End-of-the-Year Tips for Business Owners
How to reduce the possibility of tax fines and your tax burden as a small business owner As the end of 2014 draws near, small business owners have a lot on their plates. The holidays are busy enough with family and traveling, but this is also the time that you, as an entrepreneur, will likely see a huge spike in sales. For retailers, 20 percent of their sales are during the months of November and December. Service providers are also very busy, especially as they prepare for the New Year’s rush. This year’s Thanksgiving weekend alone generated almost $2 billion in sales for e-commerce companies, as reported by Reuters.
Because many business owners are wearing a million hats, their financial recordkeeping is usually put off until tax season hits the following year. This will lead to inaccurate tax filing and the potential for fines. In fact, one-third of businesses face payroll and other accounting-related fines each year because of inaccurate recordkeeping. According to Bloomberg, the IRS handed out 6.8 million penalties last year, totaling $4.5 billion in fines.
So, take action now. Now is the perfect time to organize your company’s financials and reach out to your accountant. Accountants will become very busy once mid-to-late February rolls around, so it is important for you to set up a meeting with her as soon as possible.
In order to reduce your tax-filing errors and, most importantly, prepare for a successful year in business, here are three things you need to do before 2015.
1. Schedule a meeting with your tax professional. During this session, ask her to review the chart of accounts of your company’s bookkeeping program. If you have not identified a tax professional to work with, now is the time to start interviewing. Ask your peers whom they use. It’s especially helpful if she has experience working with businesses within your industry.
2. Update your bookkeeping program. All of your business transactions need to be reconciled so that it makes sense to you and the CPA filing the taxes. Cloud-based accounting programs are the way to go. Xero is a program that’s intuitive and easy on the eyes. It allows you to keep track of all of the company’s expenses, invoices, payroll and other financial tasks. It also has an app for the iPhone and Droid, which is perfect if you are a jet-setter and want to review your financials from anywhere in the world.
3. Organize and collect all financial documents. This includes independent contractor information, W-2 forms (if your company is based in the U.S.), receipts, invoices, bills and anything else related financially to the business. If you have been maintaining your financial records consistently during the year, this should be relatively quick and easy. If not, you will need to spend some time collecting this information.
4. Bonus: Draft a business plan. Every business needs to have a plan in place in order to track its progress and create a roadmap for success. Consider your revenue goals, income streams, marketing strategy, ideal customer profiles and budget. One of the best business planning tools on the market is LivePlan. It’s comprehensive, well-designed and it links with Xero. This allows you to compare your financial performance to others within the industry.