One of your New Year’s resolutions may be to pay more attention to your health. Of course, that may cost you. Can you deduct your out-of-pocket medical costs on your tax return? It depends. Many expenses are tax deductible, but there are several requirements and limitations that make it difficult for many taxpayers to actually claim a deduction.

You’ve no doubt heard the old business cliché “cash is king.” And it’s true: A company in a strong cash position stands a much better chance of obtaining the financing it needs, attracting outside investors or simply executing its own strategic plans.

One way to ensure that there’s always a king in the castle, so to speak, is to maintain a cash reserve. Granted, setting aside a substantial amount of dollars isn’t the easiest thing to do — particularly for start-ups and smaller companies. But once your reserve is in place, life can get a lot easier.

Common metrics

Now you may wonder: What’s the optimal amount of cash to keep in reserve? The right answer is different for every business and may change over time, given fluctuations in the economy or degree of competitiveness in your industry.

The year 2020 has taught businesses many lessons. The sudden onset of the COVID-19 pandemic followed by drastic changes to the economy have forced companies to alter the size of their workforces, restructure work environments and revise sales models — just to name a few challenges. And what this has all meant for employees is change.

Even before this year’s public health crisis, many businesses were looking into and setting forth policies regarding change management. In short, this is a formalized approach to providing employees the information, training and ongoing coaching needed to successfully adapt to any modification to their day-to-day jobs.

There’s little doubt that one of the enduring lessons of 2020 is that businesses must be able to shepherd employees through difficult transitions, even (or especially) when the company itself didn’t bring about the change in question.

An impressive 432,834 new business applications for tax identification numbers were submitted during October 2022, according to the U.S. Census Bureau. Indeed, despite the relatively higher costs of doing business these days, plenty of start-ups are still launching.

One thing that every new company needs, along with a business plan, is a sensible budget. And that holds true for well-established entities as well. Let’s review some fundamentals of budgeting for start-ups, which can also apply in some shape or form to companies that have been around for a while.

“Sorry, we don’t carry that item.” Or perhaps, “No, that’s not part of our service package.” How many times a year do your salespeople utter these words or ones like them? The specific number is critical because, if you don’t know it, you could be losing out on profit potential.

Although you have to focus on your strengths and not get too far afield, your customers may be crying out for a new product or service. And among the best ways to hear them is to track lost sales data and decipher the message.

3 steps to success

A successful lost sales tracking effort generally involves three steps:

The day-to-day demands of running a business can make it difficult to think about the future. And by “future,” we’re not necessarily talking about how your tax liability will look at year-end or how you might grow the bottom line over the next five years. We’re referring to the future in which you no longer own your company.

The word “concentration” is usually associated with a strong ability to pay attention. Business owners are urged to concentrate when attempting to resolve the many challenges facing them. But the word has an alternate meaning in a business context as well — and a distinctly negative one at that.

Common problem

A common problem among many companies is customer concentration. This is when a business relies on only a few customers to generate most of its revenue.

The dilemma is more prevalent in some industries than others. For example, a retail business will likely market itself to a broad range of buyers and generally not face too much risk of concentration. A commercial construction company, however, may serve only a limited number of clients that build, renovate or maintain offices or facilities.

How do you know whether you’re at risk? One rule of thumb says that if your biggest five customers make up 25% or more of your revenue, your customer concentration is high. Another simple measure says that, if any one customer represents 10% or more of revenue, you’re at risk of elevated customer concentration.

Businesses of all stripes are about to embark upon a new calendar year. Whether you’ve done a lot of strategic planning or just a little, a good way to double-check your objectives and expectations is to revisit your business plan.

Remember your business plan? If you created one recently, or keep yours updated, it might be fresh in your mind. But many business owners file theirs away and bust them out only when asked to by lenders or other interested parties.

Reviewing and revising your business plan can enable you and your leadership team to ensure everyone is on the same page strategically as you move forward into the new year.

Many business owners spend most of their time developing strategic plans, overseeing day-to-day operations and, of course, putting out fires. Yet an underlying source of both opportunity and trouble can be human resources (HR).

Think about it: The performance of your HR department determines who works for you, how well employees are supported, and to what extent the business complies with laws and regulations pertaining to employment and benefits.

One way to ensure that your strategic HR decisions are likely to yield positive, cost-effective results is to apply a strengths, weaknesses, opportunities and threats (SWOT) analysis.

Congress recently passed, and President Trump signed, a new law providing additional relief for businesses and individuals during the COVID-19 pandemic. One item of interest for small business owners in the Consolidated Appropriations Act (CAA) is the opportunity to take out a second loan under the Paycheck Protection Program (PPP).

The basics

The CAA permits certain smaller businesses who received a PPP loan to take out a “PPP Second Draw Loan” of up to $2 million. To qualify, you must:

• Employ no more than 300 employees per physical location,
• Have used or will use the full amount of your first PPP loan, and
• Demonstrate at least a 25% reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after Jan. 1, 2021, are eligible to use gross receipts from the fourth quarter of 2020.

For many years, owners of small and midsize businesses looked at outsourcing much like some homeowners viewed hiring a cleaning person. That is, they saw it as a luxury. But no more — in today’s increasingly specialized economy, outsourcing has become a common way to cut costs and obtain expert assistance.

Why would you?

Outsourcing certain tasks that your company has been handling all along offers many benefits. Let’s begin with cost savings. Outsourcing a function effectively could save you a substantial percentage of in-house management expenses by reducing overhead, staffing and training costs. And thanks to the abundant number of independent contractors and providers of outsourced services, you may be able to bargain for competitive pricing.

