New/Smart Business – January 2011

New law includes business provisions

The "2010 Tax Relief Act" includes several provisions that will affect businesses. Here are the highlights.

* 100% bonus depreciation. The new law increases the current 50% bonus depreciation to 100% for qualified business equipment purchases made from September 9, 2010, through December 31, 2011. 50% bonus depreciation will be available for purchases made in 2012.

* Section 179 expensing. The first-year expensing option was increased to $500,000 for 2010 and 2011 by the "Small Business Jobs act of 2010." The investment limit was set at $2 million. The new law just passed provides a $125,000 expensing limit for tax years beginning in 2012. The investment limit for 2012 is set at $500,000; both limits will be adjusted for inflation.

* Research tax credit. The research tax credit had expired at the end of 2009. The new law extends the credit retroactively through 2010 and 2011.

* Work Opportunity Tax Credit. The new law extends the Work Opportunity Tax Credit through 2011. It had been scheduled to expire after August 31, 2011.

Reducing business overhead: How to fight the battle of the bulge

You may not realize this, but one of the best opportunities to increase your business's bottom line can be found by reviewing its overhead. These expenses, consisting of mundane but necessary essentials such as office supplies, utilities, credit card processing, and insurance, each have their own unique savings opportunities. Business owners and managers often get complacent and let these recurring items grow over time, eventually bloating their company's overhead costs. So, how do you harness these potential savings opportunities to fight this overhead battle of the bulge?

Consider these practices as a way to cut your costs.

1. Get new bids from vendors in such competitive industries as credit card processing and shipping. They'll be eager for your business, thus allowing you to negotiate better rates on these items.

2. Review insurance policies that may need updating. As your business's circumstances change over time, it is important to determine if you are over-insured or if certain types of coverage are not needed anymore.

3. Learn to buy strategically. Many common items used in your business can be purchased at deep discounts through wholesale clubs or trade associations which usually have pre-negotiated discounts on many goods and services.

4. Develop a cost reduction mindset and discard the flawed notion that profitability only comes through a sales-oriented strategy.

5. Involve all your employees. Those employees performing day-to-day tasks are often better equipped to spot money-saving opportunities. Offer a cash or time off reward to motivate employees.

Learn to be prudent and resourceful in managing your overhead, and you'll see immediate results in your bottom line.