On the one hand, if your business owns the car you’ll have a long-term asset and may qualify for more tax deductions. On the other hand, buying a car is a huge expense and monthly lease payments tend to be lower than car loan payments; they may also be tax deductible.

Learn more about the benefits and drawbacks of buying versus leasing a vehicle for your business:

Why buy a company car?

The major benefit to purchasing a car is that it becomes a company asset that offers a number of perks for business owners:

• You can write off your gas, mileage and maintenance expenses
• Your interest payments on a car loan and depreciation costs may also qualify as eligible business expenses
• You may enjoy lower insurance and liability rates on a vehicle owned by your business

The big con for many business owners is that buying a car is a major expense—one that may require you to finance a depreciating asset. You will, however, maintain the residual value on your investment as you pay it off, and once you own the car you can use it for as long as it can do its job.

If you decide not to buy a vehicle but choose to use a personal vehicle for business, you may also be eligible for itemized deductions come tax time. Be sure to check with your country’s small business tax rules and regulations to confirm which vehicle-related expenses you may be able to write off.

The pros and cons of leasing
For many small business owners, leasing a company car is the more attractive option. Typically, it comes down to cost and cash flow. When you lease a vehicle you won’t have to come up with a down payment or collateral—and monthly lease payments tend to be lower than car payments.

The flip side, however, is that leasing tends to cost more in the end—and those affordable monthly payments won’t add up to an asset for your business. Another point to keep in mind is your insurance requirements may be different and amount to higher fees.

Also be aware of the maximum number of miles stipulated in your lease agreement—if you exceed the limit it can also mean additional fees at the end of your payment term.

If you’ll be putting a lot of miles on a car, leasing allows you to upgrade to a new car on a regular basis – and doing so may allow you to dodge costly repairs on an aging vehicle.

As a final note on the “plus” side, just like business owners who purchase their company vehicle, those who lease can write off some of their business-related car expenses.

Final considerations

Before you commit to buying or leasing a company vehicle, do a cost-benefit analysis. Take note of the car’s total cost over the car loan or lease term including:

• Monthly payments, including interest
• Anticipated mileage
• Maintenance, fuel, insurance, parking and other related costs
• The value of the car at the end of the lease vs. the ownership period.

Talk to your accountant about which expenses you can claim on your income tax, whether you choose to lease or buy.

At the same time you may want to seek advice on how to track your company car costs accurately and efficiently. Keeping good records is a must to make sure you don’t miss any eligible write offs for your company car—and so everything is in order if you are ever called for an audit.

The post Is it better to buy or lease a company vehicle? appeared first on Dudley & Associates, Chartered Professional Accountants.

To cover the costs of your business you need to sell enough goods or services to reach your break-even point. Knowing where that point is, and how long it will take you to reach it, can be fundamental to your success. This especially true if you’re thinking about starting or buying a business.

Calculate fixed and variable costs

The first step is to establish your fixed and variable costs.

Fixed Costs

Fixed costs are bills your business always has to pay, regardless of its level of sales. Also known as overheads, they could include:

• Salaries for permanent staff.
• Rent on your premises.
• Insurance.
• Interest on debt.

Variable Costs

These are costs that increase with your levels of sales – materials and production costs are two examples. Others include sales bonuses, part-time wages and freight.

Now work out:

• The total fixed costs bill for the year.
• An average overall variable cost for each product or service sold (the Variable Cost per Unit).

Some bills might be a combination of fixed and variable costs, such as a phone bill split between a line cost and toll call charges. Separate these bills into fixed and variable parts for greater accuracy.

If breaking them up is too time consuming, choose which element is greater in the bills and classify it as that. For example, if you don’t make many calls to mobile phones or outside your local area, you’d classify the phone bill as being fixed.

Determine your break-even point

Let’s assume you manufacture shoes with the following details:

• Budgeted fixed costs of $60,000.
• Average cost to make a pair of shoes is $110.
• Average sale price per pair of shoes is $250.

Calculating your break-even point requires the use of a few formulas:

1. Sales Price per Unit ($250) minus Variable Costs per Unit ($110) = Contribution Margin per Unit ($140).
2. Contribution Margin per Unit ($140) divided by Sales Price per Unit ($250) = Contribution Margin Ratio (0.56).
3. Fixed Costs ($60,000) divided by Contribution Margin Ratio (0.56) = Break-even Sales Volume ($107,142).

Based on these calculations, if you sell more than $107,142 of shoes you’ll make a profit. That equates to 429 pairs.

Using your break-even point

Once you’ve worked out your break-even point, the next step is to work out whether the sales volume you’ll need to break even is realistic and achievable.

You can also use your break-even calculation to see the effect of changes in costs on your business. If you were able to source cheaper materials and reduce the variable cost per pair of shoes, you’d need to sell fewer pairs to break even.

If your sales remained the same, you’d make more profit.

To be of real value to you, your fixed and variable costs calculations need to be accurate. Putting inaccurate figures into your break-even calculations will give you an inaccurate result. It’s worth investing time to work out your figures accurately.

The post Identify your break-even point appeared first on Dudley & Associates, Chartered Professional Accountants.

Whether you’re preparing an employee work agreement, finalizing a new client contract, or submitting an invoice, digital signing can prove beneficial in a number of ways.

Here are just three reasons businesses, organizations, and even governments choose digital signing over paper.

1. Save time and courier costs

Ensuring all parties sign off on paper documents typically entails a number of time-consuming and potentially expensive steps.

First, you must prepare the document, courier it to each recipient, and then wait for them to receive, review, and sign it.  One of your recipients may be out of town, or home with the flu, which furthers lengthens your wait time.  Finally, after review, a recipient may request some changes, which means re-working and re-delivering the document. The resulting delays can be both costly and frustrating.

With digital signing, documents are swiftly delivered, revised and authenticated online. Transit time is minimal, so business owners can direct their energies toward earning new customers, rather than handling more paperwork.  And of course, adopting a paperless solution immediately reduces your environmental impact – an important benefit for entrepreneurs seeking more sustainable business practices – not to mention, lowers your office supply costs.

2. Safeguard your documents with digital encryption

In addition to improved efficiency, digital signing beats paper when it comes to security.  The digital signing software you use to create the signature will ensure it is encrypted, which protects your entire document from tampering.

According to the experts at Tech-Target, digital signature encryption will let you know if a single character of your document is changed or deleted.  Plus, since encryption leaves a data trail which makes it possible to trace and expose any forgeries.  By the same token, if a signee denies having authenticated your document, the signature can be analyzed to confirm its origin.

3. Track the status of your document in real time

Wondering whether the contract you sent to a new client has been opened and reviewed, or signed and sent back? Digital signing makes answering these questions far easier than the paper alternative.

From creation and distribution, to editing, validation, and storage – the entire document lifecycle is digitized and transparent.  Using cloud-based digital signing, business owners can track the status of their documents in real time, including:

• when the document was opened;
• how close the signee is to completing their validation of the document; and
• the moment the validation is complete, or if a party opts out of the process.

Some service providers also include options to send out automatic reminders to ensure the timely completion of your agreements.

From saving time, money, and trees, to improving collaboration with team members and clients, it’s no wonder digital signing is fast becoming the new business normal.

The post 3 Advantages of Digital Signing for Businesses appeared first on Dudley & Associates, Chartered Professional Accountants.