As we enter the New Year, businesses continue to be hampered by a near-unprecedented lack of supplies and materials. Besides items that have received widespread national attention like toilet paper and computer chips for cars, the slowdown in the supply chain is affecting everything from electronic devices to couches to sneakers—and plenty in between.
To complicate matters for businesses operating in a competitive environment, the supply chain disruption is being compounded by a tight labor market, especially for drivers and other delivery people. It all adds up to long delays, reduced profits, and frustration for everyone involved.
What can your small business do? Consider these practical suggestions.
Communicate with empathy. The worst thing you can do is clam up when customers start questioning orders or complaining about backlogs. Be upfront about the problems you’re facing.
Underpromise and overdeliver. It’s better to lower expectations than it is to set a high bar that can’t be reached. Don’t make promises you can’t keep. Customers will be pleasantly surprised if you exceed your initial estimates.
Be creative about pricing. If your production costs are shooting through the roof, it should be reflected in your pricing structure. Of course, you can’t pass on the entire extra cost to customers, but factor increases into the equation.
Rethink lead times. If you can afford to do it, order supplies for several months ahead of time. Stock up on essentials for your business when you can.
Find new partners. Your business may be forced to turn to different suppliers or vendors. If you can fund quality materials, expand your business contacts and regular resources.
Think outside the box. Try a different approach that may mitigate the shortages. For example, you might find a suitable and available replacement for a product component. Don’t just accept the status quo.
Finally, use a healthy dose of common sense to navigate through this crisis. Your business advisors can provide assistance.
A new year. New resolutions. Here are five ideas to consider to help improve your financial health in the upcoming year.
Save more for retirement. Plan for the future by feathering your retirement nest egg. For instance, you can contribute up to $20,500 to a 401(k) account in 2022, plus another $6,500 if you’re age 50 or older. Plus, your company may provide matching contributions up to a stated percentage of compensation. And you can supplement this account with contributions to IRAs and/or other qualified plans.
Update your estate plan. Now is a good time to review your will and make any necessary adjustments. For example, your will may need to be updated due to births, deaths, marriages or divorces in the family or other changes in your personal circumstances. Also review trust documents, powers of attorney (POAs) and healthcare directives or create new ones to facilitate your estate plan.
Rebalance your portfolio. Due to the volatility of equity markets, it’s easy for a portfolio to lose balance against your investment objectives. To bring things back to where you want, review your investments periodically and reallocate funds to reflect your main objectives, risk tolerance, and other personal preferences. This will put you in a better position to handle the ups and downs of the markets.
Review, consolidate, and lower debt levels. One sure-fire method for improving your financial health is to spend less and save more. Start by chipping away at any existing debts. This may mean giving up some luxuries, but it’s generally well worth it in the long run. Pay extra attention to debts with high interest charges like credit card debt. If possible, consider consolidating several of these debts into one or two obligations if you can lower your interest rate in the process.
Contingency planning. No one can foresee every twist and turn that 2022 will take. To avoid potential financial hardship, look to improve your emergency fund by setting aside enough funds to pay for six months or more of your expenses in case of events like a job loss or a severe health issue.
Tax return filing season usually gets a little crazy, but this year will be more turbulent than most. Due to new tax legislation and guidance from the IRS, you will have to cope with a wide variety of tax changes, some of which relate to the pandemic. Here are several tips for making some order out of the chaos.
Unemployment benefits are taxable once again in 2021. In 2020, the first $10,200 of benefits received by taxpayers with an adjusted gross income (AGI) of less than $150,000 were exempt from tax. Unfortunately the tax-free nature of unemployment benefits in 2020 was made long after many of you filed your tax return. If this pertains to you, and you haven’t received a refund from a tax overpayment yet, you might need to file an amended 2020 tax return.
Small business loans
To kick start the economy during the pandemic, Congress created a loan program called the Paycheck Protection Program (PPP). Similarly, your small business might have received an Economic Injury Disaster Loan (EIDL) or grant. These loans may be forgiven in 2021 without any adverse tax consequences if certain conditions were met. So gather your records—including what you received and when—for optimal tax protection.
Economic impact payments
Congress handed out three rounds of Economic Impact Payments to individuals in 2020 and 2021. The third payment provided a maximum of $1,400 per person, including dependents, subject to a phaseout. For single filers, the phaseout begins at $75,000 of AGI; $150,000 for joint filers. So review your records and be very clear what payments you received in 2021. Only then can you use your 2021 tax return to ensure you receive credit for your full stimulus payments.
Child tax credit
Many families will benefit from an enhanced Child Tax Credit (CTC) on their 2021 tax return. The new rules provide a credit of up to $3,000 per qualifying child ages 6 through 17 ($3,600 per qualifying child under age six), subject to a phaseout beginning at $75,000 of AGI for single filers and $150,000 for joint filers. What will complicate this year’s tax filing are any advance payments you received from the IRS during the second half of 2021. It is important that you accurately identify all the payments you received. Only then can correct adjustments be made on your tax return to ensure you receive the full Child Tax Credit amount.
Dependent care credit
The available dependent care credit for qualified expenses incurred in 2021 is much higher than 2020, with a corresponding increase in phaseout levels. The maximum credit for households with an AGI up to $125,000 is $4,000 for one under-age-13 child and $8,000 for two or more children. The credit is gradually reduced, then disappears completely if your AGI exceeds $440,000.
Due to the ongoing debate of proposed legislation in Washington, D.C., this year’s tax filing season will seem a bit chaotic. With proper preparation, though, your situation can be orderly…but only if you prepare!