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November 2015
As we approach the end of the year, both business owners and cost center managers face an age-old question: to spend or not to spend? More specifically, businesses are now deciding how and where to focus end-of-year spending. Many of those decisions will be influenced by three factors:
- Business owners may want to lower annual profit to reduce this year’s tax bill.
- Cost center managers may want to spend remaining budget in a way that’s consistent with business goals.
- Both owners and managers may want to reward and motivate employees.
Looking at each of these factors can help owners and managers determine the year-end spending approach that’s right for them.
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Spreading the Word:
The National Small Business Association reported that 51% of businesses surveyed planned to employ new advertising and marketing strategies in 2015.
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Tax Incentives
For business owners, the decision about whether to increase year-end spending may hinge on their growth and expansion plans for the coming year. Given recent history, the majority of businesses should be fairly confident about their prospects. A National Small Business Association 2014 year-end report found that more small business owners anticipated economic expansion than at any point in the last seven years, with 72% expecting new or continued growth opportunities for their businesses.
Following a successful 2015, businesses may consider lowering reportable annual profit through deductible expenses, which may help reduce next year’s tax bill. That’s why they should be aware of a specific section of the IRS tax code called Section 179. As part of the recent economic stimulus legislation, Section 179 allows businesses to deduct the full purchase price of qualifying equipment purchased during the tax year.
What type of spending should a business identify when looking to maximize its Section 179 tax deduction?* In its year-end tax tips, the U.S. Small Business Administration recommends reviewing inventory and equipment, and looking to replace aging items, such as computers, electronics, and furniture.
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Spreading the Wealth:
The 2015 limit for a single Section 179 tax deduction is $25,000, and the maximum total that can be deducted is $500,000, so small businesses have the most to gain. Check the IRS website for details.
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Cost Center Budget
For cost center managers with remaining budget, the end of the year often means use it or lose it. Managers, therefore, are faced with a delicate balancing act between spending down operating budgets so that future appropriations aren’t reduced, while ensuring that their spending has a tangible business benefit to maximize the use of those remaining dollars.
In its year-end business checklist, AllBusiness.com recommends keeping spending focused on upgrading business technology that employees use on a daily basis. This includes operating equipment as well as office electronics or appliances that constitute a business’s infrastructure.
Innovatix members have year-round access to significantly discounted pricing on these items and more through our contracted supplier, Best Buy for Business. Our contract with Best Buy offers Innovatix members access to savings that range from 2%–30% on more than 100,000 business grade products (including Best Buy’s in-store selection), many of which qualify for Section 179 deductions or support business goals for cost center managers.
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Spreading the Cheer:
According to a Bank of America report, more than half of small business owners planned to offer their employees holiday bonuses, gifts, or celebrations last year.
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Rewarding Employees
As discussed in this blog last month, recognizing employees is a strong motivational tool. Businesses have a number of options besides bonuses and holiday parties with which to reward their workers. Using an Innovatix contracted supplier that offers holiday gifts, such as Best Buy for Business, is a great way to get the most out of your year-end spending while building employee loyalty. Businesses that participate in Innovatix’s employee discount program can also take the opportunity to remind employees of the year-round discounts and savings they can receive on personal purchases from over 20 national brands (all at no additional cost to the business).
The way in which your business ultimately decides to manage its year-end spending will depend on your priorities and circumstances. But smart spending before the end of the year can lead to savings and success down the road.
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Innovatix Office Electronics, Appliances, and Computing Vendor
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*Please note that Innovatix cannot provide specific tax advice, and this blog is for educational purposes only. Businesses seeking details about Section 179 and other tax deductions should consult a tax professional.
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