. How this will play out in uninsured Americans and increased health insurance costs down the road is yet to be seen.


The new tax changes did not simplify the tax code, rather it is now more complicated.  


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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

An Unwanted Surprise In Your Paycheck

The Treasury Department recently announced revisions to the 2018 withholding tables to reflect the changes spurred by the Tax Cuts and Jobs Act (TCJA).  Included in the law, employers can use worker’s existing W-4 Forms already on file to make the adjustments to their withholding.


What that means for employers:

Since it isn’t mandatory for employees to review their W-4 form after their initial employment, employers may want to reach out to workers to encourage them to thoroughly review their pay stubs after the first payroll with the new withholding rates. Additionally, new forms will be forthcoming from the IRS, so employers will need to again communicate with workers about completing the new form to update their individual withholdings.


What the changes mean for workers:

Some 90 percent of workers will see an increase in their weekly pay as a result of the TCJA according to Government estimates. The Tax Policy Center estimates that about 80 percent of all filers will see a tax cut, while approximately 5 percent will see an increase, and no change for the remaining 15 percent.


What’s the issue?

Many Americans haven’t reviewed or even seen their W-4 Form since they were hired, so changes to the withholding could have more serious impact on a family that has grown or shrank over the years. Tax payers who are either under or over-withholding aren’t going to see the full impact of the change until it comes time to pay their 2018 income taxes – too late to make what could be costly changes.  “The results could vary dramatically from one individual to the next,” says Steven Feinberg, CPA and owner of Appletree Business Services in Londonderry, NH. “We are encouraging both employers and employees to review their withholdings,  compare it to their current situation and make any necessary changes now rather than waiting a full year to see what the impact might be.”


New Tax Brackets for 2018

Single Rate Married
Above $500,000 37% Above $600,000
$200,001-$500,000 35% $400,001-$600,000
$157,501-$200,000 32% $315,001-$400,000
$82,501-$157,500 24% $165,001-$315,000
$38,701 -$82,500 22% $77,401-$165,000
$9,526-$38,700 12% $19,051-$77,400
Up to $9,525 10% Up to $19,050

Source: Joint Explanatory Statement of the Committee of Conference, H.R.1


The new withholding tables have been adjusted to include new larger standard deductions, lower tax rates and the repeal of the personal exemption. What the tables couldn’t include is how the changes would affect individuals differently. For example, the reducing alternative minimum tax, expanded child credits and repeal of deductions on the state and local levels. All of these items can come into play and impact what an individual might normally ‘expect’ for an annual tax refund.


Tax officials at the US Treasury and the IRS are working on a revised W-4 form, which they hope to release sometime in February 2018.


Those at risk for under-withholding could include employees who receive bonuses, stock options or commissions because the withholding rate for that population has dropped from 25 percent to 22 percent. Additionally, parents with dependents over the age of 17 are also losing a key tax credit of $2,000, replacing it with just $500. Couple that with the loss of the personal exemption, and those tax cuts aren’t looking nearly as attractive as they were on the surface.


Another item to remember is that the tax penalty for underpayment, meaning the requirement of taxpayers to pay in at least 90 percent of what they owe by April 15th still carries a 4 percent interest rate quarterly. “Waiting and finding out that you substantially owe more income taxes could be coupled with a pretty hefty penalty,” continues Feinberg.


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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Should I be concerned about Net Neutrality?

Net neutrality is the concept that the internet service providers should provide equal access to web sites regardless of content or the source. The idea is that by allowing equal access everyone, big business or small, average Joe or superstar has the same access to information on the Net.   The current net neutrality laws were carried over in the Obama administration in February of 2015 with a vote of 3-2. Under the direction of Thomas Wheeler as chairman of the Federal Communications Commission, many were concerned that his lobbyist past and membership in the National Cable and Telecommunications Association would shift net neutrality in the direction of big corporate internet providers. What happened was a strong support for the American consumer. Zoom forward two years and net neutrality is once again up for debate as a new administration makes moves to threaten access. How can changes in net neutrality impact small business?

