Financial Planning and Growth
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Chapter 17 Operations, Budgeting, and Taxes
Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small
Business, First Edition. M. J. Alhabeeb.
© 2015 John Wiley & Sons, Inc. Published 2015 by John Wiley & Sons, Inc.
17.1 Operations
The term “operations” or “operating system” means the process of converting inputs to
outputs. It is to say, transforming material, labor, capital, energy, and other inputs into
goods and services. Since those goods and services are meant to serve and benefit
consumers, we can say that the operating system is the set of productive activities that
would yield certain outputs of some value to consumers. In other words, it is the value
producing system of the business. Operations management would then be the planning and
control of that conversion process. Depending on what kind of value is needed, or what type
of product consumers need, the inputs would be identified, and the process would be
determined. There would be so many inputs to the production process but we can generally
say that all inputs can be in one way or another identified by the major categories: people,
capital, material, energy, and time. People would cover physical labor and mental capacity
such as intelligence, knowledge, skills, and information. Capital would include money,
equipment, building, technological systems, and the like. Energy would mean natural or
artificial energies (excluding people's energy) such as electricity, gas, solar, wind, water,
nuclear, and the like. Material includes all physical goods necessary for production, and
finally time includes the actual and perceived time. The production process would
transform a set of inputs into output. Output can be either a physical good such as an
agricultural produce such as vegetables and fruits, or industrial products such as a piece of
furniture, an automobile, an appliance, a book, toy, or a needle. Output can also be a service
of value to consumers such as cleaning, repairing, hairdressing, or legal or dental services.
Some outputs are a mix of products and services such as the case of a restaurant output. It is
the meal plus the service of waiting and the comfort and pleasure of the place. Figure 17.1
shows the operations process as to how inputs are transformed into output. The feedback is
an operational control system that would complete the circle of operations by maintaining a
continuous line of communication in the opposite direction. It can be:
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1. informational line which provides information on how the process of transformation is
doing;
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Figure 17.1 Business Operation
2. corrective line which evaluates every step of the way and straightens out any deviation
from the designed standard;
3. reinforcing line which monitors and rewards the system's efficiencies.
17.2 Material and Supplies: Buying or Making?
For any manager who wants to service an efficient operation in order to make and sell a
product profitably, there are three major concerns:
• the right quantity and quality of material needed for production;
• the right cost of these materials to the firm;
• the right time at which these materials are ready for production line.
Whether it would be better to buy or make what is needed for materials and supplies would
depend primarily on the cost to the firm. However, beyond the cost, there are other
considerations such as:
• The quality of material. It is wise for the firm to follow the quality wherever it can be
found whether by buying or by making.
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• If there is a process secret that the firm does not want to reveal. The firm might prefer
to make the material at home, even if the process of making is costly.
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• Keeping production on schedule by securing the right timing of getting the needed
material ready for production line. This may be achieved either by buying the material
or making them.
• If the firm has an unused capacity that can be adapted to make the material, it would be
a good reason to lean toward making rather than buying.
• If the firm has a vendor or supplier who can supply the material as part of a previous
obligation or commitment, then it would be better to buy.
• If the material can only be obtained and secured by an outside source, then it would be
wise to contract it out, and have peace of mind.
Among the managerial tools to control material utilization are:
Material requirements planning (MRP), which is an operational tool to control the
activities of order, storage, delivery, condition, and timing of material that is required
for production to achieve operational efficiency.
Just-in-time (JIT), which is an inventory system by which only the material needed for
production, at a certain time, on a certain line, are delivered then and there without the
need for using any inventory system. This operational system would not only increase
the efficiency of operation, but also reduce the inventory cost, or eliminate it all
together.
Inventory control is an essential part of operations management but it has been discussed
in Chapter 12.
17.3 Product Quality
Product quality is the extent to which a product can satisfy its own consumers. It is all the
attributes and features within the product, which are responsible for registering the degree
of consumer's contentment/discontentment with the product. Product quality would have
two sides to it.
1. The objective quality which refers to the technical specifications and physical features,
which define the product performance such as speed, horsepower, torque, and load of
an engine.
2. The subjective quality which is the consumer's perception of the product features. Some
of it is purely subjective, such as the preference of design and color of a car, and some
of it is relatively subjective. This relative subjectivity of a product can be illustrated by
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the difference between two customers on a specific objective feature of a product such
as the case of one consumer who prefers a car with more speed and the one who
prefers it with less speed.
