Dealing With The 1099-k To Grow In A Bad Economy
Running a small business continues to be much harder than it was five or ten years
ago due to depressed economic activity that persists after the 2008 global recession. The recession created a number of economic factures that increase the pressure on small and medium-sized businesses and have precipitated increased rates of foreclosures, liquidations, and other symptoms of going out of business. Surviving in this climate on top of managing pre-existing difficulties like 1099-K taxes and self employment taxes requires clear and effective strategies. Efficient accounting practices and small business tax preparation need to be at the heart of such strategies.
Small businesses tend to suffer from two related problems that are caused by paying insufficient attention to accounting. They overspend on unnecessary or less competitively-priced inputs, and they don't maintain sufficient liquid capital. While too much overhead often leads to less available cash, both problems are more difficult to manage without good accounting. This means that you should set three primary priorities to keep your small business afloat until the economy becomes more stable. First, get your data collection, organization, and analysis system in place to keep your books up to date and help you generate the right accounting sheets. Second, find ways to cut overhead using your newfound accounting insight. Third, focus on budgeting strategies that prioritize cash-on-hand over investing in long-term inventory.
The first may be the most difficult, but there is a lot of information available to help business owners set up a basic bookkeeping system and automatically generate detailed, intuitive accounting tools like a profit and loss statement. This has a number of added benefits that might not be readily obvious, like making planning for estimated quarterly and 1099-K tax payments easier. And better financial planning will certainly improve your odds of surviving. But most importantly, it will make it easier to see expense patterns and identify unnecessary overhead.
Cutting expenses can require a bit of creativity, especially for businesses that already feel like they're operating on a shoestring budget. But even if you're not feeling strapped for cash, you can probably identify areas where you can cut down. For example, moving as much of your accounting online as possible, even to the point of emailing PDFs of invoices instead of mailing them, can generate a lot of savings on paper, ink, and postage. Another secret way to attack overhead is to plan every business expense very carefully. Instead of realizing you need a specific material last minute and running out to pay full price with cash at a store, regularly take inventory of your supplies so you can minimize surprise expenses that don't allow you to control how much you pay.
Lastly, look at your inventory and stock and try to control its size. This will decrease the time and effort required to manage it. But more importantly, if you wait to buy materials until you've received payment for an order, you can decrease the amount of cash you have tied up in inventory that isn't already paid for. This kind of approach keeps more cash available so that you can be flexible and adjust to new information or circumstances, capitalizing on opportunities with better frequency.
Keeping your small business' head above water requires a complicated dance for most owners, that ranges from being prepared for the 1099-K tax form to meeting new challenges. As the slow economy continues to drag many new businesses down, following these basic steps can help you perform that dance a little more effectively and confidently.
by: John V
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