How Do I Prepare My Business for Tax Season?
ARIANA BROWN, CPA SHARES HER TAX AND FINANCE SECRETS FOR SMALL BUSINESS OWNERS
Taxes and money. Two of the things we want to talk about least when it comes to our businesses, let’s be honest. They aren’t glamorous or fun. In fact, for so many of us, they’re down right stressful. But today, we’re changing that: Ari Brown, founder of Brighter Green CPA, is sharing some tips and tricks to help you prepare your business when it comes to all things taxes and finances.
Ari is a CPA for small businesses, including mine. She worked in public accounting before transitioning to her own business. Now, she helps other small business owners prepare for taxes, helps with bookkeeping including payroll and other CFO services.
For those of us who don’t think numbers are fun, Ari is truly a lifesaver. Today, she’s sharing some fantastic tips about how taxes and accounting so you can continue to move your business forward, especially when it comes to being in control of your finances.
T: 2021 has started, and started FAST. Today, I want to focus on real, actionable items that we can implement in our business so that our finances are solid this year. Let’s start with accounting… because if you don’t have your accounting set up right, your tax situation will be more of a nightmare…
As a small business owner, when do you think is the right time to outsource your accounting?
A: It really varies on the business or industry you are in and whether you’re a freelancer or not. If you’re starting to spend a couple hours a week on it and feel overwhelmed or lost, it might be time to hire someone. But remember, many accountants will be able to cater to your specific needs and get you a package that makes the most sense! When you get to that point when you have more than 20-50 transactions a month, it is just better to have an accountant in there.
At a minimum, I suggest getting an accountant to review your accounts quarterly. It’s always good to have a second set of eyes from a professional who can steer you in the right direction.
T: I know I have my own stories of mistakes I made because I was trying to do my accounting on my own with my businesses 10 years ago. Do you have a story or a situation that could have been salvaged if they would have decided to outsource their accounting early on?
A: I probably have a lot of those stories! The best way to sum it up is when you are new and you get an accountant right out the door everything is done right the first time. Whereas I’ve had people come to me later on in their business journey, and it can end up costing a fortune because you’ve been in business 8 years and you've never asked someone for help.
T: YES! That’s exactly what I mean. In your business, when you try to wear all the hats and think you can do everything, you often wind up costing yourself more in the long run. Outsourcing your accounting sooner rather than later is a great way to avoid these mistakes. When you determine your prices, include the cost of having someone help you with your money! It should be one of the first things you budget for.
A: I definitely think the cost can scare people, but it’s important to remember that your accountant will grow with you, too. We’ll cater to you and add services as they are needed - so don’t think you have to pay a fortune right off the bat!
T: I love that. It's a win win for everybody in that regard. Let’s talk about tax planning next. I know it’s no one’s favorite topic, but it’s an important one. What does “tax planning” mean to you?
A: To me, it means being proactive and being ready for tax time beforehand. It’s not just about knowing your numbers, but also working actively to take advantage of all of the deductions and credits before April 15th* that you can. (*The tax deadline has been pushed back to May 17th in the US for 2021; June 17th for the state of Texas.) If you get to April and ask us for help, we’re often out of time for a lot of what can save you money. It’s also about planning ahead for your business - if you’ve got big contracts coming in at the end of the year, can you push them and also wait to purchase a big expense so it balances out some. Things like that.
T: So if someone doesn’t have a CPA or wants to get the ball rolling for this tax year, when should they find a CPA or hire a new one?
A: As soon as possible. The sooner you can connect with the right CPA, the sooner we can help you prepare for your taxes. Try not to wait until the last minute, and yes, even January is getting close to last minute! It could be too late to take advantage of some of the credits and deductions.
T: Good to know! I know we use QuickBooks, but are there any other programs you recommend small business owners start with so they can keep their money nice and organized?
A: I honestly recommend QuickBooks online from the start. It’s a good program and can set you up for success. It’s easy to connect to your bank accounts, you can pay contracts or run payroll there, and it’s easy to reconcile your accounts.
Another popular program is Zeroes, and there’s FreshBooks, too. Zeroes is more popular outside the US, so I don’t know many people on that program. QuickBooks is really where it’s at! Just remember to use the online version so that your accountant can access it anywhere, too (not the desktop version).
T: All of this talk of connecting accounts made me think of something else to ask. Do you think it's a no-brainer to have a separate business bank account and a business credit card?
A: Yes! I am 100% on board with keeping those separate. There's a lot of things, where you know, business and personal kind of blend and merge, so separating them is really important. There are so many reasons to keep them separate: it's clean, it's easy to know this is business expense vs. personal. And, when they’re blended together, accounting fees get higher - because you have to comb through it all and sort it out. It’s super time consuming.
T: Definitely a good point. Quick question for you. When do you recommend getting an LLC or a DBA if you didn't start out with one?
A: Ideally, I just try to push everyone to get at least an Employee Identification Number (EIN) as a sole proprietor right off the bat. This helps you keep everything for your business separate from your personal social security number and personal finances. Once you're in an LLC, C Corp or an S Corp, your legal liability note is separated between business and personal. I'm not a lawyer, and I'm not going to give legal advice. I just think it's easier and cleaner right off the bat.
T: It’s so easy, too! If you want this business to be your main line of revenue, then any steps that you take to show yourself that this is legitimate, this is a business, will affect how you show up. This isn't a side hobby or a side hustle. This is a business. Do it, to show yourself and others that this is a serious business model, you have a plan, you're moving forward, you're running the ship.
T: Any tips for new business owners who are prepping for taxes?
A: First, remember it’s never too late in the year to start preparing. And you're never too small to hire a CPA. We're always here.
T: I always like leaving these interviews with a challenge. So… What can business owners do for the next seven days to implement some of these things that we've said?
A: Find your biggest pain point, what bugs you the most, or what do you wish you could change financially. Write it down and find someone that can help you with it. Whether it’s a CPA, a business coach, a money mindset coach… find them and start the work.
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