Summer is a great time for planning

Summer often brings a welcome slowdown for many small company owners as customers take vacations and the pace of business slows. So, it’s a great time to take a close look at your company’s finances and assess where you’re headed during the second half of the year.

Many small business advisers recommend that owners sit down with their accountants during June or July to determine what changes they need to make to their financial projections and overall business plans. Taxes, cash flow, capital spending and employee benefits are among the many topics that should be discussed.

One of the first items you need to consider is your estimated tax payments, and whether your remaining payments for 2006 need to be adjusted upward or downward.

“You don’t want to pay in more than you have to,” because the money you overpay can be put to better use within your company, said Gordon Spoor, a certified public accountant in St. Petersburg, Fla. On the other hand, if you’re underpaying, you’re running the risk of having to pay a penalty to the IRS next year.

You can find out more information about estimated tax payments in IRS Publication 505, Tax Withholding and Estimated Tax. You can download a copy from the agency’s Web site, www.irs.gov. You should also check with your state tax authorities to determine how much estimated tax you should be paying them.

If you don’t know what your taxes are likely to be for the rest of the year but you’re fortunate enough to have a strong cash flow, consider stashing some of the money away in case you do need it for taxes later in the year or early in 2007.

“You can have it set aside and invested in a safe investment like a money market account,” Spoor said, noting that with interest rates higher now, your company will earn more money.

Now is also the time to be looking at your capital spending plans for the rest of the year – cautiously, accountants say.

“In this dicey market, I’d be telling them not to make any risky moves like in real estate,” Spoor said.

Jeffrey Berdahl said equipment purchases should also be thought through carefully. While what’s known as the Section 179 deduction gives small businesses a great tax break when they buy equipment such as computers, office furniture and machinery used in manufacturing, the cost of financing such a purchase may offset the benefits of the deduction.

“Is it worth the tax savings?” Berdahl asked.

The Section 179 deduction allows small businesses to deduct upfront rather than depreciate $108,000 worth of equipment bought and put into service during 2006. You can find more information about the deduction in IRS Publication 946, How to Depreciate Property.

Taxes aren’t the only issue at midyear – employee benefits deserve consideration as well. Jeffrey Berdahl, a certified public accountant with Berdahl &Co. in Center Valley, Pa., advises owners to “look at a retirement plan. See if there’s a better plan out there” than the one you have now.

Small business owners who want to set up a retirement plan need to be aware that the popular plan known as a SIMPLE, or Savings Incentive Match Plans for Employees, must under law be set up by Oct. 1. You can, however, set up plans such as defined benefit plans, profit-sharing plans and many 401(k)s by Dec. 31, and the least complex plan, the SEP, or Simplified Employee Pension, can be set up anytime before you file your 2006 return next year.

IRS Publication 560, Retirement Plans for Small Business, contains information about the various plans. Your accountant and a benefits expert can help you determine which is the best for your company.

Similarly, Spoor and Berdahl recommended owners look at their health insurance plans and see if there are ways to save; both men noted that health savings accounts are likely to help many small companies lower their fast-rising health care costs.

The Health Savings Accounts combine a high-deductible insurance policy with a savings account that employees can draw on to pay their out-of-pocket medical expenses. Employees can contribute to the account with pretax dollars.

Spoor said he’s seeing a growing interest in HSAs among his clients. But they might not necessarily work for all small businesses – as with a retirement plan, you should consider meeting with a benefits expert to decide what kind of health insurance your company should provide.

Joyce Rosenberg writes about small business for the Associated Press.

Talk to us

More in Herald Business Journal

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
US board says Boeing Max likely hit a bird before 2019 crash

U.S. accident investigators disagree with Ethiopian authorities over the cause of a 2019 Boeing 737 Max crash.

Paddywack co-owner Shane Somerville with the 24-hour pet food pantry built by a local Girl Scout troop outside of her store on Tuesday, Dec. 20, 2022 in Mill Creek, Washington. (Olivia Vanni / The Herald)
An out-paw-ring of support: Mill Creek pantry feeds pets, day or night

With help from local Girl Scouts, the Mill Creek pet food store Paddywack is meeting the need for pet supplies in a pinch.

