It's time for a midyear checkup

The end of June and beginning of July is an important time for savvy small-business owners, who will be assessing their companies' finances and thinking about strategies for the second half of 2008. A midyear checkup is even more important than usual this year, given the uncertainty of the business climate.

Accountants and other tax professionals say business owners should consider steps to lower their energy bills, and not just for this year. And the government has made some recent changes to the tax laws that owners should take into consideration.

The newest change takes place July 1, when the IRS increases the mileage deduction for vehicles used for business purposes to 58.5 cents from 50.5 cents. The increase reflects the spike in gasoline prices, now averaging more than $4 a gallon nationally and likely to stay quite high for the rest of the year. The new rate applies only for the second half of the year.

And the economic stimulus package that has given millions of taxpayers rebate checks also contained two provisions that benefit small businesses. The first is a near-doubling to $250,000 of what's known as the Section 179 deduction. The second is a bonus depreciation allowance under which businesses of any size can depreciate 50 percent of the cost of equipment bought and put in service this year.

However, as Jeff Berdahl, a certified public accountant with Berdahl & Co. in Center Valley, Pa., noted, "a year or two ago, top line revenue was pretty good, but now a lot of businesses are flat, so you need to look at all areas" in your company.

For example, you might be more concerned about receivables now than a year ago. If your customers are behind in payments, your accountant can suggest ways to improve your cash flow. Berdahl also suggested trying to restructure your company's debt while interest rates are relatively low.

Soaring energy costs also should be more of a consideration than in the past.

Leon Dutkiewicz, a certified public accountant with Margolis & Co. in Bala Cynwyd, Pa., recommends business owners look at their heating and cooling systems and be sure they're running efficiently. He also suggests owners think about replacing older, wasteful units with ones that use less energy. "A little bit more money up front could save you big dollars over the long term," he said.

If you decide you need to switch from an SUV to a smaller, cheaper vehicle, don't be quick just to trade it in, said Mark Toolan, a certified public accountant in Exton, Pa. With demand for SUVs dwindling, you might end up selling it at a loss, something that can help lower your taxes. "You won't be able to take advantage of that loss if you trade it in," Toolan said.

There are also some issues to consider at midyear that come up in any economy, good or bad. If you haven't set up a retirement plan for your employees, or want to change the type of plan you have, the sooner you do it, the better. Keep in mind that under federal tax laws, a popular retirement plan for small businesses, the SIMPLE, or Savings Incentive Match Plan for Employees, must be set up by Oct. 1.