What has been popular in the last few decades is the approach to quality called Total quality
management (TQM), which refers to a complete and continuous commitment to improve all
the quality elements and aspects. TQM would specifically require a quality-focused
mentality of management in order to deliver a product that is in good quality all around,
and gain the ultimate consumer's satisfaction and loyalty.
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Let us think about this approach to the quality of auto repair service. A good or bad quality
of service would not only mean how effective the technical repair job is, but also the quality
of a host of other attached elements to it such as the quality of the spare parts, the efficiency
and friendliness of the reception and management, price and billing process, ambiance of
the waiting area, time of waiting, and the additional services offered such as a corner for
kids, restrooms, coffee, and many other elements that would collectively constitute an
integrative measure of quality for consumers. The TQM approach utilizes three elements:
consumer, organization, and tools.
Since the concern in this book is the firm, we can say a few words on the organization and
tools. For the organization's side, the argument is that making the quality of a product a
major concern for the firm cannot be achieved without an organizational structure that fits
well for such a goal. It needs a quality-oriented culture and management, which is totally
geared toward this end. Lip service by upper managers about quality would not do anything
unless the whole organizational environment is willing and capable of carrying on the
mission of a superior quality. As for the tools, the holistic approach requires a commitment
to quality, which cannot be fulfilled by only talk or dreams. It would require the right
infrastructure to help achieve it. It would need the right technology, the proper tools,
methods, and procedures, the right technical and organizational system, the proper
training, and the right timing with the proper testing and inspection system.
Quality Control
The concept of quality control started historically to be associated with the standard
product inspection which has been routinely done for centuries to check the goodness of
large production such as the agricultural produce. The major purpose of inspection is, of
course, to eliminate any bad product from reaching the consumer. During the 1920s and
1930s, pioneers, such as W. Shewhart, H. F. Dodge, and H. G. Roming, developed the first
statistical methods such as the control chart and the acceptance sampling table, which were
considered the first quality control techniques. But, quality control did not come up on the
radar until after World War II when W. Edwards Deming went to Japan to teach his
techniques to control product quality. He was followed by J. M. Juran, who was the first to
connect quality control to the involvement of the upper management. The pioneering books
of “Total Quality Control” and “Quality is Free” were published by A. V. Feigenbaum and P.
Crosby in 1961 and 1979, respectively. It was not until 1988 that the US government
recognized the significance of quality by creating the national achievement awards of
Malcolm Baldrige National Quality Awards (MBNQA). Nowadays the electronic industry
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uses a method called Six Sigma to control product defects and reduce it to fewer than 3.4
defects per million units. On the international scene, increasing numbers of reputable firms
strive to get certified as ISO9000 firms to honor the international standards of product
quality. ISO stands for International Standardization Organization.
Statistical Methods to Control Quality
These are quantitative methods, which would make product inspections easier, faster, more
effective, and less expensive. The methods would involve making measurement,
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establishing and monitoring standards, and even taking corrective action within the
production process. They are all about choosing the right sample of product, inspecting it
against the pre-established standards, and determining if the process should continue or be
interrupted and corrected. The following are the major techniques.
Control Chart
A control chart is a geographical representation of data over time showing the possible
upper and lower limits the data can have. It is a reference point to be compared to any
entry of new data. If the average of a new sample falls within the limits, and if no erratic
behavior of the data is registered, and if the upper and lower limits do not fall far away
from the standard limit, the new data is deemed to be normal and under control. Otherwise
it would indicate the need for certain correction in order to fall again within the normal
limits. Although their technique is old, today's advances in computer statistics and graphics
made it much more efficient as a method of quality control.
Acceptance Sampling
This technique involves taking a random sample from a large population of products to
determine a degree of acceptance. The ultimate objective here is to strike a balance between
minimizing the cost of inspection (by avoiding a full inspection), and maximizing the
reliability of a relatively small random sample. Generally, the larger the sample, the higher
the reliability, and the higher the cost, and vice versa.
