Whether you’re a new small business owner or have plenty of experience as a business owner – finances can be daunting to deal with. In this blog, when we reference finances, it covers your accounting or bookkeeping, and tracking your income/expenses. It’s easy to think that your priority needs to be focused on tax season and getting prepared for that. But your finances and your accountant are important year-round – not just in March. So, why are your finances out of tax season important and how can your accountant be an asset to you?
Tax Season Focus
Taxes are a part of business. It’s something we are all used to – as a business owner or as an individual. When running your small business, it’s important to keep your personal finances separate from the business ones. Keeping separate accounts make it easier to understand where your business stands heading into tax season. Using an accounting software can show you where your income stands and allows you to budget for both expenses and taxes. Plus, using a software such as QuickBooks or another accounting software can make gathering the data for your accountant easier when it comes to preparing your return. With everything that goes into running a business, having a fair amount of the information you need in one location can be a relief.
Taxes can fall on the back burner when it comes to running your business day to day, even though for a short (occasionally stressful) amount of time each year it becomes your top priority. Working closely with your accountant makes the process easier. To make it smoother keep your documents in digital form – as hardcopies can get damaged or misplaced. Digital copies and back-ups of whatever form of record keeping you have will help both you and your accountant find what you need to get your business taxes done.
What to Consider the Rest of the Year
Once tax season is over, you’re likely taking a sigh of relief that the confusing work is done. But just because taxes are done doesn’t mean your finances go on cruise control the rest of the year! A few things to consider with your finances include:
- Tracking and auditing your expenses: Understanding what your businesses is spending and getting a detailed picture of it allows you to plan for costs and to cut costs in the future. It also allows you to see how your income is being spent and to prepare for other expenses.
- Handling bookkeeping and payroll: Payroll is something that is done regularly – you might even use an automated system for it. Seeing your payroll costs and the overall bookkeeping of your business plays into the previous point of seeing the whole picture of your expenses.
- Protecting your finances: In this case both your accountant and a legal advisor can help. Knowing what business structure or entity is best suited for your needs can provide protection for your finances – we encourage you to talk with a lawyer or legal advisor to understand how it can benefit you.
- Projecting for next tax season: your business taxes don’t live in a three-month period at the start of the year. Taxes matter all year long and understanding how to project for the coming tax season can prevent surprises in how much you owe. Both you and your accountant can project for tax season and work together to be prepared.
While there is a plethora of reasons to keep tabs on your finances all year long, those are the ones that can lead to the most benefit for your businesses in the short and long term.
Is Earlier Better?
In reality – not necessarily. It may be tempting to think that meeting with your accountant or financial planners in May or June to get a jump start on projecting is a great plan. However, a lot can change with your business in six months. It’s a lot easier and safer to project three months out in September or early October, as depending on your industry not a lot will change in those three months. Of course, don’t be out of communication with your accountant until the fall – ask them questions or advice on changes that could affect you. Your accountant likely has knowledge on changes to not only tax laws but also regulations that you might want to consider. They’re a resource to your business year-round, but it’s best to wait on tax planning meetings until closer to the end of the year. Typically, the end of the 3rd quarter or start of the 4th is going to be the most beneficial timing for both you and your accountant.
At LeMay & Company, we understand it’s easy to slip into only focusing on tax season, hopefully this blog can act as a reminder why keeping tabs on your finances is important year-round. If you have questions on where to start with understanding your finances, our team can help! Give us a call at (703) 912-7862, send us an email, or set up a meeting with one of our staff members to discuss your specific needs.