This week is the perfect time to take a good look at the business issues that exist for you. They are often put off, swept under the rug, so to speak.
The following are some ways to ensure your financials are in order and to get them organized.
Talk to a Professional
[tweetthis]It’s the perfect time to make an appointment with your tax advisor. [/tweetthis] Doing so before the April rush will give you more time to discuss your financials. Rather than trying to get through the tax season, your advisor will have time to focus on long-term strategy. But, most importantly, you’ll have plenty of time to act on his or her suggestions while it’s still the current year.
Re-evaluate Your Business Entity
When starting out, many small businesses begin life as sole proprietorships or partnerships. Eventually, though, they transition to another form of business entity as they grow.
If you are still doing business as a proprietor, you may want to consider incorporating, or forming an LLC. This will shelter you from some risk. It might even save you money on taxes (though this is not set in stone).
If you formed your business with one income level in mind, and you might need to reconsider how you do business when your income level changes. Failing to take a look at your revenue can be costly. Discuss the different legal entities with your professional advisor, so you can determine what the right entity is for you.
Review Estimated Tax Payments for the Current Year
Now is a good time to review what your business made last year and what your forecast is for this year. Then, ask your tax advisor to assess your estimated tax payments. The aim is to avoid having underpayment penalties next year.
You also want to make sure that you won’t overpay your estimated taxes. There are better things to do with your money.
Separate Business and Personal Finances
[tweetthis] If you haven’t done so already, take the steps to keep your personal finances separate from your business’. [/tweetthis] This is good practice even if you are a sole proprietor. It is mandatory, though, when your business is an LLC or corporation.
This means a few things:
- Although I normally don’t recommend new credit lines, it’s a smart idea when you are a business. If you put all your business expenses on the card, you’ve got an instant audit trail of your year’s expenses. Just don’t incur any interest penalties.
- Your business needs to have its own checking account. If you’re a sole proprietor, you’re able to use your own personal checking account.
- Consider opening a dedicated savings account or money market account. You can transfer approximately 25% for each payment received as your own personal tax withholdings. This strategy will make it far less painful when it’s time to pay your self-employment and small business taxes.
Use a Cloud App to Get Organized
There’s no shortage of affordable cloud-based and mobile apps to help small businesses streamline their finances. For example, there’s Harvestapp for invoicing, Expensify for expense reporting. There are tons of other time tracking, travel, and industry-specific apps.
Not sure where to begin? Consider what is the toughest part of managing your finances.
Are you slow to invoice clients?
Did you have trouble digging through random receipts while filling out your Schedule C this year?
Do you forget to track your mileage for client meetings?
Your biggest headaches are the best opportunities to improve how you do things.
None of the above will be things you overly enjoy. However, once done, you’ll be amazed at the difference they can make to your productivity, bottom line, and mindset.
How do you organize your finances? What tips would you offer others to get it done? Share with me by leaving a comment below, won’t you.