It’s too late to reduce costs or increase sales if you haven’t been doing it all year. So how can you improve your company’s performance before year end? Business success is not defined just by higher Net Income, it’s Free Cash Flow that’s critical. That’s spendable cash.
You can reduce your taxes without reducing your Free Cash Flow. Review the assets on your balance sheet. What are the REAL numbers? By correcting those balances, you might reduce your assets, thereby reducing Net Income and your taxes.
- Correct your inventory – reducing the value reduces your taxes.
- A physical inventory will verify the Balance Sheet value is on the production floor.
- Review your inventory’s market value. If it’s less than your purchase price, you can reduce the value.
- Look for obsolete products, and reduce their value to scrap, or remove them from inventory.
- Adjust your Accounts Receivable – writing off uncollectable AR reduces your taxes.
- Amounts over 120 days old are hard to collect. But Items over a year old should be written off. If you haven’t collected them by now, you won’t.
- Any unpaid accounts you’ve turned over to a Collection Agency can be written off. You may collect a portion of the amount listed. So, take the deduction.
- Invoices in dispute are another source of possible savings. If you haven’t collected from your customer, accept that you won’t get paid, and write it off.
- Uncollectible Loans – If the company has loaned money, and hasn’t gotten paid, take the tax benefit.
- You loaned an employee money before a payday, and they quit. You’re not going to collect it, so write it off.
- Your company paid a deposit for items that you never received, and the vendor can’t refund your money. Adjust that deposit to bad debt.
- Eliminate depreciable assets that you’re no longer using.
- If it’s machinery you’re not using, dispose of it. Take the remaining depreciation as an expense.
- Dispose of furniture that you’re replacing, and write off the remaining depreciation.
- Moving into a new facility? Write off the remaining depreciation on the Leasehold Improvements from your old building.
What’s important is knowing what’s on your balance sheet. Assets with overstated values can be reduced to current value or eliminated. That asset reduction is an increase in expense, reducing your Net Income and the taxes you owe Uncle Sam.
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