Financial literacy is quite low in the US. Could you learn from these financial failings?
You need a system, whether a simple book-keeping application or a more complex one. But you also need to understand and use it. Go for training. Or hire someone to help you set up your own chart of accounts and understand what your system can do for your business.
Your ability to manage your cash flow is critical to your success.
And your tax returns are far easier with a good system. So is your planning!
Yet… last week it was a long-time owner whose bank account was overdrawn before he realized he had not seen his book-keeper in months and his employee was not entering everything correctly. A month ago it was a room full of solopreneurs – where a minority actually used a system. Last fall it was a CEO who had not made payroll on time – again; but thought employees should understand good intentions!
And don’t even ask me what happens to firms which do not pay employee tax withholdings on time – think locked doors, seized bank accounts.
I bought my first finance software when I began my business. But then I just dumped my stuff into a file folder until tax time came. It took me several years to keep records on a real time basis. Boring work, then rushed …. eventually I had to grow up and act as if I really was the business I said I was.
Have you built a good process which you really use?
How are you hiring and paying for services your business needs? Do you have employees? Independent contractors? Contractors or consultants? Interns?
Tax laws as well as labor laws contain a lot of traps. Pay attention to what you are doing when you bring in the help you need. Often solopreneurs and small organizations hire extra help or expertise on an “as needed” basis. But you do need to be clear about the “how” and “which” among your options. If you hire via a company which provides such services, it is usually a nice clean transaction – business to business.
But if you hire someone directly, you need to be sure to keep it legal.
If you hire an individual you have different requirements than if you hire a company, even when that company is also only one person. Check out this IRS guidance on hiring independent contractors. Be sure the help you hire, no matter what they call themselves, is working with you to ensure both of you are in the clear legally on your payments to them.
Want to hire an intern? Lots of small organizations think of interns as free help. Not so! See this DOL guidance. I see organizations all the time that want an unpaid intern to work for them but violate these rules – and get into trouble. Back pay, taxes, and fines are not fun to deal with!
Do you have employees? The federal and state governments are cracking down on proper payment of employees. They are looking at whether employees are properly classified or the organization is trying to call them independent contractors.
They are checking out wages and hours and whether the organization is trying to treat employees as exempt from overtime laws when the work done is actually not exempt.
I recently had a business owner who was quite surprised that she might have legal problems related to hiring someone on a part-time basis for cash only. Here, she even knew the person was receiving unemployment benefits but thought that it was his problem only. Not so!
Sure, we all know we SHOULD have a business plan.
But do you actually have one? Does it include realistic information on your revenues and expenses? SWOT analysis? (Do you even know what SWOT means? An assessment of your market and potential targets? Goals for the short and medium term? And, if you have been in business awhile, when did you last update or re-do it?
Good administrative processes will support and enhance your ability to grow and succeed. Boring, probably. Critical, yes!
Image: maltman23 via Flickr, Creative Commons
Patricia A. Frame is an experienced Human Capital issues speaker and management consultant. She founded Strategies for Human Resources to advise organizations facing organization and people challenges. Previously she designed and managed human resource functions for GE, Software AG, Maxwell Online, and others. A Wharton MBA and an Air Force veteran, she actively supports the Women’s Memorial at Arlington National Cemetery. Check out her website, SHRinsight.com, for management and development articles.