  • Internet Service Providers (ISPs) may have the ability to limit the speeds of the internet based on websites or apps frequented.
  • IPSs may be able to charge each website for data prioritization, which would give increased speeds while browsing that site.

Still puzzled about how shifts in net neutrality could impact you? Think of it this way, on the school playground there’s always a big, threatening kid who bullies the other smaller kids into giving over their lunches, paying for his snacks or some other egregious ‘fee’ for simply breathing in his space. ISPs, if left to their own devices, may become like those playground bullies, charging small businesses exorbitant fees just to play in the same playground as everyone else.



Worse yet, because your mom only gives you enough money to buy lunch but some kids have lunch money and an allowance, the playing field shifts further because they can afford to pay more for better access to the playground.



Net neutrality means that your small business gets the same internet speeds and access as Target, Walmart and your local diner. It’s fair and equal for all. Loss of net neutrality will cost your business in lost marketing opportunities, a tightened sales pipeline and less access and online sales.

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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

New Tax Bill – Three things you can do by 12-31 to save taxes

The “Tax Cuts and Jobs Act” at this writing has been approved by both houses of Congress and will be signed by the President by the end of this week.



As much as we all have opinions about this, our job is to now interpret this as best we can at this juncture and provide you with some last minute advice of things you could do by December 31 of 2017.



My first observation, as an accountant, is that this is the most significant amount of structural changes we have seen in the tax code since 1986, forcing us to rethink everything we know in terms of tax planning etc.. We have been in business since 1988.



The new law goes into effect January 1st  of 2018 for the most part. Beginning in 2018, the big game changer for individuals is the expansion of the standard deduction to $12,000 for a single person and $24,000 if you are married and filing jointly.  This means that if you do NOT have enough ‘itemized’ deductions that exceed the 12,000/24,000 mark such as mortgage interest, real estate taxes, state income taxes, charity and medical expenses, you will take the ‘standard’ deduction.



This also means in the future, most of us (including myself who owns a house) will no longer have a need or desire to keep track of their mortgage interest, real estate taxes, charity, or medical expenses for 2018 on.



The new law also sets a maximum amount of $10,000 per return of state income taxes and real estate taxes that could be itemized.



This does, however, provide a planning opportunity for 2017 to pay real estate taxes or state income taxes (such as the New Hampshire Interest / Dividends Tax or Massachusetts income tax) THIS year. For real estate taxes to be deductible, it must be ‘billed’ by your town and paid to the town, not just to your mortgage company. When in doubt, pay the town today, and get the money back from your mortgage company tomorrow.



With respect to any STATE (not FEDERAL) income taxes, we recommend that you make a ‘generous’ estimated tax payment in 2017, which would be deductible in 2017. In the event you were to overpay your tax, the overage would be income in 2018, but meanwhile you permanently saved taxes on the extra amount you paid in 2017.



Passthru income. If you have a partnership, an S corporation, or a sole proprietorship, we know that this will be taxed at a lower rate, with some sort of ‘deduction’ of 20%, but we still lack a lot of details on this. Tax planning can also be complicated in this area because of the interaction of the New Hampshire Business Profits tax on passthru income.



Given that we know that the rates on this type of income in 2018 should be lower than 2017, we are recommending that partnerships, S Corporations, and sole proprietorships attempt to PUSH income from 2017 into 2018 and to incur expenses in 2017 that you might be putting off until 2018. This advice does NOT apply to our C Corporation clients.



As we get more information on this tax act, we will keep you apprised on any issues that may affect you.



Thank you for your time, and we all wish you a very pleasant and Merry Christmas.



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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

What to do when you get an IRS letter

You filed your taxes, processed all of your W-2s and 1099-Cs and think your federal reporting is in great shape – until you receive the dreaded IRS tax letter. Your stomach knots, your mouth goes dry and suddenly a clammy panic takes hold. Now take a breath and be calm. There are all kinds of notices and letters the IRS can send, so review the letter carefully,  Often there are ample instructions on what the IRS needs a taxpayer to do.  The IRS sends notices and letters for a variety of reasons. The most common are:



There’s a balance due.

