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Financial

Budgeting for 2012
October 1, 2011

Now is a great time to project your expenditures for 2012. Overall, experts are suggesting that you keep your budget close to this year's. Here are some key trends and predictions that can help you decide what costs likely will rise, stay the same, or decline.

Salaries

If you want your employee's wages to keep pace with inflation and what other companies are doing, consider giving raises of about 3%. Continue to look for low-cost and no-cost ways to reward valued employees.

C corporations in certain industries, such as manufacturing, retail and wholesale, and technology, can award stock as compensation to give employees a great tax break. If they hold onto the stock for more than five years and sell at a profit, they won't pay any capital gain taxes. This break only runs through the end of 2011, so it may be a useful tool for year-end bonuses.

Insurance

Health insurance costs will continue to rise, but less than in prior years (about 14% for small businesses). Business owners' policies (BOPs) will probably increase by about 5%. Fortunately, workers' compensation is not predicted to change much, and directors and owners' insurance could be even less costly next year.

A number of states are raising their unemployment insurance rates for employers because of the drain on the system over the past several years (many states still owe money to the federal government). Check with your state to learn about any rate increase for your business.

Energy costs

Experts are saying that prices at the pump will be slightly lower in 2012 than they have been this year. This may ease your budgeting woes.

Other energy costs, such as electric rates, likely will remain about the same.

Other costs

Payroll taxes. As a result of the cost-of-living adjustment to the Social Security wage base, FICA and self-employment taxes for higher earners will increase in 2012. The wage base is expected to rise to about $110,000, up from $106,800 in 2011. This translates into an additional $200 or so in the employer share of FICA for each employee at this compensation level.

Cell phones. It's difficult to predict the impact of rate changes on your business. More telephone companies are switching to tiered pricing options, so the higher cell phone usage will cost you more.

Rents. It all depends on where you are. Overall, prime space could increase slightly (about 2.5%). However, in many locations there is a lot of unrented space and tenants can set the terms.

Shipping and mailing. Even though gasoline and other costs remain about the same, or even lower in some places, shipping costs are expected to rise. Truck rates will increase by about 6%, rail freight by about 5%, and air cargo by 3%. Postal rates will probably rise, even if the U.S. Post Office goes to a five-day week. Just to give you an idea about rates for next year, you can view Amazon's rate schedule.

 


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