Monthly Archives: February 2012

Tax Information – Vehicle Write offs

One of the biggest concerns that those in direct sales have is what all can they write off at tax time. The simple answer is lots of stuff!  But I know that is not the most helpful answer.  This article is going to focus on your vehicle and what you can write off and how to keep track of it.    Please keep in mind that I am not a tax accountant and I live in Canada, so the rules where you are may be different.  Talk to your favourite tax person to check the specific rules.

Mileage– The best thing you can do is keep track of the mileage that you use your vehicle for.  I like to keep a notebook in my car alone with a pencil (pens freeze in winter) to keep track of this.  It is really quite simple, create the following categories and fill them in each time.

English: Volvo highest mileage car approaching...

Image via Wikipedia

Date   Starting Mileage   Ending Mileage    Task

So for instance, I would write down “Christine Party” or “Parcel pickup” or whatever works for you.  If you are doing errands, and some are business related and some aren’t, then you can estimate the ending mileage either from prior trips or what you think it is.  No one is likely going to come to your house and drive the route to verify it.  If I am going out of town, I will put down something like “Christine Party – Town name” so I remember why the mileage is that much higher.

At the end of the year, I use a spreadsheet to calculate my mileage for me.  The only difference between my note book and this spreadsheet is that it has a column to calculate how far i drove.

Date    Starting Mileage   Ending Mileage   Distance Travelled   Task

Don’t forget, on January 1, write down what your mileage is as you are going to use that for starting mileage for the year and as the ending mileage for hte prior year.

Now, you may be wondering what to do with all this wonderful data.  You are then going to use it to determine how much of your car expenses you are able to write off.

With the data we collected above, we know the following:

January 1 Mileage   103,000

Dec 31 Mileage   110,500

Mileage for business   3,000

Percentage used for business   40%   (3,000/7,500)

So you can write off 40% of your vehicle expenses for the year.

Another option that you may have through your taxes is to claim a flat fee per kilometre/mile that you drove.  Depending on how much you put into your vehicle in the year that may be the better way to go.

Vehicle Expenses

Basically, anything that you have put into your vehicle during the year is going to qualify for a write off, with a few possible exceptions.

You can write off

  • Gas
  • Repairs
  • Insurance

But, as in the example above, you can only write off 40% of these.

Hopefully this has helped to clear up some information about using your car as part of your direct sales business.  If you have a question related to this, please post it in the comments and I will reply.

 

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Tax Information – Advertising Write Offs

One big tax issue is what all you can write off for your business.  And a bit one of these is what counts as advertising.  I’m going to go over some ideas in this article about what you can and cannot use for your direct sales business.  Please remember that i am not a tax accountant and that I am located in Canada.  Please talk to your tax accountant for the most accurate advice.

The general rule of thumb when it comes to advertising is that you have to be able to attribute it to the business.  If you cannot say that it is for the business, or directly related, it can be difficult to justify it.

For instance, let’s say you buy some new clothing for your business.  Typically, you cannot write it of… but… if it is logo clothing with the name of your company on it, or has some saying on it like “talk to me about earning free product” or “girls night in – ask me more”, that can be written off.  That would qualify as it is directly related to your business.  If you buy clothing, non-logo’d, and only use it for your business; it can be a bit trickier and I likely wouldn’t use it as a write off.

Another type of advertising is doing trade shows/vendor events.  These are a write off which is pretty obvious.  Do your best to get a receipt so that you have something stating what you paid and that you can put in with your tax time papers.

If you put in ads anywhere that cost you money, this is advertising.  Again, this is pretty obvious but as this article is about types of advertising you can write off, I am including it.

If you give away any type of product for people to try, or for a door prize, you can also write this off as an advertising expense.  And don’t forget to make sure that your label is on it somewhere so you can get repeat business!

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The Top Direct Sales Companies

Direct sales is entering a new age, when the pressures of technology are too much for many traditional commercial outlets. Click to call communications, social media, and mobile marketing are strong forces in modern day commerce. So how are the traditional giants of direct sales doing in this new landscape? Are they rising to the challenge, or withering under the pressure. The answer is that some companies are slowly adapting and tweaking their models, while others remain staunch in their ways:

Avon Products—Avon, the US cosmetics, perfume and toy seller, utilizes door to door sales, such as their well-known “Avon ladies.” Avon is a firm believer of direct selling, as they believe it builds a strong relationship-building, one-to-one bond with consumers that is free from whole sale, advertising and retail. Avon uses somewhere on the order of 87 million independent direct sellers in over 140 different countries.

