Becoming a business owner can be a dream come true, offering freedom and flexibility away from the rush and bluster of a traditional 9 to 5 work week. It can also be an extremely frightening proposition depending on where your expertise lies.
And for most people, their expertise is not in finances. Taxes, cash flow, and payroll deadlines can cause stress for many owners and make it difficult to understand where the business stands. For small businesses, these factors play an even larger role in the health of the business than larger enterprises. Starting a small business requires a certain amount of guidance and resources. There are several accounting challenges that will have serious and costly consequences if a business owner doesn’t fully understand their role.
Understanding Federal and State Labor Laws
Before they ever hire their first employee, a business owner needs to know their place with local and state governments. There are also standards that must be met that ensure payment standards, vacation and benefits for your employees, severance pay, payroll deductions and plenty more.
Any small business owner will face these, so it is crucial to understand your role, what you will be required to – and ethically should – provide employees, and what effect it will have on your budget. Ignorance will not save you from state and federal laws, so be sure to become familiar with what your responsibilities are. The United States’ Small Business Administration is a great place to begin learning your responsibilities on each level of government jurisdiction.
Complying with Reporting Deadlines
Issuing paychecks and paying payroll taxes is just half of the requirements in payroll accounting. There are federal and state requirements concerning the reporting of quarterly payroll taxes. There needs to be a clear understanding of which taxes are reported on specific reports and whether these taxes are at the state or federal level. The Internal Revenue Service does a good job of keeping these dates clear on their website.
If a business acts as a collection agent for sales or use tax, there are also laws requiring the remitting and reporting of these taxes. The local state tax department will be the best source for answering questions about deadline dates and methods of reporting.
Cash Flow Management
The ebbs and flows of cash management can be a headache for any accountant – and especially so for a small business owner. Staying on top of cash flow requires meticulous documentation, recording all receipts and disbursements regardless of size.
Banks are very good at keeping up with these things; it is their job, after all. When in doubt, record all the expenses and sales your business earns and consult with the bank that handles your accounts. Depending on the complexity of your business’ cash flow, it might even be worth consulting a financial advisor to properly plan goals and become more knowledgeable about your cash flow.
Meeting Payroll Deadlines
Paying employees on time must be a high priority of any business, large or small. There are federal and state laws that dictate when an employee must receive their pay, so cash flow management must set aside funds for payroll.
Along with the actual disbursement of paychecks, there are also crucial deadlines for remitting payroll taxes. These deadlines can be both on the federal and state level, so each category of taxes must be dealt with in a timely manner. Most payroll taxes require submission electronically; luckily, there are software systems – such as Sage Peachtree, Quickbooks, and more – available to automate this process for you as well as record your expenses.
Finally, you need employees who you can rely upon. That means planning a payroll budget that measures how much help you’ll need, what skills they’ll require, as well as a fair market assessment of what those skills are worth.
As a small business owner, it can be difficult to know what that fair market price for employment would be. Those metrics will rely on the market that you are in as well as the general value of those skills. A salary too low may experience much more turnover than you’d prefer as well. Fit Small Business lists several free tools that will allow you to fairly assess what a competitive salary in your field looks like.
A small business’ finances can be a difficult aspect of business to manage. But with proper documentation, automation, and research, you can tackle each of these issues and flourish as your own boss.
If you need help affording a payroll and/ or accounting system or require financial assistance to pay off your business taxes, turn to IOU Financial. Our hassle-free small business loans of up to $300,000 can be in your bank account in under 48 hours! Contact us today!
Guest post: Alex Briggs is a contributing writer for Rising Path Accounting.