The taxpayer is due a larger or smaller refund that what was originally filed.

There is missing or unreported income from another source.

The IRS has a question regarding the tax return.

Random selection – that’s right, each year the IRS randomly selects taxpayer reviews based on a statistical algorithm.

The IRS needs to validate the taxpayer’s identity – i.e. the SSN doesn’t match the name.

The IRS made a correction or change to the return.

The IRS is notifying of a delay in the return.

Final notice of intent to levy and notice of your right to a hearing.


If your correspondence indicates that a response is requested, it is in your best interest to respond within the given time frame to help reduce or eliminate additional penalties, or preserve your right to appeal if you don’t agree with their findings.  If you are required to respond or take action in the letter, you will want to include the CP or LTR number found on either the top or bottom right-hand corner of the correspondence. Be sure to take down the agent’s ID number, name and the date and time you spoke. Let’s review the most common types of IRS letters and what they might mean for your situation.



CP2000 Notice – issued when the income and/or payment information doesn’t match information reported on the tax return.



CP11 – This letter is sent when there are changes to a tax return or a balance due.  The IRS has made a change to the tax return and there is now a balance due.



CP12 Notice – This notice is issued when the IRS corrects one or more mistakes on a taxpayer’s return and a payment has become an overpayment or an original overpayment amount has changed.



CP-90 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing – This is the only notice that permits the IRS to take action against a taxpayer. If you have received this notice, you have already received several other communications from the IRS. Once this notice is delivered, you have 30-days before the IRS is legally entitled to take action. You can request a meeting with an IRS appeals officer or start collection due process. If you are required to pay additional taxes to the IRS and you agree with their findings, you still have a few options available to you:


Pay the amount due in its entirety

Pay a portion of what you owe

Apply for an Online Payment Agreement or Offer in Compromise.


A note about IRS letters: Beware of suspicious notices or letters that were designed to look like they came from the IRS. If you are suspicious, you can call the IRS hotline at 1-800-829-1040. Remember that the IRS will never ask taxpayers for personal information via email or social media sites.


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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.


Profits are nice, but Cash Flow rules!!!

Every time we talk with a business about the taxes they owe on their profits, we hear “If my business is profitable why don’t I have any money?” The way cash flows in and out of your business is a lynchpin for understanding business finance.  There is also a huge difference between making money and managing it.  So often entrepreneurs start a business because they love creating a new widget, or offering a leading-edge service, but they have little to no business management experience. Terms like forecasting, budgeting and cash flow are meaningless until the monthly bills come due and payroll can’t be covered. Rather than waiting until there’s a problem, let’s make a pact to learn the basics for how profits and cash flow operate.



Lesson #1 Profit and Cash Flow are Different Profit is revenue minus expenses. That means any monies left over after all the bills are paid is considered profit. Conversely, cash flow refers to the influx and outflow of cash in the business, i.e. where is the money going and why. If you go to the store to buy milk and you have no money, you have a cash flow problem. If you have money expected to you in two months, that makes buying milk nearly impossible now even though profitability is promised at a later date.   The other crux is that a business selling additional widgets (i.e. increasing sales) does not necessarily immediately increase cash flow, in fact, more often than not, the increased sales will immediately reduce it. Now you’re thinking, if sales help to generate revenue, why wouldn’t I want more sales?  Sales, especially where widgets are concerned will require an immediate additional cash outlay to manufacture, package, and distribute the item(s). All of these steps must occur well in advance of delivery and invoicing and another ten to 45 days or more can go by before the company is paid for the products. That timeframe between production of the widget and payment of the widget is where cash flow management lives.



Lesson #2 – Look at your options. Precise cash flow management, much like a synchronized swimming routine, must occur in a timely, well-choreographed dance in order to keep the business operating, expenses covered and employees paid. Part of this monetary routine can include:



Collections – Where are your current account receivables? Are they current or in arrears and if so, how far? By placing your attention on existing receivables and making efforts to encourage payments, cash flow will be improved. For invoices that are more than 90 days past due, consider a collection agency or some other type of arrangement.



