As we enter into the New Year, a lot of people focus on bettering themselves. More workouts and fewer vices are the usual focus of resolutions this time of year. But for business owners, here are some simple resolutions with your businesses well-being in mind:
1. Revisit your recordkeeping practices:
Records are vital for both business and tax purposes. They help know whether or not you’re profitable and provide key information to help you take business actions, such as adjusting prices, cutting expenses, or raising money.
More importantly, at the end of 2016 when it is time to look at deductions and tax credits your business is entitled to, these will be the records you’ll be looking back on in a year. Business owners often fail to pay attention to their recordkeeping until it is too late. Ensure you have a recordkeeping system that both satisfies tax law requirements (Check IRS Publication 583 for details on recordkeeping) and works for both you and the business. Find a bookkeeper you can trust and work closely with them, which leads us into our second resolution.
2. Plan to work closely with your tax and financial advisors.
Make it a New Year’s resolution to stay in touch and work closely with these professionals. Unless the business you own is a bookkeeping service, chances are (much like many other small business owners) bookkeeping is not one of your strengths. While there are fees for the services, employing and working closely with these people will likely save you money in the long run.
3. Review your business plan
Your business plan (which you should be regularly updating) should include projections for sales and expenses for the coming year. If you haven’t yet updated those numbers for 2016, now is a great time to do so. While these projections aren’t set in stone, they are a very useful benchmark to measure your results.
Take this time to measure the results for 2015 against prior projections as well. This will help you to more accurately project for 2016 and you’ll get an idea of changes that may need to be made to your business model.
4. Check your odometer come January 1
No, this isn’t a metaphor for internal reflection. If you use your personal vehicle for business, you can deduct the cost of business driving only if you have the records to back this up. This means noting your odometer at the start of the year and then regularly tracking any business trips and the mileage associated with them.
Consider using a mobile app to do this with ease; many are free, others entail a modest fee.
5. Fix your withholding/estimated taxes
If you work for your corporation, make sure that withholding for 2016 will cover your projected tax obligations. Be sure to take into account additional Medicare tax on taxable compensation over a threshold amount that depends on your filing status as well as additional Medicare tax on net investment income.
If you’re self-employed, your estimated taxes will have to cover roughly what you expect to owe for the year. These taxes should include not only the additional Medicare taxes if you’re a high-income taxpayer, but also self-employment taxes (to cover your Social Security and basic Medicare tax obligations).
The IRS offers guidance on withholding and estimated taxes in Publication 505; the 2016 version should be available early in 2016.
6. Resolve to find a business mentor in 2016
This could possibly be the most important of all these resolutions. Many business owners think that because their business is doing well and they are profiting, there is no need for a business advisor. Utilizing resources like Small Business Development Centers, Veteran- and Women- Business Outreach Centers, and SCORE, they offer free counseling services, business plan assistance and a range of workshops and other services. Having someone that can be constantly pushing you to get to that next level can be an amazing help.