The reality is you can’t hide from your responsibility to understand your financial situation and properly report it to the government. If you sweep it under the rug, your situation is not going to go away on its own.
Our goal is to run a profitable business. Here are some ideas to make life easier for the business owner:
It doesn’t matter whether you hire a bookkeeper or not, you need to create a system that works for you! Leaving it in a box until tax time is not a solution if you want to become a profitable and sustainable business.
Not all solutions work for everyone so it’s important to look at your habits and create a system that is easy for you to follow. For instance, I stick all my receipts and bills into a folder. At the same time every week, I enter them into my accounting program, pay the bills, and create invoices. I used to do it while things came across my desk but that made my day very disruptive.
I know someone else who keeps the receipt envelope next to the place where they remove their wallet at the end of the day. Once a month, the receipts go to the bookkeeper.
I know others that have an app where they can take a picture of the receipt and it automatically captures the proper information.
Regardless of which method you use, make sure you do not leave it in a box until the end of the year. It causes a headache for everyone involved.
2. Set some money aside for taxes throughout the year
A simplified way to look at this is to take your income tax and GST situation for the past few years and estimate the amount you might need to pay this year. If you take this number and divide it by 12, this is how much you should set aside every month going forward.
If your business is growing very fast, then ask your accountant or business coach to help you calculate a more reasonable number.
Consider opening a separate bank account to stash away your income tax and GST payments. If it is out of your regular bank account, you won’t be tempted to spend the money. Online banking is really smart these days and you can set up an automatic transfer between accounts once a month. This means you set it up at the beginning of the year and not worry about it until next year. Easy!
3. Educate yourself and ask for help
The number 1 reason why businesses fail is due to cash flow issues where they cannot pay their bills. Don’t be a statistic. Do something about it now before it gets worse.
If you are currently in a bad situation with your finances, it is not going to go away or get better on its own. As a business owner, you need to educate yourself on how to improve your situation and be profitable.
Some people are intimated by accountants and bookkeepers. Your business coach, mentor or consultant can also help put together a solution that works for you. You just need to ask.
NCP Consulting is rolling out a program to assist business owners find simple solutions to understanding their numbers. This program will include understanding the power of both the accounting and production numbers. If you are interested in more information, click here.