Delaying cash payments – Review how your orders are placed for materials with vendors. Can you set contracts for orders where a percentage is paid up front and the remaining balance paid in 15 or 30 days? This will improve cash flow as it will remain in-house longer.



Raising Additional Capital – If you cannot meet your financial obligations within the necessary time, it may be necessary to solicit additional cash through loans, issuing capital stock, employee ownership or some other type of arrangement.  Again, planning and attention to cash flow can help with strategic timing and more attractive interest rates and loan agreements. Covering debts in a crisis mode will inevitably mean less attractive interest payments and possibly selling more ownership than originally intended.  



Lesson #3 – Too much competition can kill revenue. That’s right, the one thing that makes capitalism work is competition, yet competition can be the very thing that can take a business under the quickest. How? When businesses are constantly bidding for business and trying to shave off profit margins in order to win the contract, those pennies, nickels and dollars can all add up to no actual profit at the end of the day. Yes, the business has lots of money moving through the business, but not much staying in the bank accounts. Try to be brutally honest with yourself and your bidding so that you know up-front if your business can afford to take a reduction in costs or even a loss in order to gain business.  Make sure that you are working from real numbers and in partnership with your finance team in order plan for losses on one contract and profits on another. There are volumes of books and doctoral theses on the process of cash flow and cash management which can be consulted. If you don’t have that kind of time, it may be time to bring in some additional financial advisory assistance.



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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Baby Boomers Are Not Retiring And The Impact on Small Business

Baby Boomers are delaying retirement and continuing to stay in the workforce. This trend in postponed retirement can have substantial impact on other generations within the workforce seeking advancement and career changes. According to the ADP Workforce Vitality Report released in June 2017,  “[the boomer] age group experienced 4.8 percent job growth during the first quarter of 2017, more than any other age group.” Additionally, the Pew Research Foundation found that “nearly two-thirds of workers older than 65 hold full-time jobs” of 35 hours a week or more.  While there are many reasons for the delay in retirement, four primary catalyst include:



Finances – Baby Boomers are concerned that they do not have enough cash to last for their entire retired years. Shifts in employer pension programs to self-funded or corporate match 401k retirement programs means that less money is guaranteed or available in retirement years.  Plus, the more years worked, the fewer years need to be pulled in taking retirement dollars out of an account. Retirement accounts can continue to grow (yes, money must start being taken out by age 70 ½ ) but waiting longer can increase those payouts. Additionally, delays in retirement can also mean a delay in collecting Social Security. Waiting to take Social Security from age 62 to age 70 can mean an additional growth of 8 percent annually. In a recent Employee Benefit Research Institute study found that “26 percent of workers plan to work until age 70, and another 6 percent say they will never be able to retire.”  With less and less workers able to save for retirement or have not nearly enough to carry them through their retirement years, they continue to work full time and extend their careers well into their 70s.



Healthcare – Staying on the company health plan can mean better health plans as well as other ancillary benefits like group and voluntary life and disability insurance and even access to critical illness, accident, hospital or whole life plans, not to mention the ongoing employer contributions to a 401k.  Studies have also found that continuing to work has health benefits, too.  Researchers at Oregon State University found that in an ongoing study of individuals age 50 and older, those who continued to work had an 11 percent lower chance of death from all causes than their ‘retired’ counterparts.



Demand – Employers need the experience and institutional knowledge of the baby boomer generation. Much of this knowledge has not been passed down to younger generations, leaving a large gap in training and experience that employers are willing to pay to keep.



Lifestyle – The average life expectancy has increased substantially allowing baby boomers a healthier life and more productive time to continue working. Older employees who once targeted 55, 60 or 65 as a retirement age are now looking to 70 or 75. Employers wanting to keep those experienced workers on hand are offering more creative ways to stay engaged at the organizations while providing flexibility and even reduced work weeks.



How can you keep your baby boomers engaged? Think about developing a talent retention program. Like Millennials who have certain expectations from their employers, baby boomers may need a few tweaks to their employment terms to stay happy and focused. Flexibility is the biggest request. Consider providing a flexible work schedule or even offering full-time 30+ employment benefits so baby boomers can ease into a slightly shorter work week while still providing experience, leadership and a great work ethic to the organization.