Kelly Cameron is the woodworker behind Clinton-based business Turnco Wood Goods. (David Welton)
Whidbey woodworkers turn local lumber into art

In the “Slab Room” at Madrona Supply Co., customers can find hunks of wood native to the south end of Whidbey Island.

Siblings Barbara Reed and Eric Minnig, who, co-own their parent’s old business Ken’s Camera along with their brother Bryan, stand outside the Evergreen Way location Thursday, Dec. 15, 2022, in Everett, Washington. After five decades in business, Ken’s will be closing its last two locations for good at the end of the year. (Ryan Berry / The Herald)
Print it or lose it: Ken’s Camera closes after decades caught on film

The local legend, processing film photos since 1971, will close its locations in Mount Vernon and Everett at the end of 2022.

Store owner Jay Behar, 50, left, and store manager Dan Boston, 60, right, work to help unload a truck of recliners at Behar's Furniture on Monday, Jan. 16, 2023. Behar's Furniture on Broadway in Everett is closing up shop after 60 years in business. The family-owned furniture store opened in 1963, when mid-century model styles were all the rage. Second-generation owner, Jay Behar says it's time to move on. (Annie Barker / The Herald)
Behar’s Furniture in Everett closing after 60 years

“It’s time to move on.” The small family-owned store opened in 1963 and grew to cover an entire city block.

Katy Woods, a Licensed Coach, Branch Manager, and experienced Banker at Coastal Community Bank.
Coastal Community Bank Offers Classes for Businesses

To support local business owners and their teams, Coastal offers complimentary Money… Continue reading

Innovative Salon Products online fulfillment employees, from left, Stephanie Wallem, Bethany Fulcher, Isela Ramirez and Gretchen House, work to get orders put together on Friday, Jan. 6, 2023, at the company’s facility in Monroe, Washington. The company began including pay, benefits and perks to its job listings over a year ago, well ahead of the new statewide mandate to include a pay range on job postings at companies with over 15 employees. (Ryan Berry / The Herald)
New state law requires employers to give pay range in job postings

Washington’s new pay transparency law aims to narrow wage gaps based on race or gender — though some companies may seek loopholes.

Nelson Petroleum on Thursday, Dec. 22, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
‘Egregious:’ Everett fuel company repeatedly broke water standards

Nelson Petroleum faces a lawsuit from an Everett Mall Way strip mall over discharges into a nearby wetland.

Mike Lane and son Dave Lane, right, in front of their family store Everett Vacuum with their popular sign and saying, “everything we sell sucks” on Thursday, April 7, 2022, in Everett, Washington. (Olivia Vanni / The Herald)
Suck it up — and shop it up — at Everett Vacuum

After 80 years on Broadway, the family-run store with the “Everything we sell sucks” sign moved to Hewitt Avenue.

Customers leave J. Matheson Gifts Wednesday, Feb. 16, 2022, in Everett, Washington. (Ryan Berry / The Herald)
Everett’s longtime J. Matheson gift store finds new life in Seattle

Miranda Matheson had her mother’s blessing when she opened a new J. Matheson Urban Gifts & Kitchens in Green Lake.

Carla Fisher and Lana Lasley take a photo together with Tommy Chong during 210 Cannabis Co’s grand opening Saturday, Dec. 10, 2022, in Arlington, Washington. Fisher and Lasley waited in line solely to get a photo with Chong. (Ryan Berry / The Herald)
Stillaguamish Tribe opens retail cannabis shop

More than 1,500 attended a grand opening on Dec. 10. The venture comes amid a boom in tribal cannabis stores.

Franco Montano works on putting together a wreath at his workshop on Monday, Dec. 5, 2022 in Monroe, Washington. (Olivia Vanni / The Herald)
Monroe man runs taco truck by day, makes 100 wreaths by night

Franco Montano, a former factory worker, started making the holiday wreaths in 2008. He has expanded into a thriving family business.