Successful small businesses don’t happen automatically. They require hard work and a lot of planning. Having excellent accounting for your small business is imperative if you want your business to be the best it can be. From bookkeeping, audits, payments, and tax services to financial statement preparation and advisory and assurance services, an accounting service delves into every part of the business the whole year round to ensure ultimate success.
Top 4 Benefits to Year-Round Accounting for Small Businesses
Although there are a myriad of advantages to having access to small business bookkeeping and accounting services throughout the entire year, four stand out as being the most important. They include:
Provision of a solid record of finances – Finances don’t just happen once a year, or however often you decide you need accounting for a small business or a bookkeeper to do your small business tax, or whatever services are needed at the time; records and analysis are a year-round requirement if you want to make sure your business is healthy and moving ahead at all times. By systematically keeping track of every single transaction involved in your small business, during the whole year, you can maximize performance, help eliminate the chance of errors, and evaluate such areas as cash flow, employee performance, and so forth.
Provision of business opportunities and insightful financial analysis- Whether you are seeking growth or just wanting to stay afloat, thorough analysis and realization of business opportunities are a must. It takes a healthy accounting program to do either of these feats because in-depth accounting is key to managing costs, seizing opportunities, catching directional mistakes, and improving your business cash flow. If you only employ accounting services for your small business tax at your annual tax time, you are likely losing out on information you could have gained throughout the year.
Provision of optimal tax advice and services – Small business tax isn’t a once-per-year activity. You need to have information at your fingertips that will help you save money on taxes over the course of the entire year. You also need tax planning so you can maximize deductions throughout the year. By having a year-round tax service, you can be well-prepared when tax time comes.
Provision of a good game plan – Business takes place all year. If you only hire an accounting firm for small businesses on occasion, you’ll miss out on the advantages having well-kept books and analogies provide the rest of the year. By the time your Enrolled Agent comes, your finances will have already changed from what they were when you could have corrected a mistake or grabbed an opportunity. Your business plan is ever-evolving and if you don’t have a professional overseeing the finances of it throughout the year, your business will not be functioning as optimally as it should be.
A Firm Decision: Hiring a Firm vs. Hiring Multiple Accountants
When your right-hand doesn’t know what your left hand is doing, it spells disaster for a small business. Even though your business likely needs multiple services, like small business taxes and day-to-day bookkeeping, if you go hiring different people from different places to tend to those duties, you may end up in trouble. Why spread it out when you can trust one firm to tend to your small business accounting, bookkeeping, taxes, and Enrolled Agent needs all in one place? Some reasons that a one-stop-accounting-shop is wise include:
Consistency. You are more likely to achieve a high level of accuracy and efficiency when you have one and only one accounting firm tending to all your bookkeeping and accounting needs across the board. There’s no wondering what the “other guy” is doing when you have an experienced, expert-level agency working for you.
Cost-effectiveness. When you go with one outsourced agency for all your accounting needs, you’ll get services like financial statement preparation, tax preparation, bookkeeping, analyzation of your books, and so much more for one fee.
Minimizing fraud or financial misconduct threats. Having only one accounting firm to deal with lessens your risk of being cheated, fraud, or being the victim of any other type of misconduct or criminal activity. Especially when the small business accounting firm is a well-established, reputable company, you can rely on them to meet your needs without security threats.
Lower risk of penalties. It’s not enough to not be aware of a law or regulation. You are still held accountable. In small business bookkeeping and accounting, there are a multitude of penalties you may encounter. By having service from one firm year-round, you lower your chances of being fined or penalized.
The Bottom Line: How It All Adds Up
The bottom line is that although you may think you are saving money by going with a small business accounting, bookkeeping or tax service only when you need them throughout the year and by hiring multiple outsources rather than one outsourced firm, the fact is that you may be costing your company dearly. It’s time to rethink your game plan, so you can come out winning.
The CARES Act has opened the floodgates to free money for businesses Below are the basic details of loans available to businesses. They are incredible unless regulations apply limits:
This new law lets any business borrow 2.5 months of payroll, benefits, interest on loans and lease payments.
The loan is made through a bank that is an SBA approved lender and is guaranteed by the SBA.
Loan Is nonrecourse to the borrower.
The loan is forgiven if you don’t cut back on staff and spend the money on the items listed above.
The debt forgiveness is tax free.
Any part not forgiven is 10 yr repayment.
The interest rate is capped at 4%.
There are no fees to get the loan. The SBA will pay the banks a 5% fee.
Many details to come. The original CARES act was 273 pages long, the bill as finally passed by the senate was 792 pages long. It will take time to learn what else it contains.
Preparing Your Business for the Effects of the Coronavirus – Emergency Business Planning
With the rapid onslaught of the Coronavirus already disrupting business operations in the U.S., there are three ways you can face the future: panic, do nothing, or plan. As we work with business owners through these tough times, we know the best way to do this is to plan, making the situation under your control as much as possible.
By now you have probably read all the communication from your local, state and federal governments on how to prepare for the actual virus itself, and hopefully you are moving forward with those preparations. But what should you, as a business owner or responsible manager, do to prepare your business?
