A few years ago I had a business partner who was a tax preparer as well as an Enrolled Agent. He knew his taxes inside and out and advised our clients by telling them, “You don’t do your year-end tax planning at the end of the year; you start at the beginning of a NEW year.”
It seems that many of our readers follow this same agenda and make year-end planning an ongoing event.
As 2021 rolls into 2022, taxes seemed to be the number one focus followed by inventory management, and just to be clear, we are not giving or offering tax advice, but merely offering suggestions based on what others are doing.
The reasoning behind inventory control is because some states (11 currently) tax you on “unsold inventory,” so it behooves you to get it as low as possible. This is just one of the reasons that year end specials for the holidays and New Year’s brings a double advantage.
Drake Fischer with Durity Distro in Idaho starts on inventory management during the start of the last quarter of the year:
“I start thinking about Black Friday in September or October as we normally double stock the store on all products that have been selling heavily, plus we negotiate discounts and look for the newest and hottest products on the market for Halloween, Black Friday, Thanksgiving, and Christmas. We have more opportunities to create a buzz and bring in new business.”
This specific goal brings numerous benefits: more business for the holidays, getting a buzz for the new year, and hopefully liquidating inventory to start fresh in January.
It’s a precarious balancing act as two of our readers, Geoffrey Yalenezian with Boston Smoke, and Robert Cartagine with The Chill Room in Lake Worth, FL, shared.
Yaleenezian doesn’t want to annoy his customers, so stays highly stocked in tobacco specific products, but is less concerned about “gift type” products as he described: “accessories, batteries, bongs and such are usually wiped out by Christmas Eve.”
Cartagine gets ready for inventory counting on January 1 and to keep things easier, he tries to blow out much of his inventory before the year turns.
There is no “right” way, just what works for you. Try different approaches and stay consistent if possible.
Ginny Saville with The Botany Bay in Lexington, Kentucky takes a different tack and tries to get ahead of the calendar even more: “We do our yearly physical inventory right after Christmas so we really don’t do any buying at all from Thanksgiving to New Years. We start selling down and get that count as low as possible and have lots of special pricing and sales over the holidays.”
She is a huge proponent of getting “competent tax advice,” and keeping someone with those skills on call. “The IRS offers several different ways to keep inventory, and as long as you stay consistent the IRS shouldn’t be a problem,” she reminds us.
Many entrepreneurs start a business based on passion, and they may have different levels of business experience behind them. To many, taxes are an afterthought and taxes, and poor tax recording, have brought down many businesses and individuals to their knees.
Just look at Al Capone, the notorious gangster. He ran crime syndicates for years, but finally got busted for tax evasion. Even a century later that offers a solid lesson.
Consistency is the key here, not just one shot planning.
Deanna Marshall with two Freedom Vape shops in Montana echoes this mindset and keeps a bookkeeper and accountant on staff monthly and stays “balanced” all year by monitoring income, expenses—and tax issues.
She and her husband, Ron, are proponents of activism as well, and Ron last year was elected to the House of Representatives and is very involved with the rights of smoke shops, vape shops, and the public’s right to choose.
As you read this, time may be running out, so there is no time to procrastinate, and even better, get a jump on 2022.
If you do not have a tax person on call, or even on staff, now is the best time to get them! Before “tax season” starts, which is typically Feb 1 until D-Day on April 15. Once February rolls around they are focused on that one thing.
If you are not up to speed on inventory control or cash flow management, again, NOW is the time to get someone on your team.
Many business owners focus on only one thing: sales, which is short sighted. Income is good, but lowering expenses—and tax liabilities—do the same thing, but are not quite as “sexy” as boasting large revenue numbers.
Have a great 2022, make a lot of money, and be smart business owners!