4 steps to improving your company’s sales
Most salespeople would tell you that there are few better
feelings in life than closing a deal. This is because guiding a customer
through the sales process and coming out the other side with dollars committed
isn’t a matter of blind luck. It’s a craft — based on equal parts data mining,
psychology, intuition and other skills.
Many sales staffs have been under unprecedented pressure this
year. The COVID-19 pandemic triggered changes to the economy that made many
buyers cut back on spending. Now that the economy is slowly recovering, sales
opportunities may be improving. Here are four steps your salespeople can follow
to improve the odds that those chances will come to fruition:
1.
Qualify prospects. Time is an asset. Successful salespeople
focus most or all their time on prospects who are most likely to buy. Viable
prospects typically have certain things in common:
- A clear need for the products or services in question,
- Sufficient knowledge of the products or services,
- An identifiable decision-maker who can approve the
sale, - Adequate financial standing, and
- A need to buy right away or soon.
If any of these factors is missing, and certainly if several
are, the salesperson will likely end up wasting his or her time trying to make
a sale.
2. Ask
the right questions. A salesperson must deeply understand a
prospect’s motivation for needing your company’s products or services. To do
so, inquiries are key. Salespeople who make great presentations but don’t ask
effective questions tend to come up short.
An old rule of thumb says: The most effective salespeople spend
80% of their time listening and 20% talking. Actual percentages may vary, but
the point is that a substantial portion of a salesperson’s “talk time” should
be spent asking intelligent, insightful questions that arise from pre-call
research and specific points mentioned by the buyer.
3.
Identify and overcome objections. A nightmare scenario for any
salesperson is spending a huge amount of time on an opportunity, only to have
an unknown issue come out of left field at closing and kill the entire deal. To
guard against this, successful salespeople identify and address objections
during their calls with prospects, thereby minimizing or eliminating unpleasant
surprises at closing. They view objections as requests for information that, if
handled correctly, will educate the prospect and strengthen the relationship.
4.
Present a solution. The most eloquent sales presentation may be
entertaining, but it will probably be unsuccessful if it doesn’t satisfy a
buyer’s needs. Your product or service must fix a problem or help accomplish a
goal. Without that, what motivation does a prospect have to spend money? Your
salespeople must be not only careful researchers and charming
conversationalists, but also problem-solvers.
When you alleviate customers’ concerns and allow them to meet
strategic objectives, you’ll increase the likelihood of making today’s sales and setting yourself up for
tomorrow’s. Our firm can help you identify optimal sales strategies and measure
the results.
© 2020
Reinforce protection of your company’s mobile devices
Whether it’s a smart phone, tablet or laptop, mobile devices
have become the constant companions of today’s employees. And this relationship
has only been further cemented by the COVID-19 pandemic, which has thousands
working from home or other remote locations.
From a productivity standpoint, this is a good thing. So many
tasks that once kept employees tied to their desks are now doable from anywhere
on flexible schedules. All this convenience, however, brings considerable risk.
Multiple
threats
Perhaps the most obvious threat to any company-owned mobile
device is theft. That could end a workday early, hamper productivity for days,
and lead to considerable replacement hassles and expense. Indeed, given the
current economy, thieves may be increasing their efforts to snatch easy-to-grab
and easy-to-sell technological items.
Worse yet, a stolen or hacked mobile device means thieves and
hackers could gain possession of sensitive, confidential data about your
company, as well as its customers and employees.
Amateur criminals might look for credit card numbers to
fraudulently buy goods and services. More sophisticated ones, however, may look
for Social Security numbers or Employer Identification Numbers to commit
identity theft.
5
protective measures
There are a variety of ways that businesses can reinforce
protections of their mobile devices. Here are five to consider:
1.
Standardize, standardize, standardize. Having a wide variety of
makes and models increases risk. Moving toward a standard product and operating
system will allow you to address security issues across the board rather than
dealing with multiple makes and their varying security challenges.
