A Challenging Economic Environment
We are facing an extremely challenging economic environment. This article explores what wholesale distributors can do to try and weather the storm and how distributors can lock in tax savings through IRS Section 179.
Inflation Continues Unabated
According to Statista, for the 12 months ended September 2022 inflation came in at 8.2% down from 8.3% for the 12 months ended August 2022. These are levels not seen in 40 years and the inflation rate is expected to stay high through the end of 2022. In response the Federal Reserve has been forced to raise interest rates to fight inflation, but this depresses economic growth and weakens the economy.
Costs are Up and Demand is Sluggish
As a result of mortgage rate increases, housing starts tumbled in September 2022 to their lowest levels in more than two years squeezing building materials suppliers. On top of this, all wholesale distributors are struggling with increasing materials prices and rising supply chain costs. With customers struggling building materials suppliers and distributors and cannot pass on increased costs to their customers.
How Distributors Can Cope
The solution is to implement better ERP software for wholesale distributors that will improve productivity and cut costs. Using better process flows and better information tracking will help drive efficiencies and cost-effectiveness. In effect you will be able to do more with less. Investing in better ERP software for wholesale distributors can generate a big ROI for your business in a number of critical ways, including: improved inventory and purchasing software, better tracking of your goods through the supply chain, diversifying vendors and implementing RFQs, implementing business intelligence and complex pricing, cloud-based infrastructure that frees you up from managing servers and networks and many more areas.
Tax Break - Section 179
In addition, there is a big tax break under section 179 that allows small and mid-sized businesses, including wholesale distributors and manufacturers, to deduct the full purchase price of qualifying software and/or equipment purchased during the tax year. You can get more details from the IRS Website and the Section 179 Website.
Benefits of Section 179
These tax incentives are made available to help companies invest in productivity-enhancing software that they may not otherwise be able to afford. The IRS offers these tax incentives because it believes that improvements in your infrastructure will better position your business for growth in the future. Without taking advantage of Section 179, businesses would otherwise have to amortize the purchase price over the life of the software. In other words, by using Section 179 you get the full tax deduction upfront allowing you to invest in your business. The deduction cap for 2022 software purchases is $1,080,000, and the software must be implemented in 2022.
Get started right away. Contact us to demo Accolent ERP’s leading Cloud-based software for distributors that can help you drive efficiency and cost effectiveness for your business. Distributors can lock in tax savings through an IRS Section 179 deduction, but only if they purchase and implement their software in 2022. Act now to qualify for Section 179 tax savings.