This piece was crafted for a demo client. I worked from a given title, target audience, and four talking points from the client’s perspective.
The client wanted as many of the following terms used for search engine optimization: small business accounting, record keeping, estimated tax(es), cash flow, small business consultant, tax year, IRS regulations.
Tax season is right around the corner. With nearly three months to file, you may wonder why we’d spend time talking about it now. But the reality of owning a small- or medium-sized business means record keeping year-round, so there might not be a better opportunity.
While it’s important to remember that each business and its according problems are unique, there are some things that will be true no matter what. Below are six critical small business accounting tips you shouldn’t wait until tax season to take advantage of.
Hire an accounting professional. Sometimes it seems like the tax code is an entirely different language. But accountants speak it fluently. A good one will show you how most savings occur between January 1 and December 31, and not when you file. They’ll also teach you best practices for keeping yourself organized year-round, which reduces confusion and worry come filing season.
Find out how to speak your accounting professional’s language. It’s to your benefit to learn key record keeping terms. It will help you understand your business more thoroughly. Having this knowledge also helps turn your accounting professional into a true small business consultant. Waiting to take this step until after the tax year could quickly constrict your cash flow and limit your options for growth.
Understand your business type and structure. Finding out your business is incorrectly structured during tax season means you’ve missed a large opportunity for savings and may have to pay stiff penalties. Equally important is how your business structure could be negatively impacting you as an owner and be putting you behind for the coming tax year. Understanding the Consumer Price Index, or CPI, is a good place to start when it comes to determining how your business should be structured.
When to update your books. Small business accounting and bookkeeping is a matter of priorities. It might sound convenient to update your books for the tax year as filing season arrives. However, it should be done on a daily basis. That way you’re not trying to determine the reason for deposits from months ago, or whether expenses were business related or personal. Consistently monitoring your cash flow can reduce the trouble caused by sudden, unforeseen problems.
Learn specific rules and regulations. The sheer volume of responsibilities you have as a small- or medium-sized business owner means you could mistakenly overlook IRS regulations. Knowing the ins and outs of those regulations can keep you from haphazardly estimating taxes. Seemingly small details, like whether you hire someone as a contractor or employee, or what to call the money you might take out of your business through the year, are critical to sound record keeping.
Embrace user-friendly software. At first, incorporating small business accounting software into your operation may seem intimidating. But these programs are actually designed to streamline your record keeping so it’s easier now and long-term. Software also adds value by providing a common tool for you and your small business consultant to readily understand the company’s margins and cash flow through the entire tax year.
Tax season provides you an opportunity to get to know the exact issues your small- or medium-sized business faces, as well as the solutions it needs. However, it shouldn’t be the reason you learn about them all at once.
Creating a relationship with a quality accounting professional who has a wide range of knowledge and experience means you’ll be in the best position possible all year long. And with that, every decision you make through the tax year can truly be geared toward helping your business grow.