No matter how long you’ve been in business, you’re bound to have financial and tax accounting questions. After all, the reason you own a small business is your passion for what you do – and finance and bookkeeping are not part of that passion, nor are they your strengths.
If you don’t have a tax and small business consultant who is capable of answering these questions, you’re going to have difficulty getting the guidance you need. So, to help find the answers you’re seeking, we’ve compiled the seven most common small business finance and tax accounting questions our clients ask.
A good start is financial management reporting. But, more important, you need to develop a strategy. A strategic plan to increase your profit should involve more than simply cutting expenses. You may actually need to spend more money on marketing in order to boost your sales and revenue. In addition, you might have to address inventory levels. Too much inventory ties up your cash, and too little affects your sales.
What hurts many small business owners is trying to focus on too many agendas. If many tasks are competing for your attention, you’re probably not doing any of them well. Prioritizing helps you to stay focused on the important parts of your business – those that make you money.
To understand where your money is, you need up-to-date financial reporting. Without sound reporting, determining where your money went is a guessing game. From costs of goods sold (COGS) to other data in management reports, a clear breakdown of your finances tells the tale of your business’s money flow.
Each business is unique, but these tips help determine a proper level of inventory:
The wrong decision here is a costly one, so you should seek the support of a professional. But, at the very least, consider that if someone is an integrated part of your operation, he or she is likely an employee.
There are clear rules set by the government to determine whether someone qualifies as an employee or contractor. With severe penalties, it’s not worth taking the chance of making a misinformed assessment, so you want to read up.
Many small business owners believe that their bank statements tell them how their business is doing, but this doesn’t factor in how much money you’ve borrowed. You may have plenty in the bank but perhaps not enough to pay your debts. When you take loans into consideration, you have a truer idea of the health of your business.
You’re not truly able to answer this question without solid record keeping. You won’t be able to deduct what you haven’t recorded. Utilizing software is a start, but you can’t rely on that alone. Software provides numbers; it doesn’t analyze them and give you advice accordingly. A small business tax advisor is best equipped to help interpret your data and find possible ways to reduce your tax burden.
A notification from the IRS isn’t a reason to panic, but it’s not something to be ignored. If you have compliance issues, you need to address them in a timely manner. Contact your advisor as soon as possible to make him or her aware of the issue and get the help you need to resolve it.
In many cases, whether your issues are tax or cash related, you simply don’t have the time to properly address them. The support of a trusted advisor goes a long way – not only in terms of having your questions answered and ensuring the accuracy of reporting, but also in allowing you to focus completely on running your business.
Ensure the health of your small business. Click below to discover tips on improving your cash flow.