The talk all over the country the past couple of weeks has been that record-breaking lottery jackpot. Clearly, I didn't win or I'd be somewhere sitting on a beach far, far away from any type of technology instead of writing this blog. Oh well! At least I tried.
The lottery jackpot did get me thinking about money. Money and business, precisely. And since it is the beginning of the year, it is an important topic as we look back and analyze our 2015 financial statements and look ahead to what's in store for us in 2016.
How did you do generating revenue for your business? How much inventory did you have left at the end of 2015? How much cash do you have on hand? What plans to do have for 2016 that require a larger than normal cash layout? Are you prepared?
What does your current cash flow look like?
For many businesses, especially those of you who sell a product of some sort, this time of year can be a bit stressful on the pocketbook. The holiday season is over and basically everyone is broke. Or just staying home because it's too darn cold outside to be venturing all about town. Generally speaking, it isn't until around Valentine's day that people start to shuffle around for that special gift for the sweetheart or because they are trying to shake off cabin fever.
I recently read an article published in the Milwaukee Business Journal on December 14, 2015 called "7 common cash-flow mistakes entrepreneurs make" that was contributed by the Young Entrepreneur Council. They spoke of several key points about cash flow. I'll talk about some of them here but if you click the title of the article, you can read it in it's entirety.
How did you finish up 2015?
If you sell wholesale or provide services and send an invoice for payment at a later date, you might be sitting on unpaid invoices. This can be costly as money is tied up and you wait for payment. This can be especially true if your customer has multiple locations with a centralized business office. It may take a few months to get invoices paid. Be prepared for this by making sure you maintain a cushion in your checking account.
Also, don't forget to look at expenses from last year. What kind of things did you send money on that became obsolete mid-year? Or what about those recurring charges? Are they still relevant? Now is the time to clean up your expenses and be a bit more cautious and selective when spending money.
How are you handling the holiday sales boost?
Don't do too much too soon and spend like you don't have it. And don't forget that potential tax bill coming up. Be sure to put some aside for that.
As business owners, we feel the need to spend our money as soon as we get it because we want to move to the next level. However, what you don't want to do is spend it all at once or implement new things too fast. It's time to spend money like there's not very much there and maintain that cushion I spoke of earlier. Set goals for your business keeping in mind the revenue piece and will you be able to handle those goals. And if your cash flow gets a bit thin, take a look at your on-hand inventory. Chances are everything has already been paid for so you can turn that inventory into instant cash by putting together a promotion or sale and selling it.
What about money for future projects or expansion?
Looking back at your business performance from 2015 will most definitely influence the decisions you make moving forward this year. Perhaps you need to add or upgrade equipment. Or hire an employee to help with production and markets. Whatever your plans, if you need a significant amount of money to implement these plans, doing so may empty your coffers to the point of making you cry. You should consider some different financing options that are available.
Almost all businesses need a cash push every now and then because using up all of your cash on hand is just not a smart decision. Take a look at your financial statements and visit your bank where you have your checking account. Seek out low interest business loans or credit cards that have easy repayment terms. Many banks also work with the Small Business Administration to back loans to small businesses. And President Obama just signed legislation to increase the SBA lending cap by $4.75 Billion.
Search for alternative financing options like Kabbage or OnDeck. Be cautious of these online app based lenders because sometimes their fees can be quite large or interest rates on the high side. But they can be a viable source of capital and terms generally improve based on your length of time working with them and how well you do following through on your repayment terms.
Crowdfunding could even be an option to look at. A cool thing about crowdfunding that you don't initially realize is the marketing opportunity by the exposure your business will get. There's an article from Entrepreneur magazine called "10 Top Crowdfunding Websites" that will give you some insight to the different programs out there.
There is also Kiva Zip, a crowdfunding lending program that offers 0% loans of up to $5000 with a two-year repayment schedule. Kiva Zip has a Milwaukee program centered around the entrepreneurial spirit our fine city with the support of many large Milwaukee based companies as well as the city government. I am a Trustee and a Lender with Kiva Zip and I just funded my first loan! Let's get together and talk about the possibility of your business working with Kiva Zip.
JDBC Tax Service has the Solutions
When you talk about money and your business, none of what I said here will make any bit of difference if you don't have it together when it comes to your business finances. Having a bookkeeping system in place and working that system is key to managing your cash flow regardless of how big or small it may be. So if you're feeling a bit down now because you don't know where you actually stand, let's get together and get your business started on some Solutions for Small Businesses.
Bookkeeping Solutions from JDBC Tax Services will bring us together to help you get your business finances in order to reduce the constant stress of not knowing where you stand and help you understand the performance of you business so, together, we can work to move your business in the right direction.
Based on my experience working with people who have a business or are self-employed, you're probably a tiny bit stressed. Although the first week of 2016 has really had only 3 actual business days, 2016 is starting to roll and produce some steam.
What does your 2015 look like?
The IRS starts accepting tax returns electronically on Tuesday, January 19th. But I know what you're thinking, "there's no way I will have all of my forms by then." And you're probably right. Most forms that you receive must be merely postmarked by January 31st. And then you have until April 15th. Well no. This year you have until April 18th!. Too much to explain why now, just take my word for it.
The question is "What does your 2015 look like?"
Well, simply put, do you have "Your Forms" for 2015 ready? If you have a business, the forms you need to have ready are...
My concern is that if you were set up properly for 2015, you should be well on your way to having "Your Forms" completed soon. Your mileage log is a no brainer., right? There's not much to do there but pull up the app. You started that one 52 weeks ago. But if you need a little assistance, let this worksheet be your guide.
And Year End Inventory? Well the year ended 6 days ago and unless you haven't done any business at all in the last 6 days, you've created some extra work for yourself if you haven't done an inventory yet.
Your Home Office Expense Worksheet might take a bit more time. You'll receive some of the forms in the mail soon for this one and you can probably go online to see what you've paid in utilities. That one's not so bad. Here's a worksheet to help you out.
But what about your Income Statement and Balance Sheet? Your Income Statement is essentially what will go on your tax return. It's an account of all of your business income and deductions and will show your profit or loss. Even though some of the numbers will not match exactly what turns up on your tax return (meals, for instance), it's important because it will be biggest player with how much you owe in taxes.
Your balance sheet is not as critical, especially if you're a Sole Proprietorship or a Single Member LLC. But it is important. And Estimated Tax Payments made? I sure hope you made them, especially if there's a profit on your Income Statement.
All in all, take some time in the next couple of weeks to get Your Forms ready for your tax professional. They are full of valuable information that will help you understand the financial performance of your business and assist in determining how much tax you will pay. That way, you can set some goals for your business in 2016 and work to realize your vision for the future.
Need some help getting Your Forms ready? Let's get together and see how we can get it done! I just might have a Solution for you!
Owner, Tax Professional and Entrepreneurial Adviser of JDBC Tax Services. Over 20 years operating businesses and 5 years as a Tax Professional
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