Assess the Impact on Your Business
The first step is to assess how the changing environment might affect your business. How will the virus affect the revenue and cash flow of your business? Not all businesses will see a revenue decline, and for others, the decline could be catastrophic. For some, it won’t be a question of getting or keeping the business, but labor shortages that might make it impossible to deliver your product or service. Consider these possibilities:
Sudden Drop in Demand – Many service businesses including restaurants, fitness and health clubs, and other services are already seeing a sharp drop in revenue as customers stay home. It will be made worse as authorities force businesses to close or operate for fewer hours, or as contracts from state agencies are stopped. If you are in the construction industry or a manufacturer, most likely you have contracts that will continue through the next months, so this might not be an immediate issue, or you might find yourself unable to perform to your contractual obligations through limitations in your workforce.
Sudden Increase in Demand – Some businesses are seeing huge increases in demand like supermarkets and resellers of products needed at home, and of course, suppliers of medical products. This could hit manufacturers as well if their competitors can’t deliver due to labor shortage or supply chain issues. Here, you’ll want to consider how to keep your existing customers happy, so they stay with you after the virus passes.
Labor Shortage – You will probably be affected by a drop in labor as workers are forced to stay home. The possibility also exists one of your employees is infected and your entire staff is required to be quarantined. To prevent this, you must be sure your staff is comfortable with staying home when they feel ill. This could be an issue if your company has a very authoritative management style and your employees are afraid to be honest with you. You might want to coach your employees to practice social distancing while they are not at work. Additionally, your workers might be afraid to come back to work for fear of getting the virus.
Supply Chain – If you are a manufacturer, you’ll need to assess the supply of all of your component parts. Some companies are already experiencing shortages of critical parts. If you resell products from other suppliers, you will likely have similar problems, requiring you to be resourceful
Long Term Impact – If the situation continues for many months, the long term impact will be hard to predict – but in this situation, the possibility of this lasting a long time is high.
Create an Emergency Disaster Plan
Once you have a plan, if you are facing a sudden drop in demand and a steep revenue decline, it’s time to plan for action NOW. The immediate impact of actions to mitigate the spread of the virus will probably last 6-12 weeks or longer, and your first task is to preserve cash to make it through the lean times. Make three different plans for a 10%, 25%, and 50% or more reduction in business – or “slowdown”, “significant drop” and “disaster”. If you see your revenue decline hit one of those targets, enact the plan accordingly to that category. Consider these steps in each of the plans:
Identify Non-Essential Expenses – Depending on the size and complexity of your business, access to reliable financial data about your business is critical. You will need to quickly identify and stop all non-essential expenses to preserve cash as soon as possible.
Defer any discretionary capital expenditures until the acute illnesses caused by the virus are in decline. Some projects are such that sustaining a delay will have a significant negative cost impact. On the other hand, with the federal funds rate now at zero, banks will be able to lend at historically low rates, so it may be a good time for capex. Projects with high net present value (strong justification) should be pursued, but projects with borderline justification should be delayed.
Delay payments to vendors where possible and ask key suppliers for help – they might extend additional credit or give you more time to pay.
Talk to your Bank – When the entire economy tanks, they are in trouble too. Be assured, they are working with the government to minimize the impact on their bottom line and they are fully prepared to listen to your needs. They might delay installments, cancel interest payments or provide cheap bridging loans.
If you run a non-profit, reach out to all donors and volunteers and ask for additional assistance to get your organization through – and be specific in the ask.
Essential Expenses – Decide which essential expenses need to be cut in order of importance and cut them in that order when you have to.
Employees – Plan for movement of essential employees to virtual, at-home work assignments or part time. If layoffs are necessary, stack rank your employees based on their criticality to maintaining operations.
Contact your suppliers – To understand the impact on your business, it is essential to know where your suppliers stand. Have they stopped or decreased production or has demand for their products increased to the extent that you might face shortages? Consider logistical challenges as distributing products is typically not a stay-at-home job.
Contact your customers – As much as you need to know the status of your suppliers, your customers have the need to understand your situation. In times of crisis, customer-centric organizations make a difference and will be remembered.
Reassure Employees – Be open and communicate your plans with your employees. They dread nothing more than uncertainty.
Avoid Travel – Avoid travel if possible. This is the time of year when there are lots of industry meetings but getting on a plane or staying in a hotel right now is a risky proposition. Look for opportunities to meet suppliers and customers virtually. Get out front in communicating with your customers to reassure them of the steps you are taking to keep them whole through this crisis.
Use Time to Work On Your Business – Work on the gaps in your business during the slowdown so you can come out stronger when it’s over.
Pivot to New Realities – Think about any way your business can pivot to take advantage of the new realities. There will be fundamental changes in the way we do business moving forward, and only the agile will capitalize on them.
Get Advice and Help – Discuss and develop these plans with outside help – your business coach, peer advisory board or other business mentors should help you identify areas to focus on – especially trusted advisors already familiar with your business.
