Tax season is officially over! Buy you accountant a drink for taking care of you during such a hectic, stressful time in their lives and if you added to that stress personally, buy him or her two drinks!
While no one enjoys giving money over to the government freely, it is a necessary endeavor that we must embark on as an American citizen. Although, I recommend never leaving money on the table by not claiming all your allowed deductions, the highlight of your year should not be your large tax refund, either. There needs to be some sort of balance to in your business finances.
I had the luxury of prepping and filing income tax returns for many small business owners. I witnessed multiple business owners get frustrated, take away valuable time from their business (i.e. losing money), forgo deductions (they could not locate all their receipts or statements), in addition to crying and cussing.
Many business owners are not realizing a profit or even paying themselves a salary. I have had entrepreneurs even say that they feel like they are working to pay taxes. Let’s be honest, business finances are a hard things to management. If you don’t get a handle on the finances, the business will suffer and you will be closing up shop quickly.
Unless you work in financial services, you are not in the business of finances; therefore, you should be focusing your attention on the income producing activities of your business. So if you find that management of your business finances is taking valuable time away from your business or that you are working just to pay taxes, it may be time to sit with a professional to discuss some strategies to shift your business finances to the next level.
In order to be better for next year, I want to provide some tips to help you keep the stress down during tax season. Here are my tips:
1. Get a solid bookkeeping system.
Monthly reconciliation of bank accounts and transactions is key to creating transparency in your business. As a business owners, the bottom line is important. If you don’t know how much is coming in and going out of the business, it is going to be hard to realize a profit, pay yourself a salary, and expand to the next level in your business.
2. Review income and expenses at least monthly.
You can’t know where you are going, unless you know how to get there.
3. Establish a method or system of retention and tracking.
It is not enough to throw receipts in a bag or your wallet and then try to organize them in January when it time to bring them out to determine your tax deductions. This is a task that needs to be completed throughout the year and you should be diligent about it. Expenses are the bread and butter of business and you don’t want to leave any money on the table because you can’t find your business meals or your advertising costs. Keeping track of receipts and invoices are important for record retention purposes, as well. The IRS loves paper, it serves as evidence that you are doing what you are claiming to do as an entrepreneur.
4. Keep it simple with the receipt of money.
You should not be accepting money from 10 different sources at once (i.e Cash App, PayPal, Stripe, Square, Cash, Bitcoins, Checks, etc.). This leads to confusion and disorganization of funds. Service-based entrepreneurs struggle with this one most often. Accept a few and keep it simple so you keep it all together for tax purposes and life, in general.
If you think it is time to hand the baton to a skilled financial professional, schedule a consultation with me at emeraldsparks.com. I help business owners prevent financial mistakes that would risk the future of their business, while helping them keep/realize profits and pay themselves a salary.
Realistically, you can’t handle everything as a business owner and that may be the reason why your business finances are struggling. You are trying to be the social media coordinator, the head of shipping, chief graphic designer, accountant, etc, something will fail, something will lack, so do yourself a favor and take at least one thing off your plate.
Stay frugal my friends!