2.
Password protect. Make sure that employees use “power-on”
passwords — those that appear whenever a unit is turned on or comes out of
sleep mode. In addition, configure devices to require a power-on password after
15 minutes of inactivity and to block access after a specified number of
unsuccessful log-in attempts. Require regular password changes, too.
3. Set
rules for data. Don’t allow employees to store certain information, such as
Social Security numbers, on their devices. If sensitive data must be
transported, encrypt it. (That is, make the data unreadable using special
coding.)
4. Keep
it strictly business. Employees are often tempted to mix personal
information with business data on their portable devices. Issue a company
policy forbidding or severely limiting this practice. Moreover, establish
access limits on networks and social media.
5.
Fortify your defenses. Be sure your mobile devices have regularly
and automatically updated security software to prevent unauthorized access,
block spyware/adware and stop viruses. Consider retaining the right to execute
a remote wipe of an asset’s memory if you believe it’s been stolen or
hopelessly lost.
More than
an object
When assessing the costs associated with a mobile device,
remember that it’s not only the value of the physical item that matters, but
also the importance and sensitivity of the data stored on it. We can help your
business implement a cost-effective process for procuring and protecting all
its technology.
© 2020
Can investors who manage their own portfolios deduct related expenses?
In some cases, investors have significant related expenses, such
as the cost of subscriptions to financial periodicals and clerical expenses.
Are they tax deductible? Under the Tax Cut and Jobs Act, these expenses aren’t
deductible through 2025 if they’re considered expenses for the production of
income. But they are deductible if they’re considered trade or business
expenses. (For tax years before 2018, production-of-income expenses were
deductible, but were included in miscellaneous itemized deductions, which were
subject to a 2%-of-adjusted-gross-income floor.)
In order to deduct investment-related expenses as business
expenses, you must figure out if you’re an investor or a trader — and be aware
that it’s more advantageous (and difficult) to qualify for trader status.
To qualify, you must be engaged in a trade or business. The U.S.
Supreme Court held many years ago that an individual taxpayer isn’t engaged in
a trade or business merely because the individual manages his or her own
securities investments, regardless of the amount of the investments or the
extent of the work required.
However, if you can show that your investment activities rise to
the level of carrying on a trade or business, you may be considered a trader
engaged in a trade or business, rather than an investor. As a trader, you’re
entitled to deduct your investment-related expenses as business expenses. A
trader is also entitled to deduct home-office expenses if the home office is
used exclusively on a regular basis as the trader’s principal place of
business. An investor, on the other hand, isn’t entitled to home-office
deductions since the investment activities aren’t a trade or business.
Since the Supreme Court’s decision, there has been extensive
litigation on the issue of whether a taxpayer is a trader or investor. The U.S.
Tax Court has developed a two-part test that must be satisfied in order for a
taxpayer to be a trader. Under this two-part test, a taxpayer’s investment
activities are considered a trade or business only if both of the following
are true:
- The taxpayer’s trading is substantial (in other words,
sporadic trading isn’t a trade or business), and - The taxpayer seeks to profit from short-term market
swings, rather than from long-term holding of investments.
So, the fact that a taxpayer’s investment activities are
regular, extensive and continuous isn’t in itself sufficient for determining
that a taxpayer is a trader. In order to be considered a trader, you must show
that you buy and sell securities with reasonable frequency in an effort to
profit on a short-term basis. In one case, even a taxpayer who made more than
1,000 trades a year with trading activities averaging about $16 million
annually was held to be an investor because the holding periods for stocks sold
averaged about one year.
Contact us if you have questions about whether your
investment-related expenses are deductible. We can also help explain how to
help keep capital gains taxes low when you sell investments.
© 2020
Business website costs: How to handle them for tax purposes
The business use of websites is widespread. But surprisingly,
the IRS hasn’t yet issued formal guidance on when Internet website costs can be
deducted.