Take Appropriate Action
Now that you have a plan, you must commit to taking action. Any additional delays will cause your cash to run out sooner, putting the long term health of your business in jeopardy. Hard decisions may be necessary to save your business.
Finally, discuss the potential impacts with your key advisors – your business coach, accountant, or fellow business owners. By having the discussion, they will give you essential ideas you might not have considered. By sharing their expertise and unique perspectives with each other, they simply increase their chances of success.
Tax Implications
The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. All details and updates are available here: https://www.irs.gov/newsroom/payment-deadline-extended-to-july-15-2020.
For more inquiries or assistance on emergency business planning during the outbreak of the pandemic, please feel free to contact us. We are here to support and guide you through these challenging times.
Who is your company’s perfect client? Tapping into the demographic that your product or service best-serve can help create a loyal consumer base that provides potential patrons for years to come. Not to mention, satisfied clients and customers are the best kind of advertising with positive reviews and word of mouth. Narrowing in on your loyal target audience will involve profiling and finding the perfect fit for what you offer, which takes research and marketing strategies.
Discover the perfect clients for your company, business, or brand, with these tips:
Know What you Do
Before you can recognize your ideal consumer and target audience, you need a full understanding of what you are selling. Watch, listen and observe to determine how your product or service is being used by your customers and measure changes in buying habits or patterns over time. Be an expert when it comes to conveying what you do.
Obtain Honest Feedback
In order to determine who and how your product is being used, you need to get feedback from your buying audience. This may be achieved with surveys or other tools and through offering promotions and rewards for participation. Follow-through will be impeded if there are technical issues or glitches so make sure that you choose a platform that will work smoothly for your reviews. Know that preferences, interests, and opinions can change over the course of time so survey and engage your buyers regularly. Social media is another platform that makes it easy for customers to reach you and share their experiences. This inside information can better help you find the client that is perfect for your product or service.
Stay Relevant and Current
Always update information pertaining to your consumers and keep your contact list of clients current. Maintain a simple spreadsheet or database with contacts, promotions, and campaigns- as well as the outcome and conversion rates of these efforts. A thorough and accurate customer contact list is gold; maintain and protect it.
Find your Audience
Go a little deeper to differentiate potential patrons from perfect clients by finding out a bit more about them. For instance, information pertaining to gender, job, and interests can help point to whether they are a good fit for what you offer. The more information you can elicit, the more streamlined and accurate you can make marketing efforts in an attempt to lure them from rivals or competitors offering similar goods or messages.
Target your marketing efforts toward your perfect clients with these tips. Got other business-related questions? Rely on the industry experts at BMH Accounting, with locations across South Florida. BMH Accounting specializes in serving the needs of small businesses with monthly accounting, bookkeeping, tax planning, and payroll services. Call to learn more today.
Every business, no matter how small, has several tax obligations that it must meet. This includes taxes at the federal, state, and sometimes local level along with payroll taxes. At BMH Accounting, we understand that keeping track of so many obligations can be challenging. However, doing so is essential to avoid fines and possibly other sanctions from the Internal Revenue Service (IRS) and your state or local governments.
In terms of withholding from employee paychecks, you must deduct federal tax, state tax if applicable, social security, and Medicare. Below we outline how to determine your tax obligation at both the federal and state levels. Before you arrange to pay any taxes, however, you must first choose your tax year.
How to Choose the Tax Year Most Appropriate for Your Business
Choosing a tax year to coincide with the 12-month calendar year is the most common among business owners. This typically works well for companies without special accounting situations that would require the business owner to choose another alternative. If your accounting cycle doesn’t end on December 31, using a fiscal year instead of a calendar year will work better for you. If you have a special situation such as operating your business only part of the year due to starting or stopping it, you should select a short tax year for your filing status.
Federal Taxes
The type of structure you choose for your business determines the categories of taxes you pay and how much you pay for them. You may be subject to one or more of the following types of federal taxes:
Employer tax: This covers specific payments you must make such as contributing to the workers’ compensation and federal unemployment programs.
Estimated tax: As a self-employed business owner, you must make estimated quarterly tax payments to the IRS.
Excise tax: The IRS only charges this on specific services or goods such as alcohol and tobacco.
Income tax: This is the amount of federal tax withheld from employee paychecks based on their income and number of exemptions.
Self-employment tax: People who employ themselves are subject to the full amount of social security and Medicare, currently 12.4 and 2.9 percent.
State Taxes
Each state creates and enforces its own rules regarding employment taxes. If your state collects these taxes, the types and amounts you pay will depend on your business structure and physical location. If you’re a sole proprietor, for example, you will pay state taxes via estimated payments and include your income and expenses on your personal tax form. Corporations, on the other hand, pay taxes as a separate entity from the people who own the business.
Get Help with Proactive Tax Planning and Meeting Your Tax Obligation
BMH Accounting is available now to assist your small business with a tax planning strategy to reduce your tax burden and gain a better understanding of the tax obligations you face. Please contact us today to request your initial consultation.