Statistical Process Control
This technique is to establish a certain tolerance level for variation in measurement that
would naturally occur in manufacturing processes. Suppose we are talking about a bottling
system that is supposed to deliver 16.9 oz. of soda in each bottle. Normally, there are many
reasons by which the amount of soda would not be exactly uniform in all bottles. Among
these reasons would be mechanical or electrical or operator related. The statistical process
can plot the variations and show if they fall within the established tolerance level. If a
certain number of bottles show that the soda level is being off of the tolerance level, the
system must look for the reason and correct it.
Budgeting
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Recall that operational control requires establishing a certain performance standard to
achieve the firm's objectives. That performance standard would usually serve as a building
block in budgeting. A budget is a preliminary detailed table of financial estimations for a
future period. It is designed to control the firm's activities toward achieving its business
goals, given that those goals are realistic, attainable, and drawn based on the best projection
of the future sales and revenues. The proper business budget can serve as:
a major tool to control business performance so that it conforms with the pre-
established organization standard;
a planning device to pinpoint the firm's objectives in sales, revenues, expenditures, and
profits, as well as in growth, costs, and employment;
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ble 17.1 Example of a Small Business Budget
a communication tool, which is uniquely and individually tailored to reflect the
organizational structure and confirm the responsibilities and accountabilities of each
and every section of the business.
Therefore, business budget can be looked at as a master plan for the integrated
performance of the firm, as it pursues its fundamental objectives. Table 17.1 shows a
simplistic example of a small business budget that is expecting an annual sales of $750,000.
17.4 Budgetary Variance and Flexible Budgeting
Since the typical budget is made based on estimations for the next period of time and
according to many business indicators, some or all of the budget items may turn out to be
either more or less than what has been put in the budget. The difference between the
estimated and actual figures is called the budgetary variance. It is defined as the positive or
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negative deviation of the actual budgetary item from the established amount in the budget.
Table 17.2 shows an example.
Generally speaking, any efficient management would try its best to stay as close as possible
to the budget, and avoid all sorts of exceeding the budgeted amounts. However, most likely,
some variations would occur, not necessarily to indicate misbudgeting, but they could very
well indicate some unforeseen changes that would require more funds. In the budgetary
variance shown in Table 17.2, some categories did not change so that the actual amounts
stayed equal to the budgeted amount, such as in interest, insurance, and rent. Some came
higher than the budgeted amounts, such as the administrative expenses, utilities, material,
equipment, repair and maintenance, and advertising. These items need to be looked at very
carefully to pinpoint the reason why they went up. Logically, most of them were supposed
to have been planned, so no surprises were expected. Other categories are less than what
was budgeted, such as
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payroll and payroll taxes, and vehicles. Although this is a pleasant change, it would still
need to be studied and explained. Overall, the actual budget came at $9910 more than the
planned budget. That is an overspending by 1.6%. Although it is not terribly bad, it would
still need some attention and corrective action so that the next budget would come either as
planned or less, but should not be more.
Table 17.2 Example of a Small Business Budgetary Variance
One of the methods to minimize the potential variance is to draw the budget based on two
or three probable volumes of sales. In this case, the actual numbers would most likely be
very close to one of the two or three probabilities which grant the budget a reasonable
degree of flexibility. Another method is to devise a rolling budget by which the period of 12
months would continue as months are replaced as they pass. For example, when January of
the current year is passed, January of the next year gets in the budget. In this case, a budget
would continue to cover 12 months all the time.
17.5 Types of Budgets
The following are the most essential budgets in business.
Operating Budget
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It is also called sales budget for its emphasis on estimating the expected volume of sales and
the revenues out of them. It also includes detailed estimations of material, labor, and all
other expenses so as to give an expected picture of the profits to be made in the next period.
Since all estimations can flow from the sales and revenue forecasts, we can say that this
budget would represent the core of all budgets. For example, if the budget team expects the
sales next year to increase by 30% over the current year, they must prepare the entire firm
and all its capacities to meet this expectation and urge all departments to draw up their own
specialized budgets accordingly. Production has to increase, which requires more material,
labor, hours, energy, and whatever else it may need. Inventory capacity has to increase,
marketing and distribution channels
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have to coordinate their efforts, equipment and transportation have to respond, and so on.
The opposite chain effects would occur if the sales are predicted to be less than the current
year. All the responses from all departments would be to work out a budget that would
accommodate the expected reduction in sales and revenues and to shrink their available
funds.
