Let’s face it. Poring over your business numbers isn’t a sexy activity. I think of that line from “When Harry Met Sally” as Harry is quizzing Meg Ryan’s character about her exploits with Sheldon. Harry chides her that a man named Sheldon will do your income taxes. He may even do your root canal. But a man with that banal of a name couldn’t possibly be an exciting suitor.
Well our expert today on income taxes and financials isn’t named Sheldon and as you can see by the photo above—is not banal at all. In fact, as 2019 draws to a close, Yahaira Krahmer, founder of Account.Her shares her financial to-do’s for small business owners to tackle before 2020 arrives:
Joya: There are alot of tools out there. What financial bookkeeping software are you a fan of?
Yahaira: I highly recommend investing in a cloud-based accounting software versus. Spreadsheets can be time-intensive and up the likelihood of error. My preferred choice is Quickbooks online, which is very robust option at a good price point; other contenders in the market are Xero and Wave.
Joya: I hear you. I personally use Freshbooks. In your opinion, as you service small business owners, what is the most common mistakes you see?
Yahaira: To me, business owners reviewing financials at the end of the year, is like driving a car without checking to see how much gas you have in your tank before your trip. It is crucial to pay close attention to your cash-flow statement MONTHLY in order to make sound financial decisions.
A few tips for maintaining positive cash-flow:
- Negotiate better terms with your vendors/suppliers and buy yourself more time to pay out.
- The same goes with your clients. Charge penalties for late payments. Better yet, incentivize early payment by providing a small discount if paid in full.
Ensure that the flow of money coming INTO the business is faster than the money going out.
Joya: Why is it important to evaluate your goals from last year and know where your business is?
Yahaira: Reviewing your ‘Profit & loss statement’ at the end of the year can give you a lens into what you can (or cannot) do with your business in the coming year. Are you in a position to invest by buying more equipment? Can you hire another employee? Or, do you need to shave your overhead?
Joya: And if you are looking to hire, remember to file Form I-9, withhold taxes, report information about your new hires to the state, get workers’ comp insurance. All that good stuff. I’ve noticed on the Account.Her Instagram page, you provide some nifty tax strategies. What are some good year-end tax strategies to consider?
- Contribute the maximum allowed towards retirement accounts
- Contribute to Health Savings Account [HSA] (Cover health-care costs efficiently)
- Donate to charity
- Claim the home-office deduction (if applicable)
- Hold off on billings (if income is too high for the year and may bump you to a higher tax bracket, it might make sense to wait until January to invoice clients if you think you will be in a lower tax bracket)
- Fund a 529 education savings plan
- Defer capital gains by reinvesting (sell loser investments to offset gains)
Thank you Yahaira. I always recommend that my members set an appointment with AccountHer or another bookkeeping service NOW, versus sweating bullets at midnight on April 14th. You can use this time to review your business plan. Ask questions about deductions. What’s the timeline for paying taxes? What did you do well? What can you differently in 2020? What short term and long term goals are you on track to hit? What did you already achieve that you can pat yourself on the back for? It’s a good way to set the tone for both the New Year and the upcoming tax season.
AccountHer is a virtual full-service accounting & advisory company. We work with service-based female entrepreneurs all across the country. We are passionate about helping more women-owned small businesses succeed. https://www.accounther.com/
LadyDrinks is a leadership development platform South Asian women executives. We create programming and events 4 times a month to bring like minded professional women of a certain cultural background so we may create support systems for success. The five-year plan is to host an event in every city of the world. www.ladydrinks.com