What causes you to stay up at night? Is it that fear of being audited? The constant feeling of not making enough? Stress of how and where you're going to be able to pay those taxes?
Megan Schwan, Accountant and CEO of Your Accounting SideKick, is focused on improving the statistics of failing small businesses. Considering the effects of COVID on the Massage Industry, Megan was gracious enough to provide us with important accounting & tax time tips that she provides to her customers.
This year doesn't have to be scary for you, make sure you are doing the following to take some of the "scare" out of tax time:
· Make sure you have a separate bank account for your business operations. If you have been co-mingling your funds, Stop as soon as possible.
· File your receipts in an electronic folder, with an app or in a paper file.
· Get your bookkeeping in order today, not waiting until the very last moment cannot only save you the stress but also help you not miss things because you were rushing. Get your books in order sooner rather than later. Schedule it!
· Determine how much has changed from last year. Knowing whether or not your income has drastically changed, can help you have a basis for knowing whether or not your liability may drastically change. Knowing = Less Stress
· When it comes to business and taxes, a good rule of thumb (or starting place) is to save 20-25% of your net income (sales-expenses).
· One big way you can make more without doing more, is to increase your margins. If you feel like you never seem to make enough it might be because your prices are too low. Taking time to review your pricing and margins is an important part of growing!
· Schedule time to work on your business and not just in it! When you track and review your bookkeeping, it gives you the foundation to grow a profitable and successful business! How? Because every major decision goes back to your numbers. Can you hire a team member or contractor? Can you expand your space or offerings? Can you get a physical location? It’s hard to make thoughtful decisions without the back up (your numbers).
· Make sure you know what taxes you are responsible for. Do you sell products? You may be subject to sales tax. Do you have employees? Make sure you are collecting and paying your payroll taxes on time. Penalties and interest can be heavy for these types of taxes.
· 8 out of 10 small businesses fail, usually for a money related reason. Be sure you ask the right questions and get the support you need to avoid common pitfalls and set yourself to grow a profitable and successful business.
One question I often get asked is about: “paying myself”.
If you are a sole proprietor, single member LLC, or partnership you can pay yourself as a draw. Simply transfer the money from your business account to your checking account or write yourself a check.
If you are an S-corp, or opting to be taxed as an S-corp, you are supposed to pay yourself as an employee. This is where you get a W2 at the end of the year, if your business can support it.
Knowing how you should pay yourself is important. Moving from Owner to CEO suggests that you should also pay yourself on a schedule.
Click Here to read more on the differences between the 4 main types of entity structures and how they get taxed.
Regardless of what type of business you chose to operate you will always need to have your business information before you can file your personal taxes.
When business drops, and revenue decreases, it is a good time to review your costing and prices. Are there expenses you can decrease or remove? Is there something you can barter? When times get tough it’s time to get creative and innovative. Remember to focus and identify the problem and pain points for your customers. Refer back to what products and services sell well.
Megan Schwan is the owner of Your Accounting Sidekick. Working with hundreds of businesses over the past several years she realized a gap in the market. Thousands of businesses needed the insights and support an accountant and bookkeeper can provide but either didn't need a retainer or could not afford one. As a result thousands of businesses are running under their potential and taking longer to achieve success. “Your Accounting Sidekick” was launched to fill this gap. By providing insights, support and education to businesses earlier, Megan is sure that together, we can change the statistic that 8 out of 10 small businesses fail and instead create profitable successful businesses to support families, communities and futures.