Cash Flow Budget
This is the budget that focuses on the two streams of cash: (1) all cash which comes in on
inflows (received) and (2) all cash which goes out or outflows (paid). Being a budget for the
next period would depend on the projected estimations on both the inflows and outflows. It
would also indicate if the firm is expected to be short of cash so that some arrangements can
be taken to borrow the needed funds or to pursue more investors. To secure a safe and
successful cash plan, the budget planners must prepare the following two major budgets
that the firm would need to pay its vital obligations.
1. Cash for the normal operation of business. This would satisfy the daily and weekly cash
requirements such as in the case of securing certain amount for “cash on hand” that
would pay for the usual day-to-day needs.
2. Cash for the maintenance obligations. This part would satisfy the long term expenses
such as rent, payroll, insurance, utilities, services, and taxes. Usually these kinds of
expenses are due monthly, they could be quarterly in some cases such as the insurance
premium, and they could also be annual such as the taxes.
Table 17.3 shows an example of what the cash flow budget may contain.
The following is an example of estimating how much the firm expects to collect from sales
on credit during the first 6 months of the year. Suppose that the firm predicts its total sales
in the period of January to June to be
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and suppose that in the light of past experience, the firm would expect that only 40% of its
sales are going to be by direct cash, while the rest (60%) would be on credit, and can be
collected according to the following fashion.
Table 17.4 shows how much cash the company can collect during the first 6 months.
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Table 17.3 Example of a Cash Flow Budget
Table 17.4 Collectible Cash for 6 Months
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17.6 Considerations for Budgetary Control
Aside from the significance of preparing well-written budgets, the following considerations
might be helpful, especially for the small business budgetary control.
• To increase the firm's performance efficiency, efforts should be concentrated on the
extreme discrepancies from the standard expectations. Energy, time, and money should
not be wasted on the ordinary problems. Budgetary control, therefore, has to be cost
effective. This is to say that you should not spend on tightening the budget more than
the tightening can save for you.
• All budgets have to be timely in order to pinpoint the problems and take corrective
action when and where it is needed.
• Longer term accounts receivable or slow accounts may prove to be worthwhile to be
examined and explored for the possibilities to improve on them and keep their
customers. Experience showed that slow accounts may cost the company much more
than bad debt that would eventually be written off.
• It would be wise to have the company's records audited annually to ensure proper
performance not only budget wise but also in terms of internal and operational
performance. Financial auditing is usually done by an independent certified public
accountant (CPA) who would be hired from outside the firm. A financial audit is a
professional review of all the financial records to verify their validity, discover
discrepancies, and suggest improvements. Internal and operational audits are often
done by an insider as an appraisal of the firm's functional areas of operation and its
organizational structure.
• Last but not least, it would also be wise to pay attention to feedback as an element of
control whether it is observational, oral, or written in order to establish proper and
healthy channels of evaluative communication.
Taxes
Besides taxes on individuals, business taxes are the second major source of federal and state
revenues. As much as they are essential for government, they basically mean less money
available for businesses and ultimately fewer opportunities for the firm to improve and
grow. Therefore, taxation is a vital concern for business planning, for it would significantly
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affect the firm's performance and success, growth, and survival. The following are the areas
where taxes become one of the firm's big concerns.
Firms must pay business taxes to federal and state government.
Firms must act as a tax collector for government by organizing and executing the task
of payroll withholdings, which is a costly process for the firm.
Business owners must pay their own income tax which could create a double taxation
unless this issue is resolved by changing the form of business ownership.
Business owners must pay additional taxes such as taxes on income earned on
investments outside their firm. Also, they must pay taxes on property transfers in cases
of inheriting the ownership to their heirs.
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All of these tax-related issues makes it very important for the firm to know what taxes are to
be paid, how to manage them, and if there are any ways to minimize them within the limits
of the law.
17.6 Types of Taxes
Firm's Own Business Taxes
The major part of this category is the taxes imposed on business earnings by federal
government as well as by state and local governments. It would also include excise taxes
imposed by the federal and state governments such as on automobiles, trademarks, patents,
inventories, licenses, and permits.
Sales Taxes
These taxes are imposed on consumers for purchasing goods. However, the selling
businesses are required to collect and remit them to the state and local governments. The
goods subject to sales tax, and tax rates vary from state to state. Table 17.5 shows the
current rates of sales tax throughout the United States.