Fortunately, established rules that generally apply to the
deductibility of business costs, and IRS guidance that applies to software
costs, provide business taxpayers launching a website with some guidance as to
the proper treatment of the costs.
Hardware
or software?
Let’s start with the hardware you may need to operate a website.
The costs involved fall under the standard rules for depreciable equipment.
Specifically, once these assets are up and running, you can deduct 100% of the
cost in the first year they’re placed in service (before 2023). This favorable
treatment is allowed under the 100% first-year bonus depreciation break.
In later years, you can probably deduct 100% of these costs in
the year the assets are placed in service under the Section 179 first-year depreciation
deduction privilege. However, Sec. 179 deductions are subject to several
limitations.
For tax years beginning in 2020, the maximum Sec. 179 deduction
is $1.04 million, subject to a phaseout rule. Under the rule, the deduction is
phased out if more than a specified amount of qualified property is placed in
service during the year. The threshold amount for 2020 is $2.59 million.
There’s also a taxable income limit. Under it, your Sec. 179
deduction can’t exceed your business taxable income. In other words, Sec. 179
deductions can’t create or increase an overall tax loss. However, any Sec. 179
deduction amount that you can’t immediately deduct is carried forward and can
be deducted in later years (to the extent permitted by the applicable limits).
Similar rules apply to purchased off-the-shelf software.
However, software license fees are treated differently from purchased software
costs for tax purposes. Payments for leased or licensed software used for your
website are currently deductible as ordinary and necessary business expenses.
Was the
software developed internally?
An alternative position is that your software development costs
represent currently deductible research and development costs under the tax
code. To qualify for this treatment, the costs must be paid or incurred by
December 31, 2022.
A more conservative approach would be to capitalize the costs of
internally developed software. Then you would depreciate them over 36 months.
If your website is primarily for advertising, you can also currently
deduct internal website software development costs as ordinary and necessary
business expenses.
Are you
paying a third party?
Some companies hire third parties to set up and run their
websites. In general, payments to third parties are currently deductible as
ordinary and necessary business expenses.
What
about before business begins?
Start-up expenses can include website development costs. Up to
$5,000 of otherwise deductible expenses that are incurred before your business
commences can generally be deducted in the year business commences. However, if
your start-up expenses exceed $50,000, the $5,000 current deduction limit
starts to be chipped away. Above this amount, you must capitalize some, or all,
of your start-up expenses and amortize them over 60 months, starting with the
month that business commences.
Need
Help?
We can determine the appropriate treatment of website costs for
federal income tax purposes. Contact us if you have questions or want more
information.
© 2020
Weighing the risks vs. rewards of a mezzanine loan
To say that most small to midsize businesses have at least
considered taking out a loan this year would probably be an understatement. The
economic impact of the COVID-19 pandemic has lowered many companies’ revenue
but may have also opened opportunities for others to expand or pivot into more
profitable areas.
If your company needs working capital to grow, rather than
simply survive, you might want to consider a mezzanine loan. These arrangements
offer relatively quick access to substantial funding but with risks that you
should fully understand before signing on the dotted line.
Equity on the table
Mezzanine financing works by layering a junior loan on top of a
senior (or primary) loan. It combines aspects of senior secured debt from a
bank and equity-based financing obtained from direct investors. Sources of
mezzanine financing can include private equity groups, mutual funds, insurance
companies and buyout firms.
Unlike bank loans, mezzanine debt typically is unsecured by the
borrower’s assets or has liens subordinate to other lenders. So, the cost of
obtaining financing is higher than that of a senior loan.
However, the cost generally is lower than what’s required to
acquire funding purely from equity investment. Yet most mezzanine instruments
do enable the lender to participate in the borrowing company’s success — or
failure. Generally, the lower your interest rate, the more equity you must
offer.
