March Madness may have ended but April Absurdity is just beginning. It’s the time of year that many small business owners dread, but they don’t have to. And what are they afraid of? Unknown tax liability. The key word there is “unknown.” Taxes are unavoidable. Ignorance of what you owe is avoidable.
1. Keep your financial records current
If you’re like most small business owners, financial records are just “one more thing” that get in the way of running your small business. That’s understandable. Most people didn’t open a business because they wanted to look at flow charts and spreadsheets. But it’s precisely those records that can help you know day-to-day, month-to-month, and quarter-to-quarter what you owe. Perhaps you keep these records yourself. Or maybe you have an accountant that you meet with occasionally. But there are also firms like ours which can streamline your processes and give you access to your data (as well as good advice) on a more current basis. Whatever method you use, it’s important to know where you are financially so you can more accurately steer your business.
2. Plan ahead
If you do have current financial records, then you can plan strategies for what to do with tax liability. Perhaps an equipment purchase and its resulting depreciation would help deal with some unallocated resources. Maybe you should take a less severe view of an underperforming division if it can divert some of your liability. In any case, knowledge is power. The farther ahead of time that you have an accurate forecast of your liability, the longer you’ll have to find ways to deal with it instead of simply dreading the single light of an oncoming train.
3. Be disciplined
Even better than knowing your tax liability ahead of time and planning for it is putting away money into an account that you don’t touch. All small business owners know the challenge of self-financing and it can be tempting to touch that account to finance the marketing rollout of a new product or to pay for this new piece of equipment that you really need. But the smart business owners know that robbing Peter to pay Paul at the end of the day is still a crime of robbery. It just has the added humiliation of being a crime you commit on yourself. If you’ve been smart enough to keep current financial records, prudent enough to plan ahead, be wise enough to act on that knowledge by setting aside those funds in advance. And don’t touch it!
If you’re already doing these three things, then you aren’t going to spend the next two weeks freaking out. For those who might be anxious about April 2013, spend the rest of this year implementing any one of these three steps to serenity so that in 2014 you too can spend April admiring your bracket picks instead of worrying about the 15th.