Employment-Related Taxes
Employee's Income Tax
Firms are obligated to withhold certain amounts from the earnings of its employees for
their income taxes for a period of 1 year. At the end of the year (or by January 31 of the year
following the tax year), firms would provide each employee with a statement containing all
the amounts withheld by the payroll office. This statement is called the W-2 form which
employees use to complete their tax filing. Upon completing a tax return form, employees or
their tax preparers would figure out if their due taxes are larger or smaller than the amount
which has been withheld. If it turns out that the taxes due is larger, the employees must
include the difference with their tax forms and send them to the IRS. If the taxes are smaller
than the amount withheld, the difference would be a refund that the IRS would send back to
the taxpayer.
Table 17.5 Current Rates of Sales Tax in the United States
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The amount that is withheld by employers would depend on the employee's income,
number of exemptions, length of pay period, and marital status. The number of exemptions
would be claimed by each employee at the time of employment when he/she files a
statement called the Employee's Withholding Allowance Certificate or W4. The exemptions
figure is determined based on the number of dependents that each employee claims.
Table 17.6 lists the major federal tax forms for a small business.
Table 17.6 Major Federal Tax Forms for a Small Business
Social Security and Medicare Taxes
According to the Federal Insurance Contributions Act (FICA), an employer has to collect
6.25% of each employee's total earnings for social security and another 1.45% for medicare.
The employer must also match the total of 7.65% so that the amount that would be sent to
the IRS would total 15.3% of each employee's earnings. The firm would send those
contributions for all employees each quarter when it files the Federal Form #941. For those
small business owners who are self-employed, they have to contribute the entire 15.3% as
they match it for themselves as both an employer and employee.
Unemployment Tax
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This tax is paid by businesses to the federal government as an insurance for those who
become unemployed. It is 6.2% per $7,000 in wages. The states also decide on another part
of this tax that would be used to pay workers when they get laid off. Business firms would
pay this tax by filing form #940 or the Employer's Annual Federal Unemployment Tax
Return (FUTA).
Worker's Compensation
This is an insurance that has to be offered by employers for employees against job-related
death or injuries.
Owner's Taxes
In addition to paying income taxes on their earnings, owners would pay taxes on any cash
withdrawn from the business. Owners also pay taxes on the selling price if they sell their
business. They most likely pay double taxes according to the 1986 Tax Reform Act which
subjects most sales of assets to double taxation.
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Table 17.7 Taxes paid under C-Corporation Versus S- Corporation
17.7 Taxes and Forms of Business Ownership
As was discussed earlier in the chapter on business ownership, the form of business
ownership makes a significant difference in the amount of taxes paid. The issue of double
taxation has been resolved with the forms of business which are called pass-through forms.
They are business entities which do not pay business taxes separately but they pass income
through to their individual owners. Those individuals would then be paying their own
income taxes. The tax gain offered by this adjustment to business ownership would come
from two sides: (1) by eliminating the double taxation, and (2) being subject to an individual
tax rate which is normally lower than the corporate rate.
Partnerships and limited liability companies (LLC) still have to file form 1065 with the IRS
just to report the volume of income that was passed through to owners. Owners would also
receive a copy of K-1 schedule of form 1065 as a statement of their income just like what the
W-2 does.
Similar to partnerships and LLCs, s-corporation is also considered a pass-through business
entity, in comparison to the traditional c-corporation which has to file Form 1120-US
Corporate Income Tax Return separately and independent from its owners, who file for
their own individual tax return. Table 17.7 calculates the difference in taxes for a $75,000
taxable income earned in a traditional form of business ownership such as a c-corporation
and tax improved form of business ownership such as s-corporation.
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This example shows that the traditional form of business such as a c-corporation would pay
$37,875 taxes on a $75,000 earning. That is a little more than half of its earnings, while the
tax-improved form, such as the s-corporation, would pay only $18,750, which is a quarter of
the earnings.
