The Power of Inc.
Compass Group Edition

January 2006


In this issue:

  • 2006 Standard Mileage Rates
  • What Causes New Business Failures?
  • A Few Useful Tips to Avoid an IRS Audit

2006 Standard Mileage Rates

On January 1, 2006, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) are:

  • 44.5 cents per mile for business miles driven;
  • 18 cents per mile driven for medical or moving purposes; and
  • 14 cents per mile driven in service of charitable organizations, other than activities related to Hurricane Katrina relief.

What Can Cause Your Business to Fail?

Businesses can fail for a number of different reasons, but there are some common factors that attribute to a large percentage of these failures. According to the Small Business Association, over 50% of small businesses fail in the first year and 95% fail within the first five years. How can you avoid making the same common mistakes that other business owners make when running your business?

The following list includes some of the most common factors that can contribute to a business failure:
         ·    Inadequate planning
         ·    Lack of experience
         ·    Failure to properly monitor financial statements
         ·    Not borrowing money properly
         ·    Poor credit arrangements
         ·    Failure to document important business decisions
         ·    Personal use of business funds
         ·    Unexpected growth

If you own a corporate structure, you also need to take into account that:
         ·      Following corporate formalities is required
         ·     Your company is no longer a sole proprietorship, therefore it can not be treated as such

Although risky, running your own business can be exciting and extremely rewarding if you are willing to put in the hard work and dedication it takes to succeed. You'll enjoy earnings and growth potential that is far greater when you own a business, you'll be your own boss, and everyday will bring a new challenge.

A Few Useful Tips to Avoid an IRS Audit

Obviously no one wants to be audited by the IRS. Unfortunately there is no way to guarantee that you will not be paid an unwelcome visit. There are, however, certain factors that may cause the IRS to look your way.

While beneficial for any company, if your business falls into one of the following categories, it will be especially important for you to completely and accurately fill out your tax return using exact numbers (do not round off). You may also want to attach explanations for any items you think may be questionable by the IRS.

Your company may be at high risk for an audit if:
    1.  You are self employed. Make sure your tax return is filled out correctly. You'll also want to keep records of everything in case you need to show proof of your operation and business expenses. 

    2.  You file a corporate return and you report income of over $250,000.

    3.  You claim a home office deduction.

    4.  You are a sole proprietor and you are in a business that deals with large amounts of cash,      requires a lot of traveling, is services oriented or recreational in nature, or uses subcontractors instead of employees.

If you are faced with an audit, your best mode of defense is documentation to prove all of your business transactions and expenses. Yet, keeping track of receipts and recording important business decisions and transactions can be a difficult task for many busy small business owners.

That's where the Tax Reduction Diary can help. This is an easy to use audit defense system that will help maximize your tax write-offs and audit proof your tax return. It's been proven to work miracles on IRS audits by withstanding almost every audit it's gone up against. Even the IRS is amazed!

Learn More...

Order the Tax Reduction Diary for only $150 and Receive Free Shipping until February 17! 

Employee Theft

Employee theft is a big problem for any company, no matter what the size. But for smaller companies, theft can have an even more predominant impact because they can't withstand the losses as well as a large corporations.

Studies by the Department of Commerce and American Management Association estimate that employees steal over a billion dollars a week from their employers. So what's the trick to keeping thieves from working at your business?

  1. Don't hire bad employees. Sounds simple enough, yet many small companies don't have adequate new hire screening practices in place. Don't just ask for references, actually check them. Find out if they are trustworthy before you hire them.
  2. Educate workers on the cost of theft to your business and show them how it can impact their paychecks.
  3. Post an ethical conduct policy outlining what constitutes bad behavior. Employees may not even realize that something they are doing is considered employee theft.
  4. Make it difficult for your employees to steal from you. If the opportunity is there, the employee will take it, even if they are not experiencing financial hardship or ill will towards their employer. Take away the opportunity, and you take away the crime.
  5. Annually audit your company's books. This will deter fraudulent behavior and uncover any discrepancies.
  6. Require counter-signatures on company checks or product returns/exchanges.
  7. Make time to regularly review your accounts payable. Many small business owners neglect this simple, yet effective review. This can significantly lesson the temptation for your employees to steal and can uncover small cases before they turn into bigger ones.
  8. Do not allow your company books to leave your office, which gives your employees an easy way to doctor your books.

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