I speak with many entrepreneurs and business owners and all seem to fear the ‘boogie tax man’.
“I don’t understand my business finances or the taxes and that side of it”.
The unfortunate next chapter to this story is that taxes, while scary for just about everyone, business owner or not, is the least of an entrepreneurs worries. The sad truth is most entrepreneurs I speak with aren’t actually making any money in their business and just don’t know it. Or worse they are making money on paper and do not have any cash. Don’t get me wrong, taxes are also a very real boogie man. If you don’t understand what is financially happening in your business, taxes can and will bite in the a*s on tax day. I have seen it with far too many clients…”what do you mean I owe Uncle Sugar, I didn’t make any money last year and I don’t have any money now”.
What you need to take away from this situation is that as an entrepreneur you need to know how much money you are earning and what your expenses are each month. PERIOD. Yes, it gets more complicated and no, this doesn’t take into consideration timing of revenue and expenses, that’s another topic for another day. The most important thing to take away from this is ‘what $$ is coming in & what $$ is going out the door’. You need to know what these numbers are because they will become the foundation for all of the other business planning. Yes, you SHOULD be doing business planning. Just like a pilot doesn’t take the plane up in the air and start flying around, he has a plan and a direction. You may be ‘flying’ directionless in your business now, but that SHOULD change.
We are in an amazing age of technology, especially in business. Apps exist to simplify every aspect of your business, from finance, marketing, CRM, sales and beyond. You can sync your business bank accounts to apps like Quickbooks Online, Freshbooks, etc. to track your earnings and bills. That’s why it’s so important to have separate bank accounts. If you don’t believe me, read here. Some apps are free, while others have nominal charges. Consider what is best for you and the options for upgrading as your business grows. The free option may be great today, but may not work as you grow. Look slightly down the road to see where you plan to go with your business and decide accordingly. When you start your business, every dime counts, but like everything else in life “you get what you pay for”. Make your business finance app choice, sync up your bank accounts and look at your results. If your financial results are gibberish to you, don’t worry your not alone. It is for most entrepreneurs. Reach out to your trusted accounting advisor and ask them to help you decipher your business results.