Don’t Freak Out: Taxes and the Small Business
“Why do I do this every year?”, Johanna thought to herself. For three years in a row, she found herself stressed out at tax time. Johanna frantically searched for receipts and bank statements in her home office. In the midst of her searching, her cell phone rings. It was Brandon, her tax accountant. She had avoided his calls all day. A week earlier, she had promised him she would have her tax documents to him by the end of the day Thursday. It was now Friday afternoon.
“Hello Brandon,” said Johanna nervously.
“Look who decided to finally answer her phone,” replied Brandon.
“I apologize Brandon. You know I barely made the deadline to send out 1099 forms to my contractors.”
“I understand, you’re under pressure, but your taxes responsibilities are not going away.”
“Is there anything I can do?”, Johanna asked.
“Yes, we can file for an extension.”
“Great, let’s do that!”
“Okay, but there are no more excuses Jo.”
Johanna, a self-proclaimed superwoman knows how to grow her small business, land and keep clients, crank out quality products, and still make time for her family and friends. No problem. Managing the company’s finances, on the other hand, is another story. Really, who wants to learn a bookkeeping system, balance spreadsheets, fill out quarterly tax forms, keep track of paperwork for independent contractors and file annual returns when there are customers to serve and money to be made? Johanna, much like many small-business owners, absolutely loathe managing their accounting books.
Facing the Truth
Johanna knew that filing a tax extension was a temporary fix to a recurring problem. Ultimately, she had two options:
- She could make the time and effort each month to manage her bookkeeping, review her financial status and eliminate stress and confusion at the end-of-year clean-up.
- Hire a qualified bookkeeper that would maintain her business finances on a monthly or quarterly basis.
You run a company, you’re busy. We get it. You have a to-do and must-do list filled with things you’d much rather do than taxes. But, the reality is, in order to run a successful business, you can’t dodge your financial responsibilities and expect to be successful. With either option, Johanna is fully aware, that as a business owner she is not exempt from knowing how to manage, maintain and understand her finances.
The Bottom Line
Waiting until tax season to organize your receipts is a sign of poor record keeping. It lacks the essential monitoring of cash flow within your business.
Don’t be afraid to learn how to manage your books or too cheap to hire a qualified, ethical bookkeeper on a monthly or quarterly basis. The success of your business depends on you to make correct business decisions.