Top 5 Accounting and Tax Planning Tips for Small Businesses
Chances are you started your small business because you accrued years of experience in a certain market and found you were seriously good at your job. Perhaps you continued to get raises and new titles, with more responsibility and additional people reporting directly to you. But at some point you realized you could take that experience and start making those millions for yourself instead of some corporate shareholders. If you successfully pair a great idea with the know-how to execute it, your business can be successful. But regrettably that’s not all it takes. Once you are the boss you’re also responsible for any and all accounting issues, as well as properly preparing your company for tax season. Neither of these might be your strong points, yet either one can doom you to failure and the unemployment line. So here are five of the top accounting and tax planning tips to help your small business succeed.
Start things off by brushing up on bookkeeping basics. Look, this may seem like a foreign language to you, and perhaps you have no interest whatsoever in keeping your company books. That’s understandable, and truly you should have an accounting professional on board to make sure everything is handled properly. But you should still understand the basics. Your regular bookkeeper could be out sick, for instance, when you still have to deliver some information on a deadline. Think of this as emergency preparation. You may never need it, but you’ll feel better having the basics down.
Expenses will creep up when you least expect them, despite your best planning efforts. It’s the nature of today’s business world. You have to be able to act fast, and that means having the liquid capital on hand to finance an impromptu dinner or hire an additional driver to handle a big account. To make sure this doesn’t blow your monthly budget, set up a petty cash fund. Keep a receipt book with the cash, and always have enough to handle these little things that can crop up.
All this aside, the company accounting will be an absolute nightmare if you don’t create budgets. Your company should be run on a strict budget, and you’ll need to keep an eye on it on a monthly basis. Ideally you should reconcile profits and losses so you understand if you’re going to have any money left over to put back into the business. By crafting a budget you’ll be able to keep your expenses in check and adjust for the future if a current strategy proves too costly. You’ll also understand the needs of your business more acutely, which is crucial for a small business owner.
When it comes to taxes, never leave the process to the last minute. Many small business owners choose to pay their taxes quarterly, to remove the agony of having to make a huge payment each April. A good strategy is to review the company’s tax reports each month, and then again at the end of each quarter. This will help you avoid late fees and penalties, and insure there is enough cash left over to handle any tax payments and last minute adjustments necessary.
Finally, always make sure you keep your business and personal finances separated. Imagine mingling your worker’s compensation accounts with your healthcare accounting services. This is an extreme example, and in most cases it’s more like making personal and business purchases on the same credit card. But whether this business is a one man band or a growing group of professionals, always keep that boundary clear. It will help hugely with both regular accounting and tax planning, while making sure you don’t accidentally sink so much of your own money into the company that your personal position is compromised.