Flexibility at a price
The primary advantage of mezzanine financing is that it can
provide capital when you can’t obtain it elsewhere or can’t qualify for the
amount you’re looking for. That’s why it’s often referred to as a “bridge” to
undertaking ambitious objectives such as a business acquisition or desirable
piece of commercial property. But mezzanine loans aren’t necessarily an option
of last resort; many companies prefer their flexibility when it comes to
negotiating terms.
Naturally, there are drawbacks to consider. In addition to
having higher interest rates, mezzanine financing carries with it several other
potential disadvantages. Loan covenants can be restrictive. And though some
lenders are relatively hands-off, they may retain the right to a significant
say in company operations — particularly if you don’t repay the loan in a
timely manner.
If you default on the loan, the lender may either sell its stake
in your company or transfer that equity to another entity. This means you could
suddenly find yourself with a co-owner who you’ve never met or intended to work
with.
Mezzanine financing can also make an M&A deal more
complicated. It introduces an extra interested party to the negotiation table and
can make an already tricky deal that much harder.
Explore all options
Generally, mezzanine loans are best suited for businesses with
clear and even aggressive growth plans. Our firm can help you fully explore the
tax, financial and strategic implications of any lending arrangement, so you
can make the right decision.
© 2020
Tax implications of working from home and collecting unemployment
COVID-19 has changed our lives in many ways, and some of the changes
have tax implications. Here is basic information about two common situations.
1. Working from home.
Many employees have been told not to come into their workplaces
due to the pandemic. If you’re an employee who “telecommutes” — that is, you
work at home, and communicate with your employer mainly by telephone,
videoconferencing, email, etc. — you should know about the strict rules that
govern whether you can deduct your home office expenses.
Unfortunately, employee home office expenses aren’t currently
deductible, even if your employer requires you to work from home. Employee
business expense deductions (including the expenses an employee incurs to
maintain a home office) are miscellaneous itemized deductions and are
disallowed from 2018 through 2025 under the Tax Cuts and Jobs Act.
However, if you’re self-employed and work out of an office in
your home, you can be eligible to claim home office deductions for your related
expenses if you satisfy the strict rules.
2. Collecting unemployment
Millions of Americans have lost their jobs due to COVID-19 and
are collecting unemployment benefits. Some of these people don’t know that
these benefits are taxable and must be reported on their federal income tax
returns for the tax year they were received. Taxable benefits include the
special unemployment compensation authorized under the Coronavirus Aid, Relief
and Economic Security (CARES) Act.
In order to avoid a surprise tax bill when filing a 2020 income
tax return next year, unemployment recipients can have taxes withheld from
their benefits now. Under federal law, recipients can opt to have 10% withheld
from their benefits to cover part or all their tax liability. To do this,
complete Form W4-V, Voluntary Withholding Request, and give it to the agency
paying benefits. (Don’t send it to the IRS.)
We can help
We can assist you with advice about whether you qualify for home
office deductions, and how much of these expenses you can deduct. We can also
answer any questions you have about the taxation of unemployment benefits as
well as any other tax issues that you encounter as a result of COVID-19.
© 2020
2020 Q4 tax calendar: Key deadlines for businesses and other employers
Here are some of the key tax-related deadlines affecting
businesses and other employers during the fourth quarter of 2020. Keep in mind
that this list isn’t all-inclusive, so there may be additional deadlines that
apply to you. Contact us to ensure you’re meeting all applicable deadlines and
to learn more about the filing requirements.
Thursday, October 15
- If a calendar-year C corporation that filed an
automatic six-month extension:- File a 2019 income tax return (Form 1120) and pay any
tax, interest and penalties due. - Make contributions for 2019 to certain
employer-sponsored retirement plans.
- File a 2019 income tax return (Form 1120) and pay any
Monday, November 2
- Report income tax withholding and FICA taxes for third
quarter 2020 (Form 941) and pay any tax due. (See exception below under
“November 10.”)
