Leverage for Success: 5 Tax Tips for Small Businesses

Running a small business can be an exciting and profitable endeavour, but it’s also one that comes with its share of responsibilities as well. Planning for success is much better than not planning at all, and managing your tax and accounting plays an important role in the overall health and success of your business. Below are five key tips for managing the the tax and accounting needs of your small business:

01. Separate Your Personal & Business Expenditures

This first tip may seem fairly obvious, but it’s so easy to ignore or overlook by small business owners. If you’re an entrepreneur, your personal expenses (groceries, mortgage/rent, etc.) should all be separate from your business expenses (inventory, shop/office utilities, and so on).

At the end of the day, a dollar might be a dollar no matter on which card or account it’s spent from, but come tax season you’ll be thankful that you kept your expenses separate.

02. Establish Your Options for Borrowing

In all likelihood, your small business is dependent on financing from a lender such as a bank or other financial institution. The cost of machinery, equipment, supplies, and perhaps even a lease or purchase of commercial property isn’t always doable with personal savings, which is why finding a good lender is so important.

Simply finding someone willing to lend you thousands of dollars might be a step in the right direction to realising your dream of opening or expanding your business, but take some time to sort out the various lenders and consult a professional for assistance. Even a few percentage points (or decimals) in interest can save you thousands in the long term.

03. Keep On Top of Costs & Expenditures

Generally, every business (and especially small businesses) need to generate revenue in order to survive.  While raising your revenue is certainly good for business, keeping tabs on your costs and expenditures is equally important.

This doesn’t necessarily mean cutting out critical expenses, however. Nobody will visit your shop if you stop paying for electricity to keep the lights on! You do need to spend money to make money, but you don’t need to overspend if you don’t have to.

04. Manage Your Cash Flows

Following on the previous point, keeping on top of revenues and costs are fundamental in the big picture of business operations. What is also important to keep track of, however, is your cash flow situation. A big accounts receivable (e.g. clients will be paying you later in the month) might look good, but it’s not the same as having cash in hand right now. A bird in the hand is worth two in the bush, as it’s said.

Being able to pay your suppliers on time, pay for inventory when needed, and do payroll for your hardworking employees means you’ll need good cash flows with sufficient liquid capital to meet all of these as needed.

05. Minimise Your Tax Burden Legally

Tax season can be a tricky time for many small business owners. Much like in other countries, Australia’s tax laws can be cumbersome and complex, which is why it’s often easier and cheaper to simply let a qualified tax accountant do all of that boring work on your behalf.

But there’s another possible way to save money: a tax accountant will be able to maximise your deductions in-line with tax office rules, to hopefully reduce any tax payable at the end of each year.

Badawy Large & Powers

For bookkeeping, tax accounting, and much more, consult our friendly team of experts at Badawy Large & Powers.

Read Also – Own a Small Business? Tax Planning Tips for Success