Accounting and Finance Management Tips for Small Business Owners
You can keep your books in the black by understanding the fundamentals of business accounting and finance. Competent accounting and financial management are about more than effective number crunching, however. They’re also about keeping things together so that you can maintain your sanity and peace of mind. Surveys show that most people believe that entrepreneurs hold a higher rank in society. However, that status comes with a price. Entrepreneurs must wear many hats, including those of accounting and finance read on for Tips for Small Business Owners.
Starting With the Basics
Often, entrepreneurs must begrudgingly play the role of accountants, especially when tax reporting time rolls around. Nevertheless, you must learn the necessary accounting skills.
If you’re an experienced entrepreneur, you already know and that an understanding of accounting helps you keep a watchful eye on your enterprise’s health. By understanding accounting principles, you can effectively manage your budget, expenses, and cash flow.
Typically, business owners use software tools such as QuickBooks to work with financial information, and this is a good thing. However, it’s equally beneficial to enlist an expert bookkeeper’s help – even if it’s part-time. Still, few business owners take this critical step.
A little under 50% of small business owners employ accountants and fewer than that plan to hire one in the coming year. A well-organized financial system will enable you, for example, to position yourself to cover quarterly expenses. It can also tell you what you should withhold from employee paychecks.
If you hold onto business-related receipts, invoices, pay stubs, and bank statements, you’re off to a good start. It’s even better, however, to make digital copies of these items.
Maximizing Tax Breaks
One of the most lucrative Tips for Small Business Owners is to make sure you get all your tax breaks. An effective financial management system also makes it easier for you to uncover tax deductions, thus paying for itself. By staying on top of your deductions, you’ll pay less in taxes at the end of the year. Deductions may include donations, energy credits, and healthcare spending.
Many business owners fail to take advantage of these kinds of deductions. Business and work expenses are the most overlooked deductions of all. They make up nearly 20% of missed tax deductions every year.
An accountant can help you capture these yearly savings. Their expertise in finding tax deductions will help to reduce your year-end tax burden. Even the fees you pay for tax preparation and bookkeeping services are tax-deductible when you own your own business.
Entrepreneurs will eventually make up a third of the United States workforce. The number of sole proprietors, independent contractors, and partnerships is on the rise. If you fall under any of these categories, you’ll greatly appreciate the benefit of business-related tax deductions at the end of the year.
If You Need More Time on your Taxes
It’s not good to file your taxes late, but it’s not the world’s end. Quite often, people and businesses fail to file their taxes on time. They submit their tax returns with a nearly equal distribution across May, July, and November every year.
Ideally, you’ll want to file your taxes as soon as possible. It just feels good to relieve yourself of the burden of worrying about filing your taxes.
You may think that because the IRS is somewhat lenient when it comes to filing deadlines that they may also overlook it if you decide not to file it all. Don’t make this mistake. The IRS frowns heavily on individuals and businesses who fail to file their yearly tax returns, and taking this course of action can lead to big trouble.
If you fail to file your business tax return, you face the risk of getting hit with a failure-to-pay penalty. This penalty can amount to up to 25% of the amount of taxes that you owe. Furthermore, if you file more than 60 days behind schedule, the IRS will fine you $135 or 100% of your owed taxes – whichever amount is less. This is where good tax preparation services are beneficial. Any account worth their salt will never let you miss a tax filing deadline.
This is where a good accountant is highly beneficial. Any account worth their salt will never let you miss a tax filing deadline.
Keeping Things In Perspective
If you’re considering new technology to help you keep track of your financial records, it’s important not to let the project get out of hand. Nearly everything is more complicated than it looks in the beginning. It’s easy to start out intending to implement technology and end up with a project that spins out of control.
Also, as you work to deploy new financial technology, you’ll encounter unexpected circumstances. For example, you may discover that there are things that you didn’t take into consideration that you need to address. This may require you to look into other software with more features.
As this occurs, you’ll start to realize that you’re doing more work using the same resources. Your budget is not getting any bigger, and the days aren’t getting any longer.
Fret not; you’re not alone in facing the nemesis of project management – scope creep. Hopefully, the accountant that you selected to service your finances is also adept at project management. This will become increasingly important as your business grows.
A competent accountant will help you segment your financial wants and needs into “must-haves,” “should haves,” and “nice to have.” If an aspect of your financial system upgrade falls into the “should have” or “nice to have” category. Your accountant can show you how the value of that upgrade will transform your organization versus the cost or effort it takes to implement it.
If the benefits of your upgrade don’t justify the cost, then you should table that idea. If not, you risk investing in something that will yield little to no results and only contribute to scope creep. If you find that too many of your ideas don’t warrant investment, your entire project may be off track. Accordingly, you’ll need to rethink the direction of your financial system upgrade.
If your financial accounting system needs a major overhaul, you may want to brush up on your project management skills. A firm grasp of project management skills will help you collaborate better with your accountant.
You may not think of project management when it comes to your accountant’s role within your organization. However, it would help if you revised your attitude. During the implementation of your financial system upgrade, your accountant can keep a close eye on things that can send your project woefully astray.
By hiring an accountant with project management experience, you can catch mistakes early on and make informed decisions based on facts rather than intuition and guesswork. This way, you’ll achieve the results that you desire.
It’s also important to close out your project. Many people forget to close out their projects once they’ve done the heavy lifting. However, this last step is essential for getting the most out of your financial system upgrade.
Once you or your executives sign off on improvements, you’ll most likely hand off things to operations. However, it’s essential to document what you learned during the deployment.
This kind of information can help you find problems with your project management process, quantify your upgrade’s outcome, and use what you learned about for future projects. An accountant is beneficial in helping you to make these kinds of assessments and discoveries.
They can help you to streamline your project management method so that you can enjoy a better outcome with your next major initiative. They can also help you to identify barriers to change within your organization.
Conclusion | Tips for Small Business Owners
If your financial accounting system needs a major overhaul, you may want to brush up on your project management skills. By training in project management, you can serve as an ally to your accountant, rather than an outside observer.
Project management training will also help you better understand the risks and rewards related to your next enterprise initiative. By becoming an informed entrepreneur, you can better collaborate with the stakeholders to help your company pursue its objectives and realize sustained operation. There you have it, Tips for Small Business Owners to make 2020 a success.