The month of June conjures a whole host of themes; beach blankets, kids overjoyed at the end of school and even family roadtrips and Father’s Day.
The month of June conjures a whole host of themes; beach blankets, kids overjoyed at the end of school and even family roadtrips and Father’s Day. For many small business owners, June kicks off the season of looking back at the first six months of the year and planning for the year’s remainder. The do-it-yourself entrepreneur can find herself overwhelmed if she doesn’t have a solid accounting process in place. Professional Association of Small Business Accountants member Stephen Macy, from Stephen A. Macy, CPA, PA in Clearwater, Florida has recommendations to avoid mid-year panic and spur your small business on to greater success.
“Mid-year is a great time to take a pause and review what’s happened in the first six months of your business’ year,” says Macy. “It’s especially important now, as the recession is finally easing. There are countless opportunities for small businesses to grow and prosper – if they can weigh the decisions wisely.”
Review what’s happened and make corrections
Two quarterly tax payments have already come and gone. Mid-year is a good time to see what you’ve paid in estimated taxes and balance projections using hard numbers from the first two quarters. “You want to run a fine line between over paying and underpaying estimated taxes,” says Macy. “Looking beyond just the next tax bill can be liberating and enable real long range thinking about your business.” No one likes tax surprises either. Underpayments caught early can also mean small djustments now rather than a huge tax bill next April.
Plan for growth and free cash for future investments.
Most businesses have debt, but bad debt or high interest debt can bring down the business making it difficult to plan for growth. June is a great time to review your current borrowing plan and investigate more cost effective alternatives. Even if you don’t plan to make a capital purchase this year, planning for that purchase in 2014 gives you a goal for how you should track expenses as well as save for next year’s big item.
Track where your money is going – daily.
More than just a monthly reconciliation, knowing where your money is every day means the business can be nimble enough to make corrections in near real time. To accomplish that, you’ll need a solid accounting program in place so at a glance, you can see where money is flowing both in and out of the business. Macy recommends having accounting software in place that can not only track your expenses and sales, but also provide you with on demand reporting that gives not just snapshot views but historical data for comparison’s sake.
Review capital expenses and plan for section 179 deductions, now.
Section 179 is a portion of the tax code that allows business owners to deduct the full expenses of a capital purchase immediately rather than depreciating the cost over a period of time. To take the most advantage of this tax opportunity, business owners must understand the tax differences between taking the deduction versus offsetting it into future years. Performing a financial review in June allows your business six months to plan for capital expenditures and strategic purchases. Remember that to qualify for the Section 179 deduction, your business’ expenses cannot exceed taxable income in a year where the deduction is taken.
Deferring income and accelerating expenses
Lastly, having a mid-year check-up enables business owners to review current income, projected income, and whether purchases should be made in the current year or deferred into the next. Without a good understanding of the financial and tax impacts of these decisions, a small business owner may find it extremely difficult to make decisions that are in their company’s best interests.
A small business accounting and tax professional can be a tremendous asset in planning for business opportunities and providing reporting and analysis to lead your business to greater growth. While summer is a great time to head to the mountains or the beach, scheduling a time to meet with an accountant can give you even greater peace of mind.
PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.
To find a trusted accountant in your area, visit www.SmallBizAccountants.com.
Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.
Copyright Information 2013 Professional Association of Small Business Accountants