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IRS is Handing Out Certificates of Value!

Dec 27, 2018
Article #395
Author: Mel Jones

Now that I have your attention, the headline is very true and accurate.  Every year a tax return is demanded by the IRS and in return, the U.S. government returns a certificate of value, more often referred to a good tax return. 

If one reports all the business's income and expenses, then clearly the business gets the highest certificate of value and buyers pay well for these types of businesses. 

Here are the items one should insure they have when trying to get the highest value:

1. Report 100% of revenues and have good back-up for this in the way of bank and merchant statements plus a point of sales system that ties to the bank statements. 

2. Report 100% of the expenses with proof of purchases. Don't bury personal expenses inside the cost of sales, i.e don't buy your personal groceries through the business. It's fine to run auto, health insurance, travel, etc through the business, but make sure it is well documented. 

3. Keep the books clean, running profit and loss and balance sheets each month. Get a professional to do that for you.  Review it constantly making sure no cost element gets out of control.  Make sure the business is running at least at industry standard on food and labor costs. 

4. Do inventories at least once a month if not once a week. I have written article on how to apply the 80/20 rule to inventory counts. If the business has a bar with hard liquor, it ought to be counted every night.  If a process is set in place, an inventory takes 30 minutes at a bar. Perhaps in the kitchen one only counts the high price items. But always do inventories.  There is no other way to insure the bookkeeping is accurate unless they are done all the time. 

5. If owners are taking W-2 wages and are an LLC or corporation, make sure the accountant is reporting them as officer or owner salaries on the tax returns. 

The bottom-line one can look at the IRS as a government organization giving businesses certificates.of value. 



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