FAQ

Every taxpayer should collate all income tax related documents for filing returns. So, here is a gist of the documents required:

• Abstract of bank statements
• Proof of investments and Form 16 (Salary certificate issued by the employer)
• Form 16A / TDS certificate
• Record of tax payment made like advance tax or self assessment tax
• Proof of investments in property
• Documents on purchase and sale of investments/assets
• Collect the TDS certificate and
• Collect home loan certificate

Knowing how many of your expenses you can deduct will help you plan for filing taxes during the year. More often than not, you can deduct the money that your business directly spends on services, rental space, equipment, and other items. As long as there is no gray area, such as in the case of home businesses, an expense will usually qualify as deductible.

If you have a car that use for business purposes, you may be able to deduct part of your payment, insurance, and maintenance costs at tax time. This is especially true if you use the car only for those purposes.

You may also be able to write off a portion of your household bills, such as Internet and phone. Also on the list could be your home computer, printer, and fax machine, depending on how much you use these items to run your home business.

This refers to the level of sales required to fully cover general business overhead, and it is the point where you start to move into profit. Depending on your business, you might break this down to a monthly, weekly or daily breakeven point.

It is not as simple as it might seem, since some costs vary with sales volume, whereas others are fixed. Your accountant will be able to analyse your cost structure and let you know the level of sales required to break even. Depending on your business, if your average transaction value is predictable, you will even be able to break this down further into units required to be sold. If you don’t know these numbers, be sure to ask your accountant to do some work on it for you.

You need to increase sales, do you know where to start? What are the key drivers of your revenue? In many businesses, revenue can be broken down to this formula:

 Number of Customers  x  Transaction Frequency  x  Average Transaction Value = Revenue

It may or may not be this same formula for your particular business. I will advise you on where you should focus. Your might have to concentrate on one or more of the following areas:

• Retaining existing customers
• Generating new leads or enquiries
• Converting leads to new customers (or new jobs)
• Getting existing customers to buy from you more frequently
• Analysing your pricing strategy
• Looking at ways to sell more on every transaction

There are a variety of strategies to look at. For the benefit of this discussion, let’s talk about pricing. In my experience, too many businesses have little knowledge about the impact of pricing on their sales. For example, many businesses offer discounts to people who don’t ask for them, or make assumptions about what will happen if they increase prices, which leaves money on the table.

Ask your accountant this: At my level of gross profit margin, if I increase my prices by 20 percent, how many of my customers could I afford to lose before I am any worse off? The number might surprise you — and help you with your pricing strategy.

I will take you through an analysis of your financial performance each year, pointing out key ratios such as gross profit percentage, days locked up in receivables and inventory, and others.

We can then have a quality discussion about what action you might take to fix your weaknesses and, more importantly, build on your strengths.