5 Android Apps to Make Taxes a Little Easier

I am definitely a gadget junky and Android fanboy (sorry iOS lovers, maybe I'll write a post for you later, but don't hold your breath). I love apps and am constantly looking for apps that are new, fun, helpful or just cool. In my constant search for new apps, I've discovered the following 5 apps that I thought were worth mentioning as we head into the thick of tax season. So let's dig right in...

1. BNA Quick Tax Reference

I have this one currently installed and I find it helpful. This is especially helpful for tax preparers. If you've ever seen one of the cheat sheets that show mileage rates, tax tables, standard deductions, etc. this is the digital app form. Pretty handy to have all of that information in your pocket. The coolest feature is the Tax Rate Schedules where you can plug in some information and calculate your Federal tax liability. Just remember that if you itemize you will have to adjust accordingly. BNA produces some high quality (and high price) tax planning software for tax pros. I think they did a pretty decent job with this app and I really appreciate that it is free.

2. Taxcaster

Taxcaster is an app from Turbotax. There is plenty good and bad to say about Turbotax, but I’ll leave that for another time. This app is pretty cool, especially in the interface they have designed. You can slide the bars to your income level and withholdings to get a quick idea of how much tax you either owe or can expect in a refund. The meter at the top moves automatically each time you change a number.

Like BNA, this is just a tool to approximate your taxes. I wouldn’t make any firm decisions based on them since they are definitely oversimplified models and your situation could be drastically different.

3. IRS2Go

This is an app the IRS put out last year mainly for checking on refund status. It doesn’t have a whole lot of functionality beyond that. You can sign up for tax tips and read IRS twitter updates if you so choose.

4. TaxRegs & TaxCode

Yep, it’s all here. Federal Regs & Code. Here’s the creators description, “The short story, I was tired of trying to find the Code on the web so I created this app.” I would definitely say this is an app for the pros. Unless, of course, you have insomnia in which case reading tax regulations is the perfect cure.

5. EITC Finder

Whether you are a preparer looking for an on the go way of calculating whether a client qualifies for the Earned Income Tax Credit or you are a taxpayer looking to figure it out yourself, this app can help. It is from Intuit, definitely a trusted name in accounting software. It has a decent layout and interface. Since it is a highly specific app it obviously won’t appeal to everyone.

2012 Mileage Rates Announced

The IRS has announced 2012 mileage rates. From the IRS.gov website:

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

It is the taxpayers option to use standard mileage rates for auto/small truck usage. You can always deduct actual cost as long as you are willing to meet the stringent record keeping requirements. If you are using standard mileage rates, make sure you are keeping a log. For a sample log, e-mail me and I'd be glad to send you one.

From IRS.gov IR-2011-116, Dec. 9, 2011

What you need to know about ROI

ROI is one of those terms thrown around that few people understand, but you can remember hearing it so you know you should know about it, right? Return on Investment, or ROI, is simply a measurement tool, but one I consider a cornerstone measurement tool. Your most valuable assets whether you are starting a business or running one are time and money. As an entrepreneur, you've no doubt run short on both time and money at some point, a lot of clients I meet are in a sort of perpetual state of being short on both time and money.

ROI is a tool that gives you a way to look at the ways you are spending your time and money and give you an objective look so you can evaluate what makes the most sense. Should you start a new ad campaign on Facebook? Should you sell your product on Amazon.com? That new idea you've got, should you spend 100+ hours of your time to get it to the surface? As an entrepreneur, these questions are often answered with passion instead of objectivity. Passion isn't all bad, but often it can blind us and we don't realize our mistakes until we've sunk too much time and money in the process. ROI helps temper passion and let you look at an investment at least somewhat objectively.

I read a great discussion lately about cost-per-click advertising, or CPC. We've all been to those sites where there are small ad boxes or Facebook with the ads on the right side of the screen. It seems like everyone is trying to monetize their site or blog lately. CPC is buying advertising through Google or Facebook (or many others) where you only pay if someone clicks on the little ad to go to your site. There is a tremendous trove of information on the internet about CPC. Most, however, deals with getting the lowest CPC or not paying over a certain amount for a CPC or a CPC campaign. What is typically left out of the equation is ROI.

