by Holli S. Powell, CPA
Often, creative entrepreneurs are so frightened by the thought of money, taxes, and finances that they become stuck—frozen in a place of avoidance and denial. You KNOW you’re going to owe taxes this year, but… you just don’t want to think about it. You realize you need to get organized before the end of the year, but it’s so overwhelming that it keeps getting pushed to the bottom of the to-do list. You have had “find an accountant!!!!!!” on your agenda for months, but are afraid of sounding silly or not having the answers to their questions, so you just ignore it.
I’m here to tell you that there’s no need to wait. Sit down and look at your calendar. Block off one hour. That’s all you need to make this happen!
Here are the steps you need to get organized enough to either tackle your own questions or hire someone to do it for you:
- First, dig out a copy of your 2011 tax return. Look at how much you owed or how much you got back. See if there have been any significant changes in your tax status—new baby, change in marital status, purchase of a new home, or significant increase or decrease in income. If so, you might want to consult with a tax accountant on how these things will impact your tax bill.
- Next, print out all your 2012 income and expenses. If you have your own business bank account, or use an accounting system for your business, this should be fairly easy. Take a look at how much you’ve made, compared to how much you made in 2011. Are there things that you know you’ve spent but aren’t seeing here? You may need to go searching.
- Finally, look at your cash balance (again, made much easier by having your own business bank account). What expenses are coming up in the last few months of the year? Will you have enough cash to cover them? Or, even better, are there excess funds in your account that you can use to buy things you need for your business? Is your business seasonal and, if so, will you be experiencing a busy fall/winter or a slow one?
Taking one hour each month to review these items can be the key to understanding your own finances, and using that growing understanding to make better business decisions. Better business decisions equal better business, and isn’t that what we’re all after?