Tuesday, November 10
- Report income tax withholding and FICA taxes for third
quarter 2020 (Form 941), if you deposited on time (and in full) all of the
associated taxes due.
Tuesday, December 15
- If a calendar-year C corporation, pay the fourth
installment of 2020 estimated income taxes.
Thursday, December 31
- Establish a retirement plan for 2020 (generally other
than a SIMPLE, a Safe-Harbor 401(k) or a SEP).
© 2020
Prioritize customer service now more than ever
You’d be hard-pressed to find a business that doesn’t value its
customers, but tough times put many things into perspective. As companies have
adjusted to operating during the COVID-19 pandemic and the resulting economic
fallout, prioritizing customer service has become more important than ever.
Without a strong base of loyal buyers, and a concerted effort to
win over more market share, your business could very well see diminished profit
margins and an escalated risk of being surpassed by competitors. Here are some
foundational ways to strengthen customer service during these difficult and
uncertain times.
Get management involved
As is the case for many things in business, success starts at
the top. Encourage your management team and fellow owners (if any) to regularly
interact with customers. Doing so cements customer relationships and
communicates to employees that cultivating these contacts is part of your
company culture and a foundation of its profitability.
Moving down the organizational chart, cultivate customer-service
heroes. Post articles about the latest customer service achievements on your
internal website or distribute companywide emails celebrating successes.
Champion these heroes in meetings. Public praise turns ordinary employees into
stars and encourages future service excellence.
Just be sure to empower employees to make timely decisions.
Don’t just talk about catering to customers unless your staff can really take
the initiative to act accordingly.
Systemize your responsiveness
Like everyone in today’s data-driven world, customers want
immediate information. So, strive to provide instant or at least timely
feedback to customers with a highly visible, technologically advanced response system.
This will let customers know that their input matters and you’ll reward them
for speaking up.
The specifics of this system will depend on the size, shape and
specialty of the business itself. It should encompass the right combination of
instant, electronic responses to customer inquiries along with phone calls and,
where appropriate, face-to-face (or direct virtual) interactions that reinforce
how much you value their business.
Continue to adjust
By now, you’ve likely implemented a few adjustments to serving
your customers during the COVID-19 pandemic. Many businesses have done so, with
common measures including:
- Explaining what you’re doing to cope with the crisis,
- Being more flexible with payment plans and deadlines,
and - Exercising greater patience and empathy.
As the months go on, don’t rest on your laurels. Continually
reassess your approach to customer service and make adjustments that suit the
changing circumstances of not only the pandemic, but also your industry and
local economy. Seize opportunities to help customers and watch out for mistakes
that could hurt your company’s reputation and revenue.
Don’t give up
This year has put everyone under unforeseen amounts of stress
and, in turn, providing world-class customer services has become even more
difficult. Keep at it — your extra efforts now could lay the groundwork for a
much stronger customer base in the future. Our firm can help you assess your
customer service and calculate its impact on revenue and profitability.
© 2020
Homebuyers: Can you deduct seller-paid points?
Despite the COVID-19 pandemic, the National Association of
Realtors (NAR) reports that existing home sales and prices are up nationwide,
compared with last year. One of the reasons is the pandemic: “With the sizable
shift in remote work, current homeowners are looking for larger homes…” according
to NAR’s Chief Economist Lawrence Yun.
If you’re buying a home, or you just bought one, you may wonder
if you can deduct mortgage points paid on your behalf by the seller. Yes, you
can, subject to some important limitations described below.
Points are upfront fees charged by a mortgage lender, expressed
as a percentage of the loan principal. Points, which may be deductible if you
itemize deductions, are normally the buyer’s obligation. But a seller will
sometimes sweeten a deal by agreeing to pay the points on the buyer’s mortgage
loan.
In most cases, points a buyer pays are a deductible interest
expense. And IRS says that seller-paid points may also be deductible.