Let's look at two products. Product 1 can advertise with a CPC of $1.25, gets 100 clicks on average and a conversion rate (people buy the product) of 25. Product 2's CPC is $10.00, gets total clicks of 75 and a conversion rate of only 3. Which campaign would you choose? Would you ever pay $10.00 per click? Let's look at the rest of the info...

Now which product would you move forward with? The picture is a lot more clear when you look at the return you anticipate. Of course, this oversimplifies things for the sake of explanation, but hopefully you get the idea. Many people (and many experts) would say you are crazy to pay $10.00 per click to get fewer clicks and few conversions. That's good for you and me, less competition for our profitable products. We'll let them sell unprofitable products all day long. You and I can use ROI to see $10.00 per click, in this case, makes a lot of sense.

That sort of just scratches the surface on ROI, but hopefully you can see it is not some mysterious financial term as much as it is just another tool you should have in your toolbox. I'll be returning to ROI frequently since it is such an important tool. In the meantime, if you've got questions, shoot me an e-mail.

MiTaxes: Time to Adjust the Withholdings

So unless you extended, your taxes are done and filed and if you are like most people, any refund you got has long been spent. If you owed money, you probably still feel the sting of having to send more money to the government. If you got a large refund or owed a lot, now is the time to make changes. We are already 5 months into the year, so there are only 7 more months to get this years taxes adjusted. If you work with a CPA, they should have already given you some suggestions (if not, rethink your choice in CPAs). If you do your own taxes, you'll need to recalculate your Federal W-4 and equivalent state forms to dial in your withholdings.
I was recently talking to a payroll company for a guy (I'll call him Fred) who did not have enough withholding and owed taxes in 2010. Instead of changing exemptions, the payroll rep suggested Fred claim exempt on the number of exemptions, figure out how much he needs to pay in taxes by the end of the year, divide it by the remaining pay periods, then use that amount as the “additional tax to be taken out” on the W-4. Now Fred expects 2011 to be exactly like 2010 and his situation may be unique, but I thought the suggestion was interesting and worth passing along.
Now for the disclaimer, nothing in this article or blog should be construed as tax or financial advice. Your situation is most likely different and you should consult a tax professional regarding your situation.

How cash flow, appointments and leads correlate

I was talking to a guy who pitches vending machines today, soda and snack machines. Not Coke or Pepsi, but alternative machines with healthier snacks and options for energy drinks and such. I say pitch because for the business, there's no cost. This guy's company places the machine at your business and they maintain the machines and keep the profits.

As Mr. Snack Machine was leaving, I noticed he was driving an Audi A8. Nice car, but expensive. In looking at his marketing materials, I noticed the address on his business card looked like a nearby residential address. So, for fun, I looked it up on Zillow. $625,000. Let's say he was one of the few that put 20% down when he bought his house and guesstimate his mortgage at around $3,800 per month (incl. taxes & insurance). Now let's say Mr. Snack Machine got a great deal on the A8 at $40,000 and put that monthly payment around $800. A total of $4,600 between the two.

I don't know where I got it from, but I always say, “You gotta sell a lot of cups of coffee to pay the rent on a coffee shop.” Out of curiosity I decided to figure out not only how many snack machines Mr. Snack Machine had to place, but how many leads he needs just to pay for his car and house. For simplicity, we'll ignore the other bills or let's say Mrs. Snack Machine's income covers them.

So I did some research on the interwebs and see that an average snack machine costs $3,000 and grosses an average of $500 per month (after snack costs). He probably finances multiple machines at maybe 3 years for a monthly payment around $94 each. Mr. Snack Machine said they service the machines weekly, so I estimate about $20 per month per machine for the employee. $500 gross less loan and payroll leaves a net cash flow of $386 per machine. Notice, I'm not concerned with accounting profit right now, profit doesn't pay bills, cash does. At $386 net per machine, Mr. Snack Machine needs to place 13 units to pay for his A8 and McMansion.

On the face of it, 13 units doesn't sound all that bad, right? Place a couple of machines a week and you are there in no time. But, let's take it a step further. Assuming Mr. Snack Machine's close rate is 1 in 20 (not a bad rate for this type of sales) or 5%, he needs 260 appointments to place those 13 units. That's finding 260 business decision makers willing to meet with him. Again, going with 1 lead in 20 being willing to meet with him, he needs to develop 5,200 leads! That's 5,200 business decision makers with a company big enough to support a snack machine! AND, that's just to pay for his car and house, nothing else.

