Tax Tip Thursday

I saw a post on LinkedIn recently and it really resonated with me. It’s very much along the lines of some of the things I keep saying to entrepreneurs. So, thank you to Martina at Grow CPA LLP for posting this and making the core of this week’s post.

Money Messages I Wish Every New Business Owner Knew

1. You’ll hear a lot of talk about how lucrative entrepreneurship can be, but you won’t hear nearly as much about the stories of money loss and debt.

At the end of the day, your chances of surviving and even thriving will largely depend on how in-tune you are with your money from day one.

I talk about this one often. For our bookkeeping clients, we provide them with monthly financial statements. I urge business owners to review their financials on a monthly basis at a minimum. Some things to pay attention to are:

• Your bank balances (you should probably keep closer tabs on this than once a month)
• Your aging report for receivables — this identifies who owes you how much money and for how long. This is a particularly tough area of the finances for many business owners.
• Your aging report for payables — while it is about who you how, for how much, and for how long, this is very important for supplier credit, bank loans, and selling your business.
• Your whole income statement, but of course the bottom line in particular.

2. Not every business needs to operate at a loss in the startup years.

Service-based businesses generally require very little startup costs and it’s very common and healthy for a business to end its first year in the black.

That said, you still need to watch your financials. It is very easy to get careless or complacent and end up in the red with a business that could have been in the black.

3. Don’t skimp on compliance.

It’s boring as heck, but ensuring you are on the right side of your compliance requirements will give you a huge head start and allow you to sleep a lot better!

We can help you out with the accounting, taxes, and reporting side of this! The CRA cares a lot about compliance, and so do most other regulatory bodies. That is their purpose, after all. Ignoring these requirements can quickly turn a successful business into a horror story.

4. Don’t ever catch yourself saying “I’m only doing this to make a difference anyway.”

This type of talk generally comes as a sign of defeat that making money is too hard. You didn’t start a business just to make a difference! You started it to make a difference AND to make a living. There is nothing shameful about that!

We have had clients in this situation, and they often don’t take their businesses very seriously. If you are one of these people, know that there is absolutely nothing wrong with you and you should be commended for wanting to make a difference to peoples’ lives or to the world. However, if you don’t run the business seriously, you will not only have less success but will also probably struggle to make the difference that you’ve being working for.

On top of that, you probably need to make a living.

5. Making investments or purchases in your business that you late regret is part of the game.

It’s unavoidable, really. Nobody can perfectly predict the future, and all businesses have made their blunders. The sooner you realize this and stop blaming and shaming yourself (or your employees), the better.

I personally struggle with this one. Of course we want every business decision to be the best winning decision. Truth be told, not all of them will be. Instead of shooting for the impossible, realize that as business owners (and human beings) all we can do is make the best decisions we can based on the situations that we are in. We never set out to make poor decisions, right?

The important thing is that you take the opportunity to learn from it when you make a bad choice so that you can make a better one next time.

There’s A Lot To It

How long have you been running your business? Do you have any advice to share with the new entrepreneurs out there who might be struggling? Maybe you made a bad financial decision and need some help finding a solution?

We might be able to help. Give us a call and make an appointment!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.