Improving Operational Efficiency

Atlanta CPA Teaches Business Clients Tax Law While Focusing on Operating Results

When a CPA does a tax return they are best suited to give useful financial advice that an owner can use to turn information into profits. Just as a doctor will give invaluable insight to their patient, a CPA should be a clients closest financial confidant. Below is a sample letter that might be sent to a client to assist both in ensuring future business profitability and adequate tax documentation for a corporate/business client:

Regarding Your Corporate Returns
-Your cost of goods sold (cost of doing business) is 90% leaving only 10% to cover salaries and other expenses creating a book and tax loss of $100,000. I suggest ASAP that we review our pricing guidelines and adjust so that margins are at least 30%. This would allow for you operating expenses to remain the same and break-even. To ensure profitability, given present expense levels, I would suggest your strive for a gross profit margin of 35%. Please be reminded that the K-1 losses that are not currently deductible due to basis limitations are called suspended losses and are rolled forward until you have sufficient tax basis.
-Tax law does not allow S Corporation owners to deduct tax losses only to the extent or your tax basis (which is calculated predominantly by prior retained earnings and current loans made to the company). Therefore only approximately $15,000 of your $100,000 of tax losses are deductible.
-Tax law requires all S Corporation owners to take a fair and reasonable salary given position and profit. Based upon your operating results you might consider lowering your salary until profitable levels are maintained, while being sure to maintain the reasonableness statutes required by the IRS.

Regarding Your Personal Returns
-Please get to me a copy of the year-end statements showing total mortgage interest, cash contributions to charity and real estate taxes.
-Please get to me the property taxes paid on your personal vehicles.
-Please get to me the original purchase price and date of your rental property.
-Please turn in an expense report to get reimbursed for your medical premiums
-I did not see Association fees on your rental property.

The ABC's of Bookkeeping for a Small Business
Learn the ABC's of accounting for the business and financial operations of your business. Visit http://www.hiscpa.com/keeping-books.html

Preparing and Reviewing Financial Statements
Financial results of your business are like a doctors chart of their patient, this will help enable you to understand financials and their use. See http://www.hiscpa.com/financial-statements.html

Monitoring Your Books at the End of the Month
Month-end control procedures are critical, as any variance to these will negatively impact the reliability of your internal financial. These are just a few of the tips we give clients each and every day. http://www.hiscpa.com/monthend.html

To learn more about tax entities and the taxation thereof visit http://www.hiscpa.com/article2.html  There you will also discover a wide host of resources for American Entrepreneurs.

John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/  and for his latest book Overcoming Life's 9/11's: Job's Journey and a Voice of One: Nehemiah's Prayer visit http://www.john-dillard.com/  or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!