It's not easy to find the up side of tax time, but some small businesses are discovering that the process shines the light on how to improve operations.
Many business owners find themselves short of cash to pay their tax bills, due to poor planning. The solutions could include hiring bookkeeping help, buying software to keep the books, or simply being more diligent about bank reconciliations. Accounting mistakes that result in less money than expected can bring unpleasant consequences come April 15.
For business owners who vow, “Never again,” some advice comes from Gregg Wind, a CPA with Wind Bremer Hockenberg LLP in Los Angeles. Wind told the Associated Press that business owners can avoid surprises by meeting with a tax professional twice a year to be sure business practices, finances and bookkeeping are on solid footing.
“If you keep up with it, it's really not too onerous,” Wind said. “It's when you get behind that it's difficult.”
A survey conducted by David Michaelson & Associates for Turbo Tax found that the biggest tax headache for small business owners is finding enough time to prepare and file their taxes, the Napa Valley Register reported. The average small business owner–with fewer than 20 employees–spent four hours per week, or 208 hours a year on tax recordkeeping and preparation.
The time-consuming, stressful nature of tax season shows some business owners they need to hire help. It's critical to find a professional tax preparer or bookkeeper who understands small business and is up-to-date on all federal and state tax laws, advises Elizabeth Pratt, director of the Napa Valley College Small Business Development Center.
Financial advisers can also help small businesses avoid tax woes and make smart investments, but they must understand the unique needs of the particular owner they are working with.
Eric Stumberg, co-founder and president of TengoInternet of Austin, told On Wall Street magazine that he pours most of his assets back into his company and spends a lot of time building his business, which provides wireless broadband services to campgrounds and recreational vehicle parks in the U.S. and Mexico. “I want fewer relationships to manage because, again, it takes time. Someone who can help you solve more problems is going to add more value than someone who is just bringing one solution.”
He added that brokers need to understand “what keeps him up at night” and to communicate how they can help. “There's a lot that goes into running, starting, growing and managing a small business.”
More advice from Pratt: The IRS provides an online classroom (www.irs.gov/businesses/small) offering easy-to-understand workshops on a variety of tax topics and streaming video.
"Regardless,” Pratt wrote, “it is important for business owners to be personally involved in the tax-planning and control of the record-keeping system of your business. After all, it is your business.”