Suppose, for example, that you bought a home for $600,000. In
connection with a $500,000 mortgage loan, your bank charged two points, or
$10,000. The seller agreed to pay the points in order to close the sale.
You can deduct the $10,000 in the year of sale. The only
disadvantage is that your tax basis is reduced to $590,000, which will mean
more gain if — and when — you sell the home for more than that amount. But that
may not happen until many years later, and the gain may not be taxable anyway.
You may qualify for an exclusion for up to $250,000 ($500,000 for a married
couple filing jointly) of gain on the sale of a principal residence.
Some limitations
There are some important limitations on the rule allowing a
deduction for seller-paid points. The rule doesn’t apply:
- To points that are allocated to the part of a mortgage
above $750,000 ($375,000 for marrieds filing separately) for tax years
2018 through 2025 (above $1 million for tax years before 2018 and after
2025); - To points on a loan used to improve (rather than buy) a
home; - To points on a loan used to buy a vacation or second
home, investment property or business property; and - To points paid on a refinancing, home equity loan or
line of credit.
Your situation
We can review with you in more detail whether the points in your
home purchase are deductible, as well as discuss other tax aspects of your
transaction.
© 2020
Employers have questions and concerns about deferring employees’ Social Security taxes
The IRS has provided guidance to employers regarding the recent presidential
action to allow employers to defer the withholding, deposit and payment of
certain payroll tax obligations.
The three-page guidance in Notice 2020-65 was issued to
implement President Trump’s executive memorandum signed on August 8.
Private employers still have questions and concerns about
whether, and how, to implement the optional deferral. The President’s action
only defers the employee’s share of Social Security taxes; it doesn’t forgive
them, meaning employees will still have to pay the taxes later unless Congress
acts to eliminate the liability. (The payroll services provider for federal
employers announced that federal employees will have their taxes
deferred.)
Deferral basics
President Trump issued the memorandum in light of the COVID-19
crisis. He directed the U.S. Secretary of the Treasury to use his authority
under the tax code to defer the withholding, deposit and payment of certain
payroll tax obligations.
For purposes of the Notice, “applicable wages” means wages or
compensation paid to an employee on a pay date beginning September 1,
2020, and ending December 31, 2020, but only if the amount paid for a
biweekly pay period is less than $4,000, or the equivalent amount with respect
to other pay periods.
The guidance postpones the withholding and remittance of the
employee share of Social Security tax until the period beginning on
January 1, 2021, and ending on April 30, 2021. Penalties, interest
and additions to tax will begin to accrue on May 1, 2021, for any unpaid taxes.
“If necessary,” the guidance states, an employer “may make
arrangements to collect the total applicable taxes” from an employee. But it
doesn’t specify how.
Be aware that under the CARES Act, employers can already
defer paying their portion of Social Security taxes through December 31,
2020. All 2020 deferred amounts are due in two equal installments — one at the
end of 2021 and the other at the end of 2022.
Many employers opting out
Several business groups have stated that their members won’t
participate in the deferral. For example, the U.S. Chamber of Commerce and more
than 30 trade associations sent a letter to members of Congress and the U.S.
Department of the Treasury calling the deferral “unworkable.”
The Chamber is concerned that employees will get a temporary
increase in their paychecks this year, followed by a decrease in take-home pay
in early 2021. “Many of our members consider it unfair to employees to make a
decision that would force a big tax bill on them next year… Therefore, many of
our members will likely decline to implement deferral, choosing instead to
continue to withhold and remit to the government the payroll taxes required by
law,” the group explained.
Businesses are also worried about having to collect the taxes
from employees who may quit or be terminated before April 30, 2021. And
since some employees are asking questions about the deferral, many employers
are also putting together communications to inform their staff members about
whether they’re going to participate. If so, they’re informing employees what
it will mean for next year’s paychecks.
How to proceed
Contact us if you have questions about the deferral and how to
proceed at your business.
© 2020