Typically,
the owners who struggle the most have poor records or discover
during the course of filling out the return they don’t have
the cash to pay their tax bills. Chances are, an owner in
either scenario doesn’t have a good handle on the overall
business, let alone the company’s taxes. “It’s very hard to
run a business without reliable financial information,” said
Gregg Wind, a certified public accountant with Wind Bremer
Hockenberg LLP in Los Angeles. “You could be spending too
much in a certain area, or set goals in a certain area, but
you’ll never know how you are doing.”
Perhaps
the biggest mistake many small business owners make is to
consider taxes a once‑a‑year event. They should
be an integral, ongoing part of operating a business–not the
main driver, but another facet of a well‑run company.
The
culprit is often poor record‑keeping. Many owners are
so preoccupied during the year with trying to bring in new
business and keeping current clients and customers happy that
it just isn’t a priority to keep really good records. Tax
time then becomes a nightmare of sifting through receipts
and invoices–if they can all be found.
Wind
noted that with the record‑keeping software available
for small businesses, it is much easier for a company owner
to organize his or her finances.
Moreover,
“it will save a lot of money in adviser fees if you’re organized,”
he said, noting that owners who show up at an accountant’s
with a haphazard pile of invoices and receipts end up paying
a lot of money to have the mess straightened out.
Still,
it can be demoralizing to sit with a disorganized set of books
and records, and the truth is, if that’s been your modus operandi,
your 2006 taxes are going to be a chore. But it’s not too
late to get yourself on track for the rest of 2007 and beyond.
Getting
organized doesn’t have to be hard, or expensive. It does,
however, require that you make some decisions about how you
run your business.
For
openers, you need to decide whether it makes more sense to
have someone else do the work for you. If you haven’t been
able to keep your records in good shape, and it’s unlikely
that you’re going to find the time to consistently take care
of them, then you’re probably better off delegating the job.
It can be hard for many do‑it‑yourself entrepreneurs
to relinquish the task to someone else, but in the long run,
it should benefit the business.
Many
small business owners are understandably worried about expenses,
but Wind noted that there are resources to help them take
care of their finances without running up a huge bill. You
might find there is plenty of savvy and affordable help to
be found, and it doesn’t mean hiring a full‑time worker.
For
example, accounting students at a nearby college are usually
looking to make some money using the skills they’re honing.
And there are plenty of bookkeepers willing to work part‑time.
Another
option is a temporary staffing agency, but you will have to
pay a fee, so it’s best to try the other avenues first.
But
even if you do get help getting your books and records together,
you do need to be paying
frequent attention to what they say. You need to be sure your
bank reconciliation is done monthly, and you need to know
where your cash flow stands.
Well‑kept
records can also help you assess whether your expenses are
too high or whether you have problem customers who aren’t
paying on time. These are critical pieces of information that
will have an impact on how you’re running your company.
If
you know where you stand throughout the year, then compiling
your income tax return can be more a routine event, not a
traumatic one.
