The year is almost half- over.  And, if you’ve been like many folks during the pandemic and have started a business, I certainly hope you’ve been following a few basic rules.

Because I know many of my clients didn’t when they started theirs.  Until they made the great decision to hire us and help them get on the right path- the one with a growing bottom line and avoiding unnecessary communications from the IRS.

So, I’ll share those basic rules (there are many more that help grow your bottom line).  These are to keep you legal- and free from IRS penalties.

The most important rule?

Keep your financial affairs separate.  Business is business and personal is personal.   That means you need to have a business banking account.  Pay your business expenses from the business account and your personal expenses from your personal account.  Don’t mix up the two!

If you don’t have a separate credit card, then you need to maintain great expense reports to document what items purchased belong as business expenses- and why.  OK- with whom is also an important factor when tracking business expenses.   (Which brings up a fact I’ve discussed often- for this year and next- we get to deduct 100% of our meal expenses IFF [that’s not a typo; it’s a mathematical construct that means ‘if and only if’] these meals were purchased from a restaurant or hotel.  This two year exception to the 50% deductibility was created to have us help our hospitality industry survive the pandemic decimation of their business.)

Acquire and use accounting software.  Not only will this help you track you income and expenses (and categorize them appropriately), it will let you see how well (please- not how poorly) your business is doing.  It can automatically notify you of your KPI (key performance indicators) and how closely you are meeting these goals.  Yes, if you gross less than $ 50K a year, the IRS won’t penalize you if you use a spreadsheet.  But, that also means all the accounting work is yours to do.  If you used Quicken (only for smaller businesses), QuickBooks (especially if you must track inventory), or Xero, your life would be simpler.  And the annual cost is only about $ 100- until your business grows beyond 15 or 20 transactions a month- but even so, we aren’t talking about more than $ 350 either.  An expense well worth it.  (If you are our clients, we let you subscribe at our cost- which is lower than the published costs.  Kind of like how having health insurance lets you get billed lower rates than if you go without.)

Cash is king!  And queen, and prince/princess!  Monitoring your cash flow is critical.  (That’s another reason why spreadsheets don’t cut it.  Because they are only as good as your ability to populate them with data- and discern how to use those numbers you put in the cells.)  Make sure you don’t run out of month before you run out of money!  The accounting programs will help you model and project how things are going- and let you know- in advance- of problems on the horizon.

Add a professional advisor to your team.  Of course, your best choice is us- The Adjuvancy.  We not only help you adhere to the rules, we help you make and keep financial plans and pay the lowest amount of taxes required by law.  (Other accounting/financial firms will help you adhere to the rules, produce nice reports- and some may also help you make and adhere to your financial plans and even do your taxes.  We just do it better.)  One of the other things we do- we also remind you that you need backups. 

Not only do you need to make a backup- you need to make sure the backup can be restored.  So many of our clients tell us they have backups- but when they need to restore that data, they find their systems (or the backup itself) just won’t do.  And, then they are in a heap of trouble.  (It’s also a good idea to keep the backup in a different location, so that if there is a theft, flood, or fire, you still have access to your business’ vital signs.)

Now, you have the basics down.  Go succeed!