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Start the paper-purchasing process by developing a schedule of paper consumption by month for the past 12 months. This schedule should show the trim size, grade and printer involved. Since you will want to minimize your investment in paper, you should reduce investment in paper inventory through use of common trim sizes and grades, and fewer printers. Send your paper requirements to a number of paper merchants. Be prepared to meet with them to negotiate a discount off list price.
6. Don't forget your bankers. Besides interest, banks' fees include credit card processing, foreign exchange collections and other services. All of these fees add up. Today, many banks will offer package pricing. To get a deal, you need to consolidate your business under one bank.
7. Don't forget the basics in this weak advertising environment.
- Is your rate base too high? (The big cost of maintaining too high a rate base is the cost of circulation acquisition.)
- Can you cut trim size or the basis weight of your paper?
- Does the frequency make sense?
- Should you lower your newsstand draw?
8. Can you bring home more money? In the case of owner-operated companies, consult your tax advisor to take a look at owner's compensation (salary and bonus) versus taking dividends. Once an IRS acceptable compensation is taken by the owners, there may be a tax savings in taking dividends instead of salary and bonus. Dividends are not subject to the FICA or Medicare tax. While FICA taxes end at salaries of $106,800, there is no cap on Medicare tax. The Medicare tax is currently 1.45 percent for the employee, and an additional 1.45 percent for the employer. In the case of an owner-operated company, this totals 2.90 percent.
Also, salary is subject to state and city tax withholdings. For a pass-through entity (S Corporation, LLC, partnership, etc.)—where the partners are taxed, not the entity itself—most dividends would not be subject to additional tax above and beyond the pass-through tax. Much of the pass-through entity taxable income covered by the dividend may be allocated to other states, but the salary would be allocated 100 percent to the owner operator state of residence.