17.8 Considerations and Strategies
• Taxes, as an amount to be paid, and as a management process, can be very costly to a
small business. It is, therefore, essential to try to minimize such a cost as
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much as possible. It would be crucial here for a small business owner–manager to fully
understand the difference between tax avoidance and tax evasion. Tax avoidance is a
legal act to reduce the taxes due using lawful means. It is to smartly take advantage of
all the allowances and opportunities offered by the tax system. It is basically using the
knowledge and skills of the tax savvy experts to utilize all the possibilities to minimize
what the firm pays as taxes. It would require honesty and full willingness to disclose all
material and methods used in calculating the taxes due. On the other hand, tax evasion
is an unlawful act. It would be considered a crime subject to prosecution and
punishment for it is basically escaping the responsibility to pay taxes by
misrepresenting the facts, concealing the evidence, cheating, or submitting false
reports. Tax evasion can be deadly for a small business and it would cost much more
than any benefit which might be squeezed out of trying it.
• Firms can increase their profits by reducing as much as possible their taxable income,
hence, their taxes. This can be done by being very familiar with the tax system and its
rules. Classifying all the firm's expenditures and knowing which of them is tax
deductible is the key. According to the IRS, any expenses that are essential to the
operation of business would qualify to be tax deductible, and therefore, the firm would
be legally entitled to use them in reducing their taxable income and minimizing their
tax bill, which ultimately increases their profits. The following are examples of the tax-
deductible expenses.
Production expenses such as material, labor, supplies, and transportation.
Salaries and compensation related directly to production.
Value of assets with a life span of 1 year or less, and an annual portion of the value of
any asset with a life span of more than 1 year. This portion is called the depreciation
which is formally defined as the annual cost of the use of an asset that lasts more than 1
year.
The estimated cost of using a home office for business.
Cost of using vehicles, which are specifically used for the business.
Cost of bad debt as long as it can be shown that the normal efforts of collecting those
accounts have all failed.
Interests on loans obtained directly to finance the business.
Travel expenses as long as they are specifically business related.
Value of taxes paid to the state and local governments, and those paid to governments
abroad, as long as they are directly related to business operation.
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Needless to say that a professional knowledge and experience in taxes is needed in order to
be sure that any of the categories above is tax deductible and accepted by the IRS.
• According to section 179-Deduction, a business which has just started is allowed to write
off some of the first year business expenses, such as the cost of equipment necessary to
start the business.
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• To be effective in managing taxes and other accounting and bookkeeping functions, it
would be wise to separate business bank accounts, loans, and credit from those which
are personal. This is particularly important for home businesses which may witness the
most mix up with personal finances and other affairs.
• To file tax returns, a business would need to have its own 9-digit identification number
called EIN or Employer Identification Number which can be obtained from the IRS. This
number is also necessary for other financial needs such as opening bank accounts,
applying for loans, hiring, starting a retirement plan, and more. While this number is
issued at the federal level, states may assign their own tax identification numbers called
BRN or Business Registration Number that is necessary to set up the unemployment
insurance and other tax purposes. Also, for remitting sales tax to the state, businesses
need to have another identification number called Resale Number.
• Last but not least, it is wisely significant for the small business to solicit the help of tax
professionals in order to make sure everything is done properly and efficiently. It is not
only necessary to avoid costly mistakes but also necessary to explore and utilize all the
proper and legal ways and method to avoid paying high tax bills.
17.10 Summary
Chapter 17 addressed operations, budgeting, and taxes. It started by defining operations or
operating system, and recognizing the importance of operations management. It then
addressed the essential question on whether it is better off for a firm to make or to buy
what it needs of materials for its own production. Product quality and quality control were
next to be discussed. A definition and brief history of quality control were provided, as well
as a brief description of each of the three major statistical techniques of quality control,
which are the control chart, acceptance sampling, and the statistical process control.
The next section in this chapter was budgeting. What is a budget, budgeting, and what
purpose they serve was the first topic to discuss. It was followed by the budgetary variance
and flexible budgeting. Type of budgets included the operating budget and cash flow
budget, both with detailed examples, and the section ended with providing important
considerations for the budgeting control in a small business. The last section in this chapter
was taxes. The topics addressed here were Why are taxes a big concern for the firm, and
what are they? The chapter listed and briefly described four common taxes which any
business firm may deal with—business tax, sales tax, employment-related taxes, and
business owner's taxes. For the employment-related taxes, the chapter listed employees'
income tax, Social Security and Medicare tax, unemployment tax, and workers'
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compensation tax. The following topic was how changing the form of business ownership
impacts how much tax a business firm pays. Last were some recommendations and
strategies for any firm to minimize the amount of taxes it pays while staying within the legal
limits and honoring the tax duties.
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