Savings and Growth…You Need BOTH
Recover past tax & vendor overpayments,
capture future cost savings & grow revenues
with strategic sales and marketing initiatives
Most businesses today are inundated with vendors trying to sell them one or another marketing service. Or SEO, reputation management, social media, video…it’s enough to make your head spin.
And many business owners and managers fall into line – only to be disappointed when the promised results fail to materialize.
The reality for most businesses is a patch quilt of marketing and advertising “campaigns’ with little discernible ROI.
There are better and more systematic ways to put your business on the soundest footing possible for greater profitability and growth.
Let’s step back and consider the basics of increasing your business profits.
Savings Come First
At the risk of oversimplifying, there are two fundamental ways to increase profits – cut costs and grow revenues.
There’s only so much cost-cutting that can be done, of course – and it’s not the path to long-term success.
However, when cash flow isn’t keeping up with operating costs, there ‘s no faster way to rebalance your profit and loss statement. And unlike increasing sales, every penny you save falls straight to your bottom line.
But cutting costs can be difficult. Your employees depend on their income and the negative fallout from staffing cutbacks can permanently impair employee morale – and that can easily ripple through to your customers and prospects. Happy employees make for happy customers…disgruntled employees, not so much.
There may be ways to not only cut costs, however, but recapture past overspending and not impact your employees or your business operations – other than to improve them by putting money back in the till.
Recover Tax Overpayments
Most business owners suspect they’re paying too much in property taxes. And most of the time they’re right.
But negotiating with town assessors and appeals boards is no one’s idea of a good time.
What if you could farm that out to a team of professionals experienced in researching local property valuations to document that your business property is overvalued and you’re due a tax refund?
Well, now you can.
And that’s just one of several tax savings and recovery initiatives at your disposal – all of which can be outsourced to professionals with more than a decade’s experience and success in producing over $300 million in tax savings for clients.
And the best part – especially if you’re experiencing a cash crunch – is there’s no up-front cost to explore these opportunities. If they fail to find you tax savings, there’s no fee for their efforts…No Savings, No Fee.
A Tax-Savings Trifecta
Everyone can relate to property tax savings. It’s easy to understand.
And the typical client averages a 15% refund on their property taxes – and comparable recurring savings every year.
But there are much bigger potential savings in two more obscure tax-savings opportunities that many eligible businesses are also overlooking.
Unlike property taxes, though, they do require that your business has paid taxes in any of the past three years or will this year. They’re income tax refunds and credits, so if your business hasn’t or isn’t paying any income taxes, there’s nothing to refund or credit.
The first of these is for commercial building owners and the other for businesses that make things – not just manufacturers, but designers, contractors, and others as well.
The first is for businesses that have bought, built, or renovated a building in the last 20 years – including leasehold improvements by businesses that rent their space.
Most such businesses have had their entire building costs depreciated over 39 years (27 for residential buildings) when a more precise allocation of building costs would depreciate certain building costs over much shorter periods.
A building may not require replacement for 39 years, but the carpeting, lighting, and other components within it are likely to require replacing much sooner – and those should properly be depreciated over shorter timeframes. The IRS recognizes 5, 7, and 15-year timeframes for various components.
How Does This Help
Your P&L and Cash Flow?
Shorter depreciation periods for 20-30% or more of your building costs means higher operating costs and lower taxable income for your business. That means you may have been overpaying state and federal income taxes based on these erroneous depreciation schedules.
Not only are you entitled to a refund of those overpayments for the current tax period, but in most cases you can recapture past overpayments as well – in addition to lowering your future tax payments for the next several years.
Many businesses see six-figure payments from the IRS and state taxing authorities – some in the seven figures. The more buildings your business owns or leases, the larger your potential tax recapture.
The study required to document the correct allocation of your building costs is called a Cost Segregation Study and the IRS even recommends a particular type of study – called an engineering-based study – that’s the most precise way to allocate building and related costs.
The reason your building(s) may not currently be depreciated this way is because of the gap between accounting and engineering – and far too many businesses are falling through this crack and paying the price in their tax bills.
You can fix that – and help solve your near-term cash flow problem by doing so.
Manufacturer Tax Credit
The third leg of this tax-savings trifecta is one an estimated 95% of eligible companies are missing out on.
It’s the poorly-named research and development – or R&D – tax credit. Before you skip this section because you “Know” you don’t qualify – hold on a second. These are tax credits, after all – not just tax deductions, which means they’re worth several times as much to your bottom line depending on your tax bracket.
The confusion here is with the image that “research and development” conveys of lab coats and PhDs. But that’s a misperception made more costly as tax rules and case law have substantially liberalized what qualifies for these tax credits, including changes to the IRS rules in 2014 that make the available credits much more substantial for many businesses. Some have seen a three-fold increase in their eligible tax credits – making it far more worthy of pursuit.
The reality is that even minor improvements in both products and processes can qualify for these tax credits. These can be in basic manufacturing, as well as engineering and design firms, software companies, and a host of other businesses not ordinarily thought of as research-oriented.
You do need to make something – but it doesn’t have to be a tangible product. Software , even gaming software, can qualify – as can engineering and architectural design changes and other process improvements.
And the dollar amounts here often exceed the other two categories of tax savings combined – especially when the process is repeated annually.
You’ll generally need a payroll of $1.5 million or more to make it worthwhile, although much smaller technical companies often qualify for more tax credits than much larger companies. It all depends on the makeup of your payroll and the proportion devoted to eligible activities.
This also requires an in-depth engineering study to properly document your eligibility per IRS requirements. But this too can be outsourced with minimal requirements for your own staff in providing relevant documentation for the experts conducting the study.
What About Growth?
I did start out with “Savings and Growth – You Need Them BOTH”. And you do if you hope to make your business the long-term success you expect it to be.
Growth strategies and opportunities and discussed thoroughly on this site and warrant greater attention than is possible in this summary page.
But you’ll be in a far better position to explore those opportunities with more cash available to fund them. The measures discussed above can go a long way to help fund those growth activities.
For many businesses challenged to mount an effective growth strategy today, recovering past tax overpayments – along with other vendor overpayments also available for recovery – may be the only sure path to growing their business for a more sustainable and successful future.
And even if your cash flow is sufficient for your needs, who doesn’t want more?
You might argue it’d be business malpractice not to explore these prospects. Doing so can only strengthen any manager’s position as a steward of their business.
To see in a few minutes how much your business may be entitled, click on the image below.