Small businesses (defined as businesses with fewer than 500 employees) account for 99.7 percent of all business in the United States. But running a small business can be difficult. According to a U.S. Bank study, 82 percent of businesses that fail do so because of cash flow problems. According to the Wells Fargo Small Business Index, $10,000 is the average amount of startup capital required by a small business owner.
With so much at stake, it pays to know what to do and how to do it correctly when it comes to paying bills and taxes on time. For small businesses, especially Mom and Pop stores, paying taxes correctly and bills on time is crucial. The IRS can audit any business tax return within three years of filing and it can collect back taxes owed for up to 10 years. As an example, if a 2017 audit of a return filed in 2015 finds discrepancies in previously filed returns, then the IRS can collect back taxes owed between 2007 and 2017.
To avoid the hassle and keep your small business going, here are some important steps to take:
- Follow the Numbers: In the midst of growing a small business, it can be easy to neglect bookkeeping. But bad bookkeeping comes with consequences. Not keeping track of receipts and expenses can lead to a mess when tax time rolls around.
Rather than scrambling, there are plenty of bookkeeping services to help ease the stress of keeping track of expenses. Companies like QuickBooks and GoDaddy offer bookkeeping services online and they also have apps, allowing businesses to keep track of their finances on their phones if they so desire.
Bookkeeping services can also give your small business a forecast of how it’s doing financially to better inform important decisions going forward. Bookkeeping services also offer sound advice from experts.
- Be Careful With Borrowing: Borrowing money is essential when most small businesses are getting started, but borrowing must be done carefully.
One way to improve cash flow is through receivables funding or invoice funding, which turns invoices and accounts receivable to cash or lines of credit. Receivables funding and accounts receivable loans allow businesses several benefits including:
- Keeping Equity
- Fast Access to Money
- Less Stress
- It’s Small Business Friendly
Whichever way you plan to borrow money, it’s important for a businesses to provide a full report of how much they plan to borrow and how they plan to spend the money. It’s also important to keep track of interest rates on loans, but paying back a loan too fast can also be bad for business, leaving a business short of needed money.
- Be Confident With Decisions: When running a small business, especially one that you own, every decision big and small is important. Decisions must be made with confidence and when it comes to tough decisions, trusting your instincts is key. Having confidence in your decision will help your business grow and might make customers more confident in your business.
To avoid tax or bill problems, bookkeeping is essential. Keeping track of the flow of your money will allow you to make better decisions in the long term and short term and be confident about where you business is headed. If you use a borrowing method like receivables funding or invoice factoring services, keep track of how much money is borrowed and how that money is spent. Accounts receivable financing companies can help your small business get immediate access to funding with good accounts receivable financing rates, help smooth out cash flow and gain access to short-term capital.