Amway—Another of the big direct sales global companies, Amway specializes in health, beauty, and home care products. They have taken direct sales to a new level by incorporating social media campaigns into their strategy. While Amway still focuses on face-to-face interactions, social media is being used to follow-up the original meetings.

Natura—Natura is a Brazilian skin care, solar filters, and cosmetics manufacturer that has been using the direct sales model since 1974. Using a team of over 80,000 resellers spread across South America, Natura has become popular among women as a bikini waxing service.

Vorwerk—Ranked as the 4th largest direct selling company of all time, this vacuum cleaner company has been peddling household appliances for the better part of a century. Eschewing all e-commerce and even Facebook itself, President Dr. Friedrich Kroos believes it is the personal contact and emotional connection to the product—a kind of “lovemark mentality”–that has allowed Vorwerk to grow.

Herbalife—Herbalife is a global nutrition, weight-loss and skin care company that uses over 2 million independent contractors in 81 countries. Michael O. Johnson, Chairman and CEO of Herbalife, even wrote a 10 point manifesto outlining the merits of direct sales.

Only time will tell whether these companies can continue to grow their brands through direct sales alone. Several of them have implemented more complex multi-level marketing strategies that include network marketing, Velaro integration, and referral marketing. While some may say that direct sales that utilizes social media is a bit of a contradiction, many manufacturers have to begun to attempt to broach this paradox by using social media sites as secondary and complementary methods.

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Keeping Track of Papers for Tax Time

Come tax time, if you cannot find the paperwork, then it is hard to claim it.  You can, but if you get audited, they are going to want to see the paper to back up your claim.  For this reason, it is a good idea to keep organized through the year so when the tax season sneaks up, you are ready for it.

Image by Getty Images via @daylife

Envelopes/Folders – You can organize your direct sales paperwork in a variety of ways. For me, I have found that having a large brown envelope is a great way to do it.  I have one envelope per month for sales and have it organized as such – party summary (from my company’s backoffice) and receipts relating to the party attached.  I also write the order number on the receipt just in case they get disconnected.  As I do not have a lot of expenses beyond what I purchase from my direct sales company, I have just one envelope for expenses.  I could easily itemize these out by month or by type.

Electronic Files – Just like my paper files, I have a folder on my computer for all my electronic invoices.  I have them sorted out by type of invoice (party, supplies, long distance, credit card) and sort them into those folders and make sure each file is labeled by date.  A few clicks and I am able to find anything that I need.

Excel Spreadsheet – I do all my accounting via Excel spreadsheet as I find it easier than using software.  But, software definitely has its advantages such as being able to prepare a report for you at yearend to use for your taxes.  That said, if you are not comfortable with either option, a spreadsheet with a list of various expenses is a good idea to prepare for your tax accountant.  I recommend a few columns though:  Item, Purpose, Date, Amount less tax, Tax.  This will help your accountant classify the expenses and record them in the correct spot.

One of the best things you can do for yourself is keep on top of your paperwork and have it sorted out.  This creates less stress later on and you will likely find it helpful throughout the year.

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A Quick Tax Overview – Direct Sales

Recently someone on my company’s Facebook group asked if she had to claim her direct sales business even if she did not make over $600 and as a result, did not get a tax form.  There was some thought that if you made less than that the government considers your business a hobby and then you do not need to claim it.

But… in reality, there are many reasons why you may not have received over $600 in overrides in your direct sales business.

  • Joined later in the year
  • Didn’t have a direct sales team

    taxes

    taxes (Photo credit: 401K)

  • Had to take time off due to illness

That said, you still need to claim this income on your taxes and the main reason is that you will also get tax deductions.  You can claim things such as a portion of your utility bills, car maintenance and gas as well as expenses around you home.  You need to be careful though that you are only claiming those which are legitimate.  If you are not sure, you can check out the website of your tax agency or give them a call.