Outsourcing also allows you to leave administration and support tasks to someone else, freeing up staff members to focus on your company’s core purpose. Plus, the firms that perform these functions are specialists, offering much higher service quality and greater innovations and efficiencies than you could likely muster.

The subject of payroll has been top-of-mind for business owners this year. The COVID-19 pandemic triggered economic changes that caused considerable fluctuations in the size of many companies’ workforces. Employees have been laid off, furloughed and, in some cases, rehired. There has also been crisis relief for eligible businesses in the form of the Paycheck Protection Program and the payroll tax credit.

Payroll recordkeeping was important in the “old normal,” but it’s even more important now as businesses continue to navigate their way through a slowly recovering economy and ongoing public health crisis.

Four years

Most employers must withhold federal income, Social Security and Medicare taxes from their employees’ paychecks. As such, you must keep records relating to these taxes for at least four years after the due date of an employee’s personal income tax return (generally, April 15) for the year in which the payment was made. This is often referred to as the “records-in-general rule.”

“Gamification.” It’s perhaps an odd word, but it’s a cool concept that’s become popular among many types of businesses. In its most general sense, the term refers to integrating characteristics of game-playing into business-related tasks to excite and engage the people involved.

Might it have a place in your company?

Internal focus

Sometimes gamification refers to customer interactions. For example, a retailer might award customers points for purchases that they can collect and use toward discounts. Or a company might offer product-related games or contests on its website to generate traffic and visitor engagement.

But, these days, many businesses are also using gamification internally. That is, they’re using it to:

• Engage employees in training processes,
• Promote friendly competition and camaraderie among employees, and
• Ease the recognition and measurement of progress toward shared goals.

It’s not hard to see how creating positive experiences in these areas might improve the morale and productivity of any workplace. As a training tool, games can help employees learn more quickly and easily. Moreover, with the rise of social media, many workers are comfortable sharing with others in a competitive setting. And, from the employer’s perspective, gamification opens all kinds of data-gathering possibilities to track training initiatives and measure employee performance.

Many businesses have a life cycle that, as life cycles tend to do, concludes with a period of decline and failure. Often, the demise of a company is driven by internal factors — such as weak financial oversight, lack of management consensus or one-person rule.

External factors typically contribute, as well. These may include disruptive competitors; local, national or global economic changes; or a more restrictive regulatory environment.

But just because bad things happen doesn’t mean they have to happen to your company. To prepare for the worst, identify a business turnaround strategy that you can implement if a severe decline suddenly becomes imminent.

Warning signs

When a company is drifting toward serious trouble, there are usually warning signs. Examples include:

• Serious deterioration in the accuracy or usage of financial measurements,
• Poor results of key performance indicators — including working capital to assets, sales and retained earnings to assets, and book value to debt,
• Adverse trends, such as lower margins, market share or working capital,
• Rapid increase in debt and employee turnover, and
• Drastic reduction in assessed business value.

Business owners, with the year just about over, you and your leadership team presumably have a pretty good idea of where you want your company to go in 2024. The question is: Can you get there?

Funny thing about customers: They can keep you in business — but they can also put you out of it. The latter circumstance often arises when a company overly relies on a few customers that abuse their credit to the point where the company’s cash flow is dramatically impacted.

To guard against this, you need to diligently assess every customer’s creditworthiness before getting too deeply involved. And this includes running the numbers on entities you do business with, just as lenders and investors do with you.

Information, please

A first step is to ask new customers to complete a credit application. The application should request the company’s:

• Name, address, phone number and website address,
• Tax identification number,
• General history (number of years in existence),
• Legal entity type and parent company (if one exists), and
• A bank reference and several trade references.

Depending on which industry or industries you serve, there may be other important data points to gather, as well. If you haven’t updated your credit application form in a while, consider doing so — especially if you’ve gotten burned on the same type of credit failure multiple times.

With the pandemic behind us and a red-hot summer in full swing, many of your company’s employees may be finally rediscovering the uninhibited joys of vacation.

Business owners and their leadership teams are rightly urged to engage in regular strategic planning to move their companies, thoughtfully and consciously, in a positive direction.

However, no matter how sound a set of strategic objectives might be, it’s always important to bear in mind that your competitors have plans of their own. That’s why you should consider integrating competitive intelligence into your strategic planning efforts.

Companies tend to spend considerable time and resources training and upskilling their sales staff on how to handle existing customers. And this is, no doubt, a critical task. But don’t overlook the vast pool of individuals or entities that want to buy from you but just don’t know it yet. We’re talking about prospects.

Identifying and winning over a steady flow of new buyers can safeguard your business against sudden sales drops or, better yet, push its profitability to new heights. Here are some ideas for better targeting and converting your company’s sales prospects:

Continually improve lead generation. Does your marketing department help you generate leads by doing things such as creating customer profiles for your products or services? If not, it’s probably time to create a database of prospects who may benefit from your products or services. Customer relationship management software can be of great help. When salespeople have a clear picture of a likely buyer, they’ll be able to better focus their efforts.

Use qualifications to avoid wasted sales calls. The most valuable nonrecurring asset that any company possesses is time. Effective salespeople spend their time with prospects who are the most likely to buy from them. Four aspects of a worthy prospect include having:

• Clearly discernible and fulfillable needs,
• A readily available decision maker,
• Definitively assured creditworthiness, and
• A timely desire to buy.

The optional standard mileage rate used to calculate the deductible cost of operating an automobile for business will be going up by 1.5 cents per mile in 2024. The IRS recently announced that the cents-per-mile rate for the business use of a car, van, pickup or panel truck will be 67 cents (up from 65.5 cents for 2023).