As we weather the summer heat wave and 100 degrees plus temps, it’s a good time to do a little housekeeping before business heats up in the fall. Here are 3 action steps you can take right now to set yourself up for success and learn about summer financial housekeeping.
Be Aware of Mileage Rate Changes
According to the IRS website, the Internal Revenue Service has announced plans to increase the standard mileage rate for the last six months of 2022, effective July 1st. The new rate for business travel will be 62.5 cents per mile and the rate for active-duty military members will be 22 cents, both up 4 cents from the rate at the beginning of the year.
The IRS is making the adjustment to better reflect rising gas prices across the country. If this is a rate that you use, you’ll want to document your mileage on the last day of June so you can apply the lower rate for the mileage for the first 6 months and use the higher rate for the last half of the year.
Manage Inflation Costs
When it comes to financial housekeeping, one crucial aspect is analyzing your inventory. Take a comprehensive look at your product lineup and identify the items that consistently outperform others. These top-selling products should become your primary focus, while considering eliminating the underperforming ones. It’s beneficial to scrutinize each variation of a SKU, as there may be versions that don’t justify the expenses invested in them.
By prioritizing these “breadwinning” products, you can enhance both efficiency and profitability. In the current business climate, having sufficient cash on hand is crucial for survival. Although it may seem like a daunting task, start small by analyzing the top and bottom 20% of your money-making products. Once you’ve completed this analysis, you can systematically work your way through the remaining products.
Operational expenses are another area that requires attention during financial housekeeping. Begin by questioning what items or services you no longer utilize and can eliminate. A simple starting point is reviewing your credit card bills from the last three months. Reduce expenses in areas where the returns are insufficient. As we all face the rising costs of Amazon fees and advertising, having available cash to cover these expenses becomes crucial. Relying on loans with steeply climbing interest rates will only eat into your profit margins instead of helping them.
By implementing these financial housekeeping practices, you can optimize your business operations, increase profitability, and ensure a secure financial future. Start taking action today to effectively manage your finances and position your business for long-term success.
Early Tax Prep
Check in with your tax Preparer before September. The big push for accountants in the fall is September 15 for filing corporate extensions and October 15 for filing personal extensions. Before you and your accountant get extra busy in Q3 and Q4, it’s important to take a few minutes and check-in.
By now, you have roughly 6 months of data and can project your next 6 months. This doesn’t have to be a highly detailed conversation, just go over the big numbers. Ask your accountant to give you an estimate of your tax liability for the year. Make sure you’re setting aside the right amount of money for taxes because you don’t want to let the money sit in a tax account if your taxes are going to be less this year. You can use this to increase your inventory buy. You also don’t want to be setting aside too little. A big bill in April is never a fun prospect and with interest rates on the rise, you don’t want to borrow money to pay the tax bill.
While taking these steps may not save you from the rising summer temperatures, they will definitely help beat the heat of a busy Q3 and Q4. Take a look at any areas where you could save up some cash and work on getting ahead of the game so you’re not left sweating when business starts ramping up.