How well do you know your customers?

How well do you know your customers? Which ones are the most profitable? Which ones take most of your time? It’s worth taking the time to find out. If your business is like most, the 80-20 rule applies. That is, 80% of your profits come from 20% of your customers.

If you can identify that top 20%, you can work hard to make sure this group remains satisfied customers. Sometimes all it takes is an appreciative phone call or a little special attention. Also, by understanding what makes this group profitable, you can work to bring other customers into that category.

Keep in mind that it’s not always profits alone that make a good customer. Other factors, such as frequency of orders, reliability of the business, speed of payment, and joy to deal with are important too. Ask your accounting staff and your sales staff. You’ll soon come up with a list of top customers.

There’s another way in which the 80-20 rule applies to your business. Very likely, 80% of your problems and complaints come from 20% or fewer of your customers. If you identify those problem customers, you can change the way you do business with them to reduce the problems. Consider changing your pricing for those customers so that at least you’re being paid for the extra time and effort they require. Sometimes the only solution is to tell these customers that you no longer wish to do business with them.

The bottom line is that understanding your customers better can only help your business. Contact us if you need help analyzing your customer profitability.

Napa Valley Winemakers Must Act Quickly to Get Accurate Claims Adjustments

Winemakers in Napa Valley must respond quickly to the financial challenges caused by the earthquake that recently rocked the renowned winemaking region.

Winery

Wineries that carried earthquake endorsements on the business interruption portion of their insurance policy have to move quickly to get the most accurate claims adjustment. “In order to get a precise claims adjustment, a winery has to first engage an insurance adjustor with extensive industry experience in winery losses,” said Thomas Garland, Manager at Appelrouth, Farah & Co. with extensive winery loss experience. “Understanding the complete winemaking process from harvest to crushing, to fermentation, to draining and pressing, to aging, and finally to bottling is a very detailed endeavor that requires understanding of production, yields, and varietal allocations,” added Mr. Garland.

Smaller wineries often gamble and choose not to obtain earthquake endorsements because they are cost prohibitive. The silver lining for these smaller wineries is the fact that the harvest season is just beginning. Wines need stillness to age properly, but the earthquake changed altered this process. Many wines that were originally destined to become Premium and Ultra-Premium wines with high margins may now need to be repurposed as lower margin common table wine.

“Appelrouth Farah & Co., has extensive industry experience having been involved in losses that stemmed from the February 2010 earthquake that riddled the winemaking region of Chile,” said Stewart Appelrouth, Co-Founder of Appelrouth Farah & Co. “From business interruption as a result of the damages, to the loss of attraction as a result of cancelled wine tours, hotel stays and bookings, our team will work closely with the adjustors by offering resources to accurately quantify and reasonably estimate the losses suffered and help the winery get back to where it would have been but for the loss,” added Mr. Appelrouth.

Wine losses are complex, yet with the help of an experienced team, a winery can get back to the art of winemaking and delivering a premium product to oenophiles worldwide. For information on how to successfully mitigate wine losses, contact Stewart Appelrouth or Thomas Garland at 877-446-0999.

Tax Deductions For Volunteer Work

If you do volunteer work for a charitable organization and have not kept track of your out-of-pocket expenses, you might be passing up an excellent opportunity to lower your tax bill. To qualify, your unreimbursed expenses must relate directly to the charity, and you must itemize your deductions on your tax return. Here is a brief rundown of some possible deductions.

  • Volunteers may deduct the cost of phone calls, postage stamps, supplies, and other out-of-pocket costs incurred in their volunteer work. For volunteers who are required to wear a uniform, the cost of buying and cleaning uniforms is deductible if they are unsuitable for everyday wear.
  • The cost of your time, no matter how valuable it may be, is not deductible. That’s true even if you would normally be paid for the type of service you contribute. For instance, accountants who perform free consulting for charities can’t deduct what they would normally charge for their services. 
  • Using your car in connection with volunteer work can earn you a deduction. The standard mileage rate for volunteers who use their own cars is 14 cents per mile. Alternatively, you may deduct your actual unreimbursed expenses for gas and oil – but not maintenance, depreciation, or insurance. Either way you choose, related parking fees and tolls are deductible as well.
  • If you travel overnight for charitable purposes, your expenses are deductible as long as they are reasonable in amount and not connected with personal activities or any element of recreation.
  • Special rules apply to conventions. Travel and other out-of-pocket expenses related to attendance at a convention for volunteers are deductible only if you have been chosen as a delegate to represent the organization.

Finally, just remember that it is up to you, the volunteer, to substantiate your deductions. If you take these deductions, you should be prepared to show the IRS the connection between the costs claimed and the charitable work performed.

Expenses qualifying for the child care credit

Working parents can find summer child care solutions challenging. However, a nonrefundable credit is available if the qualifying child care expense is incurred so that you (and your spouse, if married) can work. The maximum credit is 20%–35% (depending on your adjusted gross income) of the lesser of (1) your qualifying child care expenses up to $3,000 for one and $6,000 for two qualifying individuals or (2) your earned income (or your spouse’s, if less).

Qualified child care expenses provide for the well-being and protection of a dependent child under age 13 and must be reduced by the amount of any employer-provided dependent care benefits. Amounts paid for food and education generally are not considered work-related expenses; however, services that are incidental to and cannot be separated from the costs of caring for a child are not excluded from the credit. Therefore, expenses paid to a day care center are usually eligible for the credit, whereas summer school or tutoring expenses are not. The cost of day camp should qualify for the credit; however, overnight camps are not considered work-related and don’t qualify.

If you pay someone to come to your home and care for your dependent child, you may be a household employer required to withhold and pay Social Security and Medicare tax and pay federal unemployment taxes. Keep these rules in mind as you plan summer child care. Have more tax questions? Contact us.

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