I'm not saying Mr. Snack Machine should quit, once he gets the revenue stream up and running, it can be a profitable business. My point was to simply walk you through the thought process of tying leads to how much cash flow you need. As a business owner you should always be thinking about cash flow. No matter what business you have (aside from government contractors), you should be able to start at how much cash you need and back into how many people you need to touch in your market. If Mr. Snack Machine wants to double his income, he better start thinking real quick about how he can get 10,400 (quality) leads instead of 5,200.

It doesn't matter if you are an author, artist, widget maker, app developer, or whatever, you should be able to walk through this same process for your business. If you've got questions, leave a comment or send me an e-mail. I can also send you the spreadsheet I used to do the rough calculations. Send me an e-mail and I'll send it to you.

Cash Flow Tip #1: Stretching Out Payables

Cash flow tips are a list of tips I'll be presenting on ways to improve the cash flow in your business. They will cover a wide range of topics. They are not pie in the sky ideas, but tried and true methods I've used with clients or the companies I've managed. I decided to pick a somewhat simple one today in talking about your accounts payable.

One way to improve your cash flow, especially in the short run, is to stretch out your accounts payable, in other words, taking longer to pay them. For example, let's say you purchased $100,000 of widgets from XYZ, Inc. with Net 30 day terms. XYZ expects payment from you in 30 days obviously, but if you take 45 days to pay, you've now used XYZ's money for an additional 15 days with (theoretically) no cost of money. When I discuss this with clients, I get two responses, either 1) you can't do that, it's unethical, or 2) of course you would, industry average is 45 days to pay anyhow. Both answers are wrong.

First, the unethical argument. I would not recommend stretching out a payment like this without talking to the vendor first. Especially in our example of a large invoice taking an extra 15 days over terms. Over the years, I've found most (not all, but most) vendors very willing to allow you extra time to pay an invoice whether you are in a cash flow crunch or your business is seasonal, IF (that's a big IF) you call them up front and talk about it. For some reason, most people are averse to this, but I highly recommend it. Calling up front helps you establish a relationship with the vendor and lays a groundwork should you attempt to renegotiate terms to 45 or 60 days.

Try calling to renegotiate terms with a vendor or ask for a favor if you've been paying 15 days late on all your invoices and there is no relationship and you are typically in for a big surprise. Which addresses the second response of 45 days being industry average. Yes, in most cases that's true and in some cases vendors don't care that you pay late, don't know you pay late or will ignore your late payments until it is time to renegotiate terms or pricing. With no relationship with your vendor and late payment history, you stand in a difficult position to renegotiate.

I've worked with numerous vendors to modify terms either temporarily or permanently. Most recently working with a manufacturer with very slow sales in the 1^st quarter due to seasonality. When you have regular conversation with vendors, they often anticipate the call and again, most are willing to work with you. Assuming you have an average payables balance of $500,000 and let's assume you are able to get all of your vendors to agree to temporary 45 day terms, that's $250,000 in cash or that you don't have to draw on your line of credit.

I'll repeat again how important that communication is, especially in this economy when many companies are stretching out their vendors to stay alive as a last ditch effort. That's not what I am talking about here and is a much different, urgent issue. You need to communicate to your vendor what you need and why so they don't assume you are in last ditch effort mode!

Returning to the basics

In firefighting, the success of an operation often comes down to the basic lessons a firefighter learns in Firefighting 101. Throwing ladders, pulling hose, carrying tools are all basics and critical whether you are a rookie or have 30 years in. It doesn't matter if you have the best chief on your fireground or brand new high tech tools, if water is not effectively being put on the fire, it's not going out.

Your business is no different. Constantly going back to the basics and being sure they are addressed are critical to your success. Are you overwhelmingly meeting the needs of your customers? Are you investing your time and money wisely? Is your focus on cash flow instead of profit? If you are not measuring and paying attention to these basics, your operations will suffer.

That's the purpose of this blog. I want to help you focus or learn the basics so you can be successful. It doesn't matter whether you are just starting out or 30 years in the game, the basics have to be there. I've worked with hundreds of business owners to focus their market, turn around cash flow, develop a strategy for investment, and generally be happier. You are living your dream, shouldn't happiness come with that?