Besides dealing with the everyday routine of tending to your business, as busy as you are, you forget some things that might be important when handling your finances. There are little things that are taken for granted of which can become problems when you don’t pay attention to it.
Not checking credit reports
A mistake a business owner could commonly make is not checking their credit reports. For a business to prosper, it may need more capital for improvements. More capital would call for a need for funds. A good business credit score would be important for a loan approval. Just because you never borrowed money to start up your business, doesn’t mean that you do not need to monitor your credit regularly. Keeping a good credit score in tip top shape is essential. You never know when you will need capital, especially when you are not reaching your regular revenue, or worse, when you are only breaking even.
There are three top credit bureaus that provide credit monitoring services. With the large volume of records they possess, there could be a mix-up with the records. Checking your credit report regularly will minimize the chances of you having dirt on your otherwise spic and span credit score. You don’t have to learn your lesson before deciding to get credit monitoring. Remember, prevention is always better than cure. You’d rather concentrate on your business than spend time cleaning up the mess that the mix-up made. If you are busy, get credit monitoring so that you will be alerted if there are any changes in your credit.
Every business invests and needs capital. Capital can be understood in a lot of ways. It could be fungible money, or the machinery’s, equipment and supplies that are indispensable to your business. While they are very much important, do not over do it. If you are still starting out, you could wait for expensive machinery or extra equipment that you might never use. For example, you are starting a beauty salon. You could start with five or six mirrors and chairs, not twenty. You’re not yet established and you’re just starting up. You can always buy more when the business gets going. If you spend more on things that are not really indispensable to your business, then you have in effect overspent. Keep capitalization at a minimum. Also, since you are making many purchases, it is imperative that you get credit monitoring. Somebody else could end up using your business or your name in making purchases. Monitor your credit regularly. You may be busy with a lot going around with the start up, but you might be paying for something that you did not buy. You might be surprised to see a purchase of an espresso maker when you are setting up your beauty salon.
Hiring on impulse
When hiring employees to manage your finances, you can consider a background check, being careful to do so lawfully. People under your employ like accountants, cashiers and secretaries have access to a variety of information that you ought to protect. A secretary or accountant may be filing your taxes for you, so your personal information falls into their hands every day. Your secretary handles your personal information every day, and this exposes you to possible identity theft. Since this is unavoidable, get credit monitoring as a security measure.
Not making donations
This might be applicable to big business owners. You can be a hero in two ways: you can be a hero to your pocket and also a hero to other people in need. Instead of paying bigger taxes, why not help yourself while helping others? Donate some of your money to save on taxes. The IRS does not tax the donation you make to charitable organizations. When you donate part of your revenue, you can move down from the tax bracket you belong to, thereby subjecting yourself to a lower tax rate.
Throwing out receipts
When you buy your raw materials or utilize services of contractors and other people, make sure you keep the receipts. This could be a big tax break for you. You must remember that expenses can be deductible from your income. Therefore when you deduct these expenses, you arrive at a lower income tax. You need these receipts to prove that you actually purchased supplies and equipment and utilized the services of subcontractors. The IRS will need to look at these so that you can claim your deductions.
Not filing on time
Being late to any event is bad enough, but being late in paying your taxes or filing fraudulent taxes has criminal implications. When you are late, you are subject to a myriad of penalties that the IRS can impose. This will be an extra expense on your part, and these expenses are not deductible from your income. You end up spending more when you don’t file on time. It is also advised to get credit monitoring because your identity might be used by somebody else to file taxes and claim the refunds for themselves. The IRS is trying its best to prevent this type of identity theft but it has become so bad, identity theft topped the IRS dirty dozen list list. Keep that in mind and help your business by being vigilant.
Joy Mali is an active finance blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.