2020 has been an interesting year for businesses, while some have grown others have been greatly affected by the pandemic. Today on ABC4 Utah we have a local expert – Ron Valentine joining us from Valentine CPA.
Ron tells us that according to statistics he is showing that 9 out of 10 businesses fail miserably within the first year and there are many reasons for this. One of the reason’s that Ron sees is that business owners get distracted with their priorities.
There are 3 important pillars that business owners need to focus on. Some pillars are more important than others. The most important according to Ron is operations. Operations are their product or service. Companies need to really pay attention to this. The need to have great operations that sell excellent products and provide stellar service.
The next pillar that business owners need to focus on is their marketing. This is their lifeblood. A business can have the best product or deliver the best service but if no one knows about it, their business will suffer.
Finally, the last pillar is their accounting. Which is their payroll compliance, bookkeeping, and tax strategies.
The first two pillars are vital, and kind of like breathing. Doing your accounting is different than the vital need of breathing; it is more like fixing a broken arm. Both are important but one is vital. Ron has found over and over that the small business owners who understand their priorities and work on the first two pillars and offload their accounting, tend to prosper. Even if businesses want to do their own in-house bookkeeping, payroll compliance is so complex that I really suggest that they offload that to their accountant.
Some small business owners use a CPA for their taxes, a payroll company for their payroll, and a separate bookkeeper. All of these functions are part of the business’s overall financial well-being and they come to a head now when the tax return is needing to be prepared. For instance, the CPA preparing the tax return needs to know the information that the bookkeeper has based on profitability, different tax strategies should have been employed.
Also, asset depreciation is a huge part of tax planning and software like QuickBooks doesn’t have an asset manager so many bookkeepers who just understand the keystrokes of using the software are missing a key component in tax planning. Tax planning needs to be integrated with payroll also.
Also, tax planning needs to be integrated with payroll. To get a tax deduction, you have to spend money. The best way to spend money is on yourself. That is why small business owners need to integrate retirement plans as part of their tax strategies. The best retirement plans have to be integrated through the payroll function. The planning needs to be done before the year is over. Most tax preparers get the info after the fact. It’s like the accountant is counting the dead at the end of the battle. Small business owners need an accountant that will help them fight the battle.
As Ron mentioned retirement plans are good if set upright. As a rule of thumb, anything that you spend from the business that helps you generate your profit is a tax-deductible expense. You want to spend on things that will grow your business. Some missed expenses because they don’t really come out of the business checkbook are mileage deductions and a home office. The IRS requires a contemporaneous mileage log. The home office can be a helpful deduction if done right. The IRS came out with a simplified method but in every instance, we have seen, the deduction is less than using the old method to getting square feet and making sure that home depreciation is included.
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