The following is a guest post by Josh Youngblood, President of JLYTax, LLC.
I’ve spoken to countless solo entrepreneurs and small business owners since the start of the COVID-19 crisis. Their circumstances may differ but their fears are usually the same: How do I manage a once-in-a-lifetime event? Will I make it? Could I have prepared better?
Don’t be hard on yourself — whether you’re a new business owner or a seasoned professional, we’re all learning as we go. But it is absolutely not too late to take action, or too early to plan for a future disruption to your business.
I’ve broken it down into five simple areas you can work on.
If those of us in business have learned anything during this pandemic, it’s the importance of having your accounting records in order. Knowing where you stand financially each month – your revenue and expenses – is vital to the success of your business.
A good accounting partner can help with this process, allowing you to focus on what you do best: running your business. This is where a firm like JLY Tax can assist you. We help clients understand their business’s financial picture, identify ways to control their expenses, and point out tax advantages throughout the year.
Once you’ve evaluated where your business stands, you can focus on planning and improving business processes to increase profitability.
Are you considering expansion, acquiring equipment, or seeking additional training? We meet with our clients throughout the year to discuss these issues and create a plan that gives clients the greatest tax savings.
As you plan, take advantage of services that allow you to pay a year in advance for a discount. It’s too easy to assume that the value to you of a dollar tomorrow will somehow be less than it is today. Recently, we outlined our monthly services expenditures and contacted vendors to see what type of discounts we could get for paying a year in advance. Many people are receiving disaster loans for their business, and those resources are a great opportunity to take advantage of this pay-in-advance option.
Are you overlooking items that are tax deductible? Especially right now, there’s no reason you can’t maintain and even enhance your business’s
Outsourced services like Smith.ai offer an array of tax-deductible services. Whether it’s a live receptionist or web chat, you can take advantage of these services to keep your business growing at a tax discount.
Consider other deductible expenses, such as software (CRM, web hosting, and other cloud services), accounting and bookkeeping services, and consulting or training services related to improving your business.
With many of my clients, I have seen these types of expenses generally increase business profitability. For example, a good CRM is essential for growing your business and keeping up with your contacts. Not to mention, Smith.ai integrates with numerous CRMs so your calls are logged directly into your system.
Remember, under Internal Revenue Code 162 the IRS allows for the deduction of “an ordinary and necessary expense,” further clarified in Publication 535 - Business Expenses. In short, if you need an expense for your business, meaning it is necessary and common to your industry, then you are allowed to deduct it. (Note that common doesn’t necessarily mean that many businesses already use it, just that many businesses might.)
Like anything, there are exceptions. Just because you think a service is necessary and common doesn’t mean the IRS agrees. However, services like Smith.ai would certainly fall under the guidelines of being a deductible business expense. After all, the whole point of being in business is to acquire and maintain clients.
It’s vital to keep current with the latest information that is relevant to your sector. This is where a consultant can help you and your employees, whether the focus is efficiency, training, or expanding knowledge in your field. Professional memberships, which can also be tax deductible, are also exceptionally helpful at helping you build knowledge and relationships in your industry.
Utilize any tools that save you time. My favorite (and tax deductible) tool right now is Superhuman, an email app that works with Gmail/G-Suite. It saves me many hours each week: For example, I can get through 150 emails in no time. The beauty of the product is that it is all about keyboard shortcuts, and a useful feature is its ability to have emails pop back into your inbox at pre-selected times.
Scheduling software has optimized the efficiency of my business. In the past, addressing client calls took time: A new or current client would call, and if I was in a meeting, the receptionist would take a message, and then I would then return the call later and assist the client. Now, our company calendars are synced with scheduling software that will allow a client or prospect to book their appointment from our website, from a link in our email signature, or directly with the receptionist. This eliminates back-and-forth calls and allows us to plan our day and week in advance, which in turn lets us give greater attention to our clients. I was hesitant to change how I was booking appointments at first, but I wish I had implemented this years ago. The improvements in efficiency have been huge, and I haven’t looked back.
These are turbulent times to be a business owner. Taking steps to examine your business, plan for the future, and focus on maximizing efficiency and profitability will help keep your business going — and let you plan for success in the future.