How SMB Clients Can Beat Next Year’s Tax Woesby
Despite the fact that small and medium sized businesses are established linchpins in the American economy, recent research has discovered current tax policies disproportionately affect them and stifle their growth opportunities.
Sage has recently investigated the effects of taxation on small and medium sized businesses. As a former small business owner, I found the results frustrating, yet not surprising. As it turns out, the smaller a company’s employee count is, the greater percentage of their profits go towards taxes.
In other words, under the current tax systems, small and medium sized businesses end up paying higher tax bills than larger enterprises with more profits. This inverse relationship between tax bills and company size can disincentivize entrepreneurs from starting their own businesses, as they know they could end up paying for it down the road.
Given the importance of small and medium sized businesses to the economy, it’s crucial to recognize and address these disadvantages. The most powerful step towards rectifying this inequity lies in instilling policy changes that would reduce the tax burden faced by small businesses.
In the meantime, small and medium businesses can still take measurable steps to lessen the burden to their workflows:
1. Cutting Back on Cash Flow Issues
Small and medium sized businesses have limited financial resources, making them very susceptible to losses from late or large payments. For instance, medium-sized firms, with about 100-499 employees, spend over $80K on tax-related accounting in each year— a significantly higher cost than small (10-99 employees) or micro (less than 10 employees) businesses.
High tax burdens increase financial pressures for small and medium sized businesses. These pressures stifle a company’s ability to grow as it lacks the capital to invest in new or experimental projects, strategies, or services to develop its business.
Cuts to incoming funds will also influence whether or not businesses can stay ahead of other expenses such as paying suppliers, thereby affecting the entire supply chain. While small and medium sized businesses cannot change tax policy all on their own, they can change their own internal processes.
Companies should look to adopt new tools to regulate and track cash flow unrelated to tax bills. By automating invoicing and payments, businesses can assure they are getting paid and sending payments on time. It can be challenging to keep track of countless pending transactions, but online tools are equipped with the processing power and analytical capability to keep teams organized and profitable.
To find the best solution for your business clients, look into which convenient, integrated software services can manage payments as a part of internal accounting processes.
2. Letting Go of Low Productivity
Tax-related accounting doesn’t just cost teams money, it costs time. Smaller firms spend the greatest proportion of their working time on tax-related admin tasks.
Globally, tax-related accounting can take anywhere between 7-29 days per year and the US reports the greatest number of yearly days spent on tax-related admin activity— about 6 percent for small firms.
While admin is a necessary evil for most businesses, the associated costs in lost productivity threaten the bottom line. In fact, over $143B has been wasted in the US this year due to lost productivity. The effects are felt even more severely among smaller businesses that do not have the supplementary funds to waste.
To save time on admin tasks, companies must turn to automation technology and AI systems that can collect and analyze data for business insights. These tools help companies to work smarter and more efficiently across industries.
By leveraging cost-effective cloud-based software, businesses can increase flexibility and productivity to reduce the drain admin puts on teams. From “hiring” a chatbot to assist with customer service inquiries and task execution, to augmenting data and using AI to inform decision making, these technologies help to better allocate a company’s most crucial resource— its people.
Automating processes gives workers more time to spend on more strategic sides of the business. Ensure that your clients’ best assets aren’t stuck number crunching, when they could be with their customers power lunching.
3. Wiping Out Workplace Woes
When the people, the core asset for any company, are disengaged, the entire company suffers. Lack of funds can limit a company's ability manage its people appropriately or reward them financially, while laborious and banal tasks can create a team of uninspired employees.
Low morale could end up costing you in lower productivity and growth, and make it difficult to recruit new employees. To gain and retain top talent, teams need to invest in tools that can curb costs for talent acquisition and development.
HR automation tech can source prospective candidates, vet resumes, and help reduce bias in hiring decisions. Additionally, AI-powered “people analytics” can make teams more effective and strategic.
By integrating predictive software that can help aggregate and identify patterns across datasets, HR teams can process employee engagement metrics, timecards and feedback surveys in real time to better understand their people and help them grow.
Making a Move
In order to navigate setbacks and inefficiencies in cash flow and productivity, business leaders need to proactively adopt new technologies to avoid falling victim to unfair taxing policies. As long as small and medium sized businesses are disadvantaged by the current tax system in the US and abroad, competition and business growth will be stifled.
In order to get ahead of the roadblocks, businesses should focus on finding the right tech to improve client experiences, advance business strategy and help teams work more effectively.