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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

How Much Do You Need to Start Your Business?

No business ever starts with the problem of having too much money. Barring a lottery ticket win that spurs endless cash into a venture, most entrepreneurs take the leap into business ownership with a shoestring budget and gut determination. If you’ve ever sat down with a business advisor one of the first questions asked will be, “How much money do you have to start?” It’s a reasonable question that leaves many budding business owners scratching their heads and feeling defeated before they’ve even begun. Exactly how much is enough?




In 2009, The Kaufmann Foundation estimated that a new business start-up required on average $30,000.  While that may have been for a brick and mortar Main Street business, many micro-businesses can start with significantly less, somewhere in the $3,000 range.  Home-based franchises can start with even less financial commitment anywhere from $500 to $2,500.  But this all still feels like speculation and as anyone with a checkbook knows, it’s important to know where the money is going and how much to plan for the coming weeks and months.



Let’s start at the beginning.  You’re sitting at your kitchen table ready to take your business idea to business reality. What’s first?


1.      Begin tracking expenses as soon as possible. Associated costs with starting the business can be deducted up to $5,000 in the first year before your business even makes its first sale.  Costs above and beyond the first $5,000 will need to be amortized over a period of 180 months starting with the first month your business opens.


a.      Market research – Often involving more time than money, market research can include even your mileage costs to the library or the related costs for purchasing key industry reports. Costs for these can range from just your time to several thousand dollars depending on the depth and qualify of your research.


b.      Secure your business name by registering with your country clerk or state government. If you are using a Doing Business As, or DBA for your sole proprietorship, Partnership or Limited Liability Corporation (LLC), you’ll need to register this name.  Check with your individual state and county for specific rules, but costs can range from free to $1000 depending on your state and business type.


c.      Travel – Keep track of any travel to view potential business locations as these can be deducted.


d.      Consultants – Lawyers, accountants and business advisor fees can all be counted as start-up expenses. Plan on spending anywhere from $75 to $250 per hour for consulting fees.  You’ll want to budget more if the business is complicated or will require ongoing consulting support or patent work.



2.      Start-up Calculators can give you a good ballpark number. You can use a quick start-up planning calculator by going to or at the Wall Street Journal. If you determine that your expenses are too high, take another pass at the numbers and see what can be trimmed. Instead of purchasing expensive software licenses, try some of the cloud-based programs.  If buying hardware is too costly, investigate leasing agreements instead. Once you have a good starting point, you’ll want to take those estimates and formalize them into a full-blown business plan. While business plans may seem like drudgery, they are a necessity for a successful start-up. 


3.      Talk with other business owners and gain the value of their experience.  Reach out to other business owners both in your industry and in a range of other business types. You’ll glean a realistic picture of costs, ways to reduce them, and learn some of the potential pitfalls of business ownership. 


4.      Develop a plan to cover your operating costs for the first month and a large list of potential customers.  Knowing who your customers are and how to speak to them will help you immediately put sales vehicles into motion. Buying customers mean cash can flow into the business as soon as the doors open.



No list can be exhaustive on all of the line items you’ll want to cover before opening your business. The start-up calculators and a full business plan will be the best road map to gauge financial readiness.



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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

Do you get how Cash Flow works for business?

One of the most difficult balances to maintain in any business, but particularly small business, is the constant tug of war that happens between cash in and cash out. The nuances of how to keep enough cash on hand to pay expenses and cover the ebb and flow of sales seems more art than science. For small business start-ups who have little in the way of experience, and even less in savings and cash on hand, managing cash-flow can be confusing and challenging. Early business growth brings advice from all sides often leaving entrepreneurs scratching their heads and ultimately guessing at how to keep it all flowing.  Here’s a few of our most frequently asked questions with answers from our best small business advisors.

Q: What’s the best way to see how cash is flowing through my business?

