Why do most small businesses only consult with their accountant once a year before tax time? Just as scheduled checkups with your doctor are essential to keep you healthy, regular communication with your accountant is vital for the health of your business.
YEAR-ROUND HEALTH CARE
Chartered Professional Accountants (CPAs) do much more than help you navigate a few annual tax deadlines. Your CPA is a year-round trusted advisor that provides professional expertise tailored to your needs.
The tax world is complicated, with ever-changing laws, regulations, deductions, and credits. Regular communication lets your accountant offer insight into your company’s financial picture, keep you updated with rules and benefits, and develop tax strategies and business planning. A CPA is invaluable in navigating the complex realm of COVID incentives.
Your CPA can also help maintain a pivotal linchpin to a successful business: bookkeeping. Accurate and organized bookkeeping is essential – your CPA can help save you time, energy, and frustration.
Here are some tips from CPAs in the know.
The best method of keeping your records in tip-top shape is to have a bookkeeping routine. Itemizing bills and invoices immediately rather than delaying until a tax deadline reduces stress and time by avoiding the struggle of detailing a pile of receipts with a foggy memory. Taking advantage of user-friendly bookkeeping software is a valuable tool in this regard.
SHOULD YOU INCORPORATE?
Incorporating your business can be a tremendous opportunity to profit from tax incentives, deductions, easier access to capital, and managing liability and risk. You can also benefit from special rules providing the potential to minimize taxes, provide owner financial protection, and access capital gains exemptions if the business is sold. A CPA can discuss with you if your business becoming a legal entity is the right choice.
IT’S NOT PERSONAL; IT’S BUSINESS
Keep business and personal finances separate. Use a business account and avoid transferring money between personal and business accounts. Doing so will make it easier at tax time, protect you from potential legal issues, and is particularly important for corporations. By paying yourself dividends or a salary, the salary is taxable for the individual and is a deduction for the corporation.
Purchasing business and personal items separately allow for seamless expense tracking, as it is much easier to find relevant information for tax statements. For example, filling your business vehicle with fuel and purchasing a snack using the same transaction creates a bookkeeping tangle. Buy them separately.
Stretching a personal purchase to claim it as a business expense isn’t wise. Enjoy a nice vacation – but don’t invent a business meeting to claim your bed and breakfast as a business expense. Similarly, dinner with friends is a lovely evening, but discussing business doesn’t justify it being deductible.
Another tricky situation is paying family members for services. Using a single account necessitates detailing completed jobs, the time involved, and whether you would pay someone else the same wage. Again, let your CPA guide you on how this is best done.
MAINTAIN ROUTINE CHECKUPS
Regular communication lets your CPA maintain a current view of your company’s financial condition and be in the best position to keep your business healthy.
Discussing significant decisions with your CPA before making them – such as beginning a new process or making a large transaction – will provide an opportunity to implement the best plan for your unique situation and inform you of any possible tax ramifications, optimizing your financial decisions.
Instead of waiting until the pressure of tax season to address issues that have arisen throughout the year, sitting down a few times to discuss financial questions and strategies will help avoid the dreaded words: “I wish you had talked to me sooner.”
Wise business owners keep the business in the best shape it can be in by meeting with their CPA regularly.
At SLF, we’re here to help. For more information contact your SLF Advisor.