With all the changes, delays and amendments made to the tax procedures this year, we weren’t surprised that we received an influx of questions and recommendations, in addition to responding to a wealth of requests for tips on how to be proactive for next year’s tax season. What should small business owners be doing in order to stay ahead of their tax liabilities? Is there anything that a small business can do to prepare? Of course, there is a ton of things one can do. The following is not to be taken as legal or accounting advice – in fact, it is far from it. Our team would like to extend some personal tips that we use ourselves to prepare for tax season in attempts to minimize the shock of having to pay the IRS when the time comes, even when you are well aware that you will have to pay the IRS when filing!
First and foremost – let us be clear in saying that the time to start preparing for filing your return next year is RIGHT NOW! Whether you are performing a service or selling products to your customers, accurate record keeping throughout the year is imperative in order to be proactive about filing your taxes.
Especially for small business owners that are generally responsible to pay quarterly sales taxes as well as their annual income taxes – record keeping can not only keep you on track for accurate reporting, it will make your life so much easier throughout the year in estimating (and preferably escrowing) the taxes you will most likely be responsible for, come April 2019.
Utilizing Accounting Software or General Ledger Records
The most popular and commonly used business accounting software is QuickBooks. This powerful software handles everything from writing checks and payroll to accounts receivables and invoicing. Many business owners favor this program as it has the potential to eliminate the need to retain an on-site bookkeeper. In fact, many administrative professionals are dually certified in the QuickBooks, making it that much more convenient to utilize.
However, not all small businesses choose to or even warrant the use of such sophisticated accounting software. Believe it or not, there are still companies that handwrite their accounting with paper checks. Why pay additional expenses just to keep up with unnecessary presences?
A general ledger may possibly be one of the most outdated elements of basic accounting that is still by far the most accurate that a business owner can utilize. Since a business usually operates with multiple bank accounts and internal accounts, keeping general ledgers for each account can help maintain a centralized place to balance your finances. Plus, it gives you a good resource to look back on to analyze expenses that could use a bit of trimming!
Consider Automation Wherever Possible
You will be floored by the various ways you can automate simple yet time-consuming processes that will enable you the freedom to focus on more pressing areas such as client relations and business growth.
Did you know that placing a simple inventory order on automatic reorder or saved list with one vendor can save up to 20 hours of manhours a fiscal quarter? It may sound a bit excessive, however, countless hours are wasted checking for and ordering inventory as needed rather than consistent logging and streamlined order processes. Not to mention, the advantage of bulk ordering when you stay organized and ahead of the patterns!
Putting the Pieces Together
Never be afraid to revise your business plan – a successful business plan is one that is continuously revisited and revised. As your business grows, the business plan should evolve with it. Figures change, funding needs will change, company size will change – each aspect warranting updated budgeting and growth projections.
In addition to pristine record keeping and an optimized business plan, keeping up with compliance and educating yourself on the various regulations will give you an advantage over the competition that may leave it solely to the CPA.