No matter whether you are starting up a business or you have owned your company for years, having a sound strategy to record and manage your daily operations is the key to staying successful. Accurate record keeping will help your business stay out of trouble with the IRS, and keep you earning income.
But, record keeping is not the only part of the equation. Opening business accounts, managing sales, maintaining employee payroll and taxes are just some of the areas that many business owners struggle to manage.
Regardless of the type of business you own, the ultimate goal is to succeed and make money. Highly successful small business owners and entrepreneurs know that for their business to last, they have to be work hard, but also be prepared for any circumstance.
For example, seasonal purchase patterns or lack of inventory for products the business provides can lead to reduced income. But, if the business owner has an eye toward the future and an understanding of how the business should “operate in the now,” then the owner could avoid financial pitfalls that can cause the business to fail.
Follow these tips to ensure your business is set up for long term success:
As a sole proprietor, opening separate accounts helps to differentiate between personal and business. This is essential for keeping yourself out of trouble with the IRS, but if you do receive an audit, then separately tracked business expenses will help to speed up the process by determining deductible business expenses more easily.
Tracking expenses is easier today than it was 30 years ago. Electronic transactions can easily be tracked and stored for quick review. Online banking has revolutionized how small business owners manage their day to day business operations.
Proper record keeping is essential for:
Physical receipts, bills and other invoices are a different matter. Paper receipts can be lost, damaged or fade over time. Making copies and filing daily will keep your receipts together and allow you to access quickly.
Be sure to take extra measures to keep track of your paper receipts for the following expenses:
As your company grows and you hire more staff, setting up a payroll schedule and tax withholding account for your employees is essential.
Labor is often the largest expense that many businesses must pay. Your employee wages are not the only expense, but you must consider your own income. Additionally, employees that work more than 40 hours will be due overtime pay. If you haven’t kept your labor in check, then you could be short in payroll.
Independent contractors pay their own taxes, but you will need to track how much you pay each person in case you are required to file 1099s.
Sales tax laws are becoming more difficult understand due to increasing online sales. Knowing the laws in your state, and how Federal and international rules apply will be necessary to avoid tax trouble. Taxes must be taken at the time of a sale, and set aside to be paid during your business tax payment schedule.
Your tax payment can differ depending on the business entity of your company.
If your business provides a service before accepting payment, then you could potentially incur non payment for services provided. This will cause an issue in with your bookkeeping. Sending an invoice is no guarantee that you’ll be compensated. This might be acceptable early in the quarter, but as your business period closes it becomes more problematic. Follow up regularly with your customers to make sure you receive your payment.
This provides a snapshot of your business’ financial health. This can be used to determine profit/loss, and to help when applying for credit or business loans.
Working with a local accounting professional is in your best interests. Individual citizens and couples may be able to avoid hiring an outside party for tax preparation, but small business owners can not afford to forego this necessity. Although you may be good at numbers and maintain excellent records, working with tax code for business is another matter.
Tax codes change regularly and having a full understanding of what is acceptable for your business would require that you handle accounting on a daily basis. As the business owner, you can’t afford to spend your time on bookkeeping, when actually managing your business and meeting client needs are the priority. Working with a professional small business CPA is the right action for business owners.
The success of your business is tied to how well you plan and organize. But, many other factors contribute to the ability of your business to remain profitable for years to come. Contact our team by calling 919-420-0092 or completing the contact form. Schedule your consultation with our small business accountants today!