It Is Tax Deductible?

One common comment I hear from some small business owners is they can buy something because it is tax deductible. Then, the small business owner spends money or is using up their credit limit on unnecessary expenses. This attitude can be dangerous for a small business owner. There is a need for business owners to effectively plan and efficiently spend their financial resources.

A small business owner is someone who “wears many hats.” They are skilled at the service they provide or product they produce. They spend little or no time in keeping track of all their expenses or finding out where the money is being spent. However, a very important part of business is managing their finances. The small business owner needs to know where the money is being spent and how much money is generated from their business in order to more effectively plan their current or future financial activities. Some small business thinks of spending time and money on keeping track of their financial situation as unnecessary or something they may do later.

If a business owner spends the time and money on keeping track of finances, they are able to more effectively plan or budget, more prepared for emergencies, to set realistic targets on a short term or long term basis, know how and where money is being spent, all revenue is received, keep customer information, payment information, and keep track of supplier purchases.

In the short and long term, the small business owner will be saving a lot of money, time and stress by having control over financial operations. This is something that is never too late to start. By delaying, the financial information will not be as accurate. As time goes on, expenses or what customers owe may be forgotten or financial papers are lost. There is a large initial cost in time and money by trying to “create” financial records from information that is not all available and covers a long period of time. Of course, the combined financial information will not accurately reflect the business operation. There is a huge benefit by setting up a process for handling the financial information at the start of the business. Of course, as the business grows, the process for handling financial information changes to reflect the current needs of the business. By having accurate financial information, the small business owner will know where money is being spent, what customers owe, be able to more efficiently plan or budget, be able to find and correct problems, and operations will run smoother on a daily basis.

The importance of the small business owner having control over the financial operations of his business cannot be over-emphasized. There are some simple and cost effective ways to organize and keep track of financial information. They will be discussed next month.

Iva Pederson