What’s up, tax savers? My name is Tyler McBroom, and we are in the middle of a series, taking a deep dive into the importance of payroll for small business owners. And if you missed the first video, we covered the high-level components of what payroll is. So go take a look and watch that if you haven’t had a chance to.
So I’m Tyler McBroom. I am the CEO and Managing Partner of Measure Results. We’re a CPA firm with a big focus on helping small business owners all around the country pay as little tax as legally possible. [We] have gathered some tips to help you keep your payroll, your finances, and your business as a whole organized and compliant. So let’s get into those.
1. Know