LUTZ BUSINESS INSIGHTS
5 accounting strategies for the self-employed
justin korth, tax director
Being a business owner is great, but you’ll quickly realize you hold responsibilities in areas that you may not have much experience. Leveraging the expertise of others can allow you to spend your time on what matters most: running your business!
Without careful management, your finances can quickly get the better of you. You may find yourself scrambling to gather and make sense of crumpled receipts once tax season hits; worst-case scenario, your business could run out of money, leaving you unable to pay yourself or your employees.
Start with our 5 accounting strategies for the self-employed, and you’ll have a better grasp on the responsibilities of being your own boss:
1. Use Software to Ensure Your Records Are Organized and Up To Date
Without real-time financial data, you have very little visibility into your business finances. We recommend you start by using online accounting software, such as QuickBooks Online, to record your transactions and keep track of your cashflow.
Getting started is easy and inexpensive – the QuickBooks Online Simple Start plan costs just $20 per month and contains most everything small businesses need to start.
2. Plan Your Future Cash Flow
Your accounting software tells you what your business has done, but you also want to have one eye on the future. Where is your money going to go and how does that affect the decisions you make today – do you need to pay down debt? Buy more equipment? Hire additional staff? These future decisions have implications today.
Improving your cash flow will take time, but by looking to the future, you can start to make more strategic decisions about how you use your money. You may need to tighten up your inventory, balance your receivables and payables payment terms, and step up your collection efforts.
3. Understand Tax Implications
Understanding taxes can seem like an impossible task for many business owners. There are income, payroll, sales, and personal property taxes – that’s a lot to think about!
The penalties for not filing can be stiff, so it is worth investing your time sorting this out. While you could master your tax obligations yourself (with considerable time), we recommend most self-employed business owners contact a tax professional for advice. This gives you the assurance you won’t be hit by any unexpected fines, and you’re capitalizing on all the deductions and credits available for your business.
4. Consider Changing the Legal Structure of Your Business
The legal structure of your business impacts which tax rules you follow, how much liability you personally have, and how easy it is to move money between you and the business.
Many businesses start life as a sole proprietorship, but that doesn’t mean they should stay with that same structure; it potentially makes you personally liable for any debts or other financial obligations the business has.
Other alternatives, such as an LLC, offer liability protection because it is treated as a separate legal entity. Other options could be partnerships, s-corporations, or c-corporations. Take time to consider which structure is best for your business.
5. Save For Your Future Retirement
Just because you no longer work for someone, doesn’t mean you shouldn’t be saving for your future. It might feel like it now, but you won’t be able to work forever.
The earlier you start planning for your retirement, the easier it is. Setting up a generous retirement plan will also help you hire and keep the best employees.
ABOUT THE AUTHOR
JUSTIN KORTH + TAX DIRECTOR
Justin Korth is a Tax Director at Lutz. He began his career in 2016. He is responsible for individual, business, and fiduciary tax compliance and consulting, estate & business planning, and taxpayer representation on IRS matters. In addition, he oversees our international workforce initiative.
AREAS OF FOCUS
- Income, Business, and Fiduciary Income Tax Returns
- Taxpayer Representation
- Estate and Business Planning
- Client Accounting Services
- Small Business Accounting Consulting
- Forensic & Litigation Support
- Real Estate Industry
- Agriculture Industry
- Medical Staffing Industry
- Manufacturing Industry
AFFILIATIONS AND CREDENTIALS
- Nebraska Society of Certified Public Accountants, Member, Legislation Committee
- American Institute of Certified Public Accountants, Member
- Certified Public Accountant
- BSBA in Accounting and Finance, University of Nebraska, Omaha, NE
- UNO School of Accounting, Advisory Board Member
- UNO College of Business Scholars Academy, Mentor
- UNO Young Alumni Academy, Member
- St. Vincent de Paul Knights of Columbus, Member
- Youth Catholic Professionals - Omaha, Former President
- JPII Newman Center, Finance Committee Member
- Sacred Heart Catholic School, Mentor
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