It was good seeing you both again. Each time we meet the numbers and growth are getting better and better.
The key items we spoke about during the meeting are as follows:
- The 2018 personal taxes due, totaling about $20K, were a “best case scenario” considering the taxable income generated during 2018. Some deductions carried over from 2017 (equipment write-offs) that took $100K off of the top line of the Company’s income and reduced your 2018 taxes by about $30K.
- The business loan has an incredibly low-interest rate. Paying the loan off earlier does not benefit you as long as there are other debts with higher interest rates. I understand your desire to be debt free, although I strongly encourage you to prioritize generating cash flow and sales growth over paying down the business loan due to its low-interest rate.
- Please contact an attorney that you are comfortable and familiar with to get some assistance with negotiating the rent terms. The circumstances surrounding the Company’s ability to rent the space for a set time frame and price are not as formal as the business loan and that could be a potential issue in the future.
- Based on your prior year W-2’s and this year’s payroll you should have no issues qualifying for a mortgage in 2020. I wish more of our clients understand the relationship between payroll and creditworthiness.
- If you have unused or unproductive machinery that can be sold, the proceeds would go a long way toward the purchase of a new machine or paying down the newest financed machine’s balance. Depending on the actual amount received from disposing of the older machines, you may want to consider splitting the funds received between a down payment on a new machine and paying down an older machine’s loan.
- We also noted that your payroll tax payments (paid monthly) are getting fairly significant. Since these payments are paid monthly and quarterly, it has the potential to make for a cash crunch if one of your major customer’s is slower to pay than normal. Consider switching your payroll to make weekly payroll deposits to keep cash flow consistent. This way, you could push off supplier payments and still make payroll if a customer stalls on payments.
- Let’s schedule another meeting or phone call in late May to catch up and review how things are going.
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