A: Try using a cash flow chart. This visual tool can help you see the big picture of how money enters and leaves your business.  Start by making a list of all the start-up costs and one-time expenses, monthly fixed and variable expenses, and projected sales. The end results from the charting will help determine if the business is viable and how long you will need start-up funding.


Q: Are there tools I can use to better track cash flow?

A: The good news is that yes, there are all kinds of online, easy-to-use, and even some free applications that can be a great way to help you keep tabs on cash flow. The Small Business Administration website has a Start with the Cash Flow Template from SCORE. 

Pulse is an online app dedicated to tracking cash flow.  With this easy-to-use app, you’ll be able to monitor cash flow, invoices, project future cash needs and even attach files to transactions to keep everything all neat and tidy.

If you’re already using Quickbooks, take a look at the Cash Flow Forecast Report that is imbedded in the software’s reporting features. It can provide you with a great deal of data on accounts receivable, accounts payable, bank accounts, and projected balances.


Additional key areas of cash flow include other key areas of your business such as the break-even point, inventory management, and handling overdue invoices. Let’s review the basics.

Know your break-even.

The break-even is the point where expenses out meet cash into your business – in essence, the point where your cash flow levels off. To find your break-even, create a spreadsheet that lists all income from sales on a daily, weekly, monthly and yearly basis.  Now put in all the of the expenses that must be paid out. After that deduction, you’ll find your breakeven point – when expenses and sales converge.

Breakeven Point = fixed costs / (unit selling price – variable costs)


Inventory management

The key to most wholesale and retail businesses is in the inventory. Too much inventory and you risk staling (if it is a food or expiration based product), or locking up cash flow. Too little inventory and customers can become turned off if they cannot purchase immediately.  If your lines of credit dry up, selling the inventory off is one way to increase cashflow, but if no one wants to buy the inventory you’re stuck holding it with little or no cash alternatives.


Overdue invoices

Small business wait time on accounts receivables are increasing.  According to a Wall Street Journal Survey, “64 percent of small business had unpaid invoices of more than 60 days old while 20 percent say the problem worsening.” Slow or no collections are one of the most difficult areas of small business to rein in. Try incentivizing clients to pay early or on time with a net 10 discount and a percentage charge for late payments.  If after implementing the above recommendations you still aren’t seeing cash flow improvement, it may be time to consider a collection service.  Collection agencies can take as much as 30 percent of the total amount due, so you’ll want to weigh your efforts to get the client to pay versus the cost of using collections.  Offer extended credit terms or credit card payments as an option.  If the client or company doesn’t have the funds to pay, the only other option is to take back the merchandise and return it to your inventory. Again, this may be a difficult process. 


How can you speed up invoice payments? Invoice promptly after work is complete. Provide a detailed invoice including your work order, contract or other documentation, contact information, purchase order, Tax ID and account number.  Send the invoices electronically for even faster delivery. Reconsider your acceptable payment options such as Amazon Payments, PayPal, or other merchant services that can include credit cards.


Rule of Thumb

Business experts advise businesses to always try to have a cash reserve of 3-6 months to cover the slow months.  While this is the golden rule, like many rules, it often isn’t realistic when it comes to small business start-ups and managing limited cash flow. If you find that business is taking a dramatic turn and cash flow is severely restricted, don’t attempt to wait out the storm. Knowing where your business stands at all times is the best small business advice we give.  If a business owner can see that cash flow is shifting, she can make a strategic move to correct the issue or seek temporary funding before the deficit becomes too damaging to the company.


If you found this article useful, please do not keep this a secret. Share it with a friend.


Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.

New to Small Business?

Things you should know for your first tax filing.


If you started your new business in 2017, then March or April of 2018 is a first big milestone for your company. Those are the months when your first reported tax documentation is due to the IRS. Depending on your business type, you may be responsible for not only the business’ filings, but also other shareholders or partners involved in the enterprise.  If you have employees, then you’ll have another layer of documentation such as W-2 and 1099s.  What are all of these requirements and how do you know if your business is ready to prepare and distribute them correctly? Let’s review some of the basics starting with your company’s business entity.

Business Type Matters

If you haven’t already met with a small business advisor to discuss the business entity type, you should.  While you can’t change your entity type from the preceding year, you can impact next year’s taxes by making a change, if necessary.  There are many differences between sole proprietorship, partnerships, limited liability corporation (LLC), S corporation and C corporations. 

Sole proprietors can deduct “ordinary and necessary” business expenses like any other business entity, however, more in-depth tax deductions and advantages aren’t always available. It is essential that sole proprietors keep separate and distinct bookkeeping from personal and household expenses including separate checking accounts and credit cards.

Partnerships are formed by two or more individuals. For tax purposes, income and losses from the partnership are reported on Form 1065.  Income taxes are paid on the partnership directly, rather the partners are taxed on their share of the partnership income, regardless of whether they take money out or reinvest it back into the business. Additionally, partnerships have personal liability for any financial debts the business incurs.

A limited liability corporation (LLC) has varying rules from state to state. The IRS has the option to treat the LLC as either a corporation, partnership or in a single-member LLC, a sole proprietor.  The benefit of an LLC is that if offers the protection of a corporation from personal entanglement in debts accrued by the business (unless the loans or debts are personally guaranteed).

Corporations are the most complicated structurally and are not the best option for new business start-ups.  Over time, as the business gains revenue and growth, shifting to a corporate structure may make sense. Remember that both S and C corporations require shareholders, a board of directors, and very involved set of taxation rules.  The transition to corporate status is not something that should be done lightly or without outside advice and counsel.  S corporations offer small business owners the advantage of paying taxes at the shareholder level, rather than being subject to higher corporate rates.  C corporations can deduct a wider range of expenses but must also deal with the double taxation issues.


Business Licenses

Certain industries are required to obtain a business license on a federal level. Business types included in the requirement are agriculture, alcohol, aviation, firearms, ammunition and explosives, fish and wildlife, transportation, mining and drilling, nuclear energy, and broadcasting. Additionally, there are business licenses required for certain professionals. This is to protect the public and ensure that the professionals providing the products or services have the correct educational degrees and qualifications. 


Tax / Employer Identification Number (TIN/EIN)

Often the same none-digit tax identification number, these numbers can be the same or different. Sole proprietors often use their own Social Security Number as their TIN for tax purposes.  Other businesses, such as C-Corps, S-Corps, partnerships, and LLCS are required to obtain an EIN. Any business that pays wages, files pension or excise tax returns or simply wants to avoid using their personal SSN can sign up for an EIN by completing Form SS-4 or apply online via

Estimated Tax Payments

Start-up business owners are exempt from making quarterly tax payments in the first year of the business’ operation; however, they are responsible for submitting them for subsequent years.  If you are filing quarterly payments for the first time, you’ll want to review last year’s income, tax credits, and deductions to calculate your expected tax burden.  If you anticipate owing more than $1,000 for the tax year, you must begin paying quarterly tax payments.  If you fail to submit at least 90% of the taxes owed, you may be subject to penalties.

Self-employment tax

Comprised of Social Security and Medicare, self-employment tax is paid by individuals whose income is not subject to employer withholding. Self-employed individuals are responsible for both the individual portion of the self-employment tax and the half traditionally paid by an employer (also you). To reduce this financial impact on the business owner, the IRS allows the deduction of the employer-equivalent portion of the self-employment tax.  For example, if you owe $10,000 in self-employment tax, you can deduct half, or $5,000, which reduces your overall taxable net income.  

W-2 and 1099s

If you have employees, even just one, then you are responsible for providing each employee Form W-2  which outlines what the employee received in wages and any contributions to health care, federal and state taxes and other payments. As an employer, you are also responsible for collecting the federal and state tax withholdings and making quarterly payments to the federal and state agencies on behalf of the employee. If you don’t have employees but do utilize the services of an independent contractor, then payments for services rendered can be provided on a Form 1099-MISC. The red Copy A of the 1099-MISC must be filed with the IRS. Bear in mind that you can only send an original copy of this form, not downloads from the IRS website. The black and white Copy B and C versions can be downloaded and completed for distribution to your independent contractors.  


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Copyright 2017 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire.