There is a fundamental difference between business and personal finances when it comes to taxes.
Start you off on the right track for the next tax season year with these financial faux pas that are sometimes overlooked by small businesses.
1. Not keeping financial records up-to-date
This is the number-one mistake small-business owners make and also the most important to remedy. While it seems logical to keep records accurate, it is easier said than done.
No one wants to pour over accounts payable, receivables and cashflow at the end of a long day, which is why this important part of the business is often overlooked.
One way to help manage this is to employ financial tools that do the work for you. The cloud has opened up a myriad of applications that can “speak to one another” and automate back-end services.
Additionally, the anytime, anywhere ability of cloud computing and smartphones makes it so you can update your books on the go.
2. Skipping the annual budgeting and financial forecasting
If you don’t have something to measure against, how will you know if you are on track? Data is knowledge, so create a simple plan based on your business insights and knowledge of market trends to forecast ahead and plan accordingly.
3. Not meeting with an accounting professional regularly
Remove some of the burden by working regularly with an accounting professional and use their expertise to your benefit.
It’s recommended that business owners meet with their accounting counterpart at least once per month to maintain good financial standing.
4. Misclassification of employees
This issue is becoming increasingly important as more businesses outsource jobs to contractors.
Misclassification can result PAYE and tax discrepancies. Play it safe and classify accordingly.
5. Mixing personal with business expenses
Small businesses are afforded tax breaks and write offs that are typically unavailable to the general population. These include home office deductions, mileage, some business meals, utilities and travel expenses.
Make sure you are taking advantage of these and not leaving money on the table, but be careful not to over indulge, as excessive deductions are one of the biggest triggers of an audit.
Good financial health is something that needs to be fostered 365 days a year. Avoid the financial “sins” and use the proper financial structures to keep your company on the right path.