December may be the time for holidays and travels, for getting together with family and friends, but it’s also the time to be thinking about your taxes.
Oh no! Tax talk in December? Way to bring down the party!
It’s true—if you wait until April to prepare to file your tax returns (or even your extensions), you’re not entering the tax season prepared and with your business house in good working order.
What Are the Best Practices to Put in Place Right Now?
• Engage a knowledgeable, reliable certified public accountant. We know you, the typical small business owner. You want to control every detail of your business down to the penny, and you also don’t want to overspend for professionals. But trying to save money on CPA expenses is “penny wise and dollar foolish.” A knowledgeable CPA will be able to recommend strategies to lower your tax outlay throughout the year. With just a few pieces of well-timed advice, you will quickly learn that a CPA is an essential regular expense.
• Seek tax advice twice a year at least: at tax time and when it’s not tax time. You can work closely with your CPA to determine what capital expenses might be coming up, payroll and benefits expenses you might be incurring or even profit-sharing plans. With your CPA’s guidance, you can create a calendar that makes sense for your business’s cash flow while also minimizing your tax exposure.
• Make sure your accountant creates quarterly or even monthly profit and loss statements (P&L’s) as well as balance sheets. Your P&L shows your income and expenses. Your balance sheet includes all of your long-term and short-term debts (your mortgages and other loans) as well as your assets, which would include your real estate, furnishings, accounts receivable and stock on hand, as well as your money in various bank accounts.
• Determine if you need financial statements quarterly or monthly. Many business owners operate quite well with just quarterly finances, and their CPA may offer a more reasonable fee for just quarterly finances. But if your business is new or there is a new component (reflagging a hotel, recent renovations, new management company, new products offered), then you might want to switch to monthly financial reports. If you are considering refinancing or engaging in a new loan, you will need up to date financials and you will not necessarily be able to wait for quarterly reports.
• Read those P&L’s and balance sheets! It’s not enough to just know that your CPA is creating reports. Those reports are for you to know your business’s strengths and areas of concern. Make a note of which line items of revenue and expenses are significantly different from the previous month. What do you think led to those changes? Is there anything you can do to operate your business that will prevent increased expenses in those changed line items or can continue to show increased revenues? Compare your P&L to this month last year. How is this year shaping up? Are you more or less profitable? Are your expenses higher or lower? Why? How was your income? What aspect of your business shows the most growth and the most potential for growth in the future?
• Make adjustments based upon your financial statements as well as other business data you collect. You can’t trim expenses if you don’t have a sense of what the nature of your increased expenses are. You also cannot determine if marketing programs are working if you don’t have any data about how people are finding your business. These are just two types of data that you should utilize in making purchasing, hiring and marketing decisions.
• Are you considering refinancing or purchasing? Start to get your books in order. Then call our associates at GRP Capital. We can help you determine the best path towards securing funding. We work hard to represent you and your business to our lending partners only after we understand your revenue goals, any roadblocks you have encountered and determine how a new loan will help you achieve maximum profitability. We also regularly consult with your accountant when necessary to make sure you have the appropriate documents to make the strongest case for a lender.
Whether you are expanding your existing portfolio or investing in your first business, GRP Capital has the resources to help you meet your required capital needs. Our services include divisions of Real Estate Capital Markets, Small Business Financing, Construction Lending, GRP Capital Debt Fund, and Consulting and Advisory. Learn more at grpcapital.com.