IRS – Small Business

Revenue Canada – Business

If you have kept track of all your revenue and expenses throughout the year, the tax process should be relatively easy and painless.  If you have not, you will need to sit down a few evenings and get it sorted out. You can pay your tax accountant to do this for you but it will only help to increase your bill.

Sort the papers into those which brought in money and those which you had to pay out money.

Find the utility statements and organize them in some method that makes sense.

Know when you started your business if you only started it in the current tax year that you are working on.

Disclaimer:  I am not a tax accountant.  Please consultant with your tax accountant for the advice that is relevant to where you live and your situation.

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Tax Season in Direct Sales – Everyone’s Favourite!

Did you sense the sarcasm in that title?  Personally, I do not mind doing taxes, but I have done my own ever since I started working and I also work in accounting so they are not the scariest thing to me.  But for many people, they are not comfortable with doing accounting or taxes for their direct sales business.  Hopefully this guide will give you some ideas to take the scare factor away.

Tax

Tax (Photo credit: 401K)

Revenues – You need to claim the funds that you made from your business.  This is the proceeds that you made on your sales.  For instance, if you made $100 on a sale but your cost was $75, then you need to claim that $25.  If you had a team, then you may have made commissions on them which will also need to be claimed.  Your company will issue you a tax receipt when the money they have paid to you is over $600, regardless of the mix between revenue from parties or team commissions.

Deductions – There are lots of deductions that you can take with a home based business.  Various expenses to keep your house running, costs associated with your mortgage, expenses associated with your vehicle and of course, those that are encountered in the course of your business. For many people, these deductions make the difference between owing money and paying in.  It is always best to consult your tax agency or tax accountant to find out what is and is not deductible and what you qualify for.  The deductions that I get may not be the same as the people on my direct sales team.

Expenses – Not only do you get deductions from your home and your car, you have legitimate business expenses.  Did you purchase postage to mail out catalogues?  How about paid for advertising in the form of business cards or a car decal?  Did you give away any product for raffles, hostess gifts or just to allow people to try the product?  All of these are valid expenses and ones that you need to keep track of for tax time.

 

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Picking the Best Direct Sales Company

I have to tell you right off the bat, there is no such thing, at least, in regards to the best company for everyone out there.  But, chances are, there is a company that is best for YOU and that is the one you want to find.P question

When searching for a direct sales company, there are a few things that you want to think about before joining.  These answers may impact the decision as to what home based business you want to join and make you think a bit more about what you are looking for.

  • What do you want from the direct sales company?
  • What kind of products do you love?
  • What products do you think you can sell?
  • Is there a minimum commission you want to make?
  • Do you require the hostess program paid for by the company?
  • Do you want the ability to ship directly to your hostess?
  • How much time do you want to spend working your business?
  • What are your goals with the direct sales business?
  • Will your partner/spouse support you?
  • What kind of support will you want or require?
  • Are you looking for a business to stay in for six months, a year, five years?
  • How much money does it take to get started?
  • How much money can I afford to invest?
  • How quickly do I need to see a return on my investment?
  • How saturated is the market in my area?
  • What types of opportunities are there for me within the company?
  • What incentives does the company provide?
  • What sort of training does the company offer?
  • How long has the company been in business?
  • How financially stable is the company?

Some of these questions may not be relevant to you and your search, but it is important to consider the different angles out there.  Questions that you did not think of may end up impacting your decision so being aware of them can be helpful.

 

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Should you be recruiting in direct sales?

If you are in direct sales, chances are you have heard all about recruiting and why you should do it.  But, recruiting and moving up the ladder in your company may not be what you want to do.  And there is nothing wrong with that!  If you are unsure, here are some things to think about and consider.

Time Commitment– Not only will you spend time training, but you will have to find time to look for recruits, talk to them about the business and possibly assist them with actually getting signed up.  Some people only have a few questions before they will sign but English: A simple binary tree diagram illustra...others require a few hours of discussion and questions before they are willing to sign up.  Everyone has a different personality and that is where this stems from.

Training – One of the most important things that you will be doing when you start building a downline is helping to train them.  Sometimes the amount of training you have to do is minimal but sometimes you may find yourself spending several hours assisting them.  Of course, some uplines do not train those that join them but I assuming if you have found this blog, you are actually trying to run your business well.

Availability – Another factor is how much time do you have for training.  I am not saying can you commit to an hour a day, but are you available for your team to get a hold of you?  For me, I cannot help my team out during the day as I work a day job, but I am available to them via email or phone evenings and weekends.  So far this has not been an issue but I think sometimes they forget that I do not do this full time.  While you do not need to be available 24/7 to your team, you still need to make sure that you can check your email or voice mail on a regular basis to help them out.

Helping Everyone – As you build a team, and those people start building teams, you may find that you are helping those who are not in your front line.  This may be because their frontline is unavailable, is not willing to help, or they just do not realize who they should be contacting.  Even though you may not be making much commission off these people, do not neglect them.  You do not know when their upline will leave the company and those further down will move directly under you.

Overall, I find having a team is rewarding.  I enjoy helping those on my team with their problems and concerns and helping them find a way to deal with it.  But if you end up with a person or a team that is needy, it can end up being a bit of a problem.

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Climbing up the ladder –Is it worth it?

Chances are if you have been in direct sales a while and have been recruiting, you have looked at your companies career plan and made some decisions about what you would like to attain.  But, is this something that is truly realistic and something that you can attain?  Don’t get me wrong, I am not saying to give up and that you cannot do it, as I’m sure there are many in your company that have.  But it is not always for everyone.

Climbing the Ladder in Direct Sales
Trevor Dennis /Free Photos

The first question is:  What do you want from your business?  Are you looking to earn as much money as possible?  Is it a way to get out of the house?  Are you doing it to afford the extras in life?  Do you want a new car and therefore you are aiming for the car bonus your company may offer?  Do you want to make money with a minimal amount of effort (okay, really, who doesn’t?) Are you doing it for some other reason?  Depending on the answer to this will help you to figure out the rest.

If you are doing this to make as much money as possible, recruiting and moving up the ladder in your direct sales company may not be the best way to go.  Granted, you do make money off your recruits, but depending on the size of your team and how much they are doing, the monetary gain may not be a lot.  Compare how much you make from the average party to how much you would make off your teammates if they were doing the average that a consultant in your company makes, and see how the numbers work.

But if you are going for a goal of earning a free car from the company, then you likely will need to be doing recruiting as well as personal sales.    You need to look at your companies plan to see what the requirement is to earn it and then aim for it.  (Playing devil’s advocate.. if you add one or two parties a month, that might be enough to make the payments yourself).

Some people also want the recognition and rewards that come with moving up the ladder.  For instance, many companies offer free trips or other incentives for attaining various levels.

Ultimately, it is up to you for what you want out of your direct sale business.  And if you do not want to climb to the top of the ladder, and you are perfectly fine where you are, there is nothing wrong with that.  I have been at the same level with my company for two years and it is exactly where i want to be.

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Unique Ways to Save on Direct Sales Supplies for Trade Shows

International Money Pile in Cash and Coins

International Money Pile in Cash and Coins (Photo credit: epSos.de)

Previously I have talked about buying supplies that don’t cost a lot of money for your business.  Things like business cards, brochures, and other items.  But chances are you need other items for your business that you may have to get elsewhere.  Here are some ideas to help you save on those items.

Table Coverings – I recently discovered this one and I can’t believe it took me so long!  If you have a thrift store where you live, check to see if they have an area with sheets and other home items.  I picked up a huge black sheet for 4 dollars and a pretty white lacy runner for 2 bucks.  I was previously using sheets but they didn’t look as nice as this one does.  A quick wash and I’m ready to go.

Risers – Chances are, if you look around your house you can find a lot of items that you can use for risers in your display.  Recently I changed how I was doing things and started to highlight our seasonal products in a different way.  I took one of the boxes that I hauled my product in, flipped it over, and covered it with another table covering I had.  This distinguished it from the rest of my table, and kept my area looking neater as I didn’t have this big random box.  If you do this, just make sure you don’t have anything you may need in that box.  You can also use other smaller boxes at various points on your table with the same effect.

Candy – Depending on what you are selling, you can use candy to help decorate your table.  Around valentines, heart shaped candies can be cute, as you move towards Christmas you can purchase chocolate balls.  This is multipurpose as you have a snack while at events, and you can invite people to your booth, take a candy, and browse.  And of course, you get the tax deduction!  If you use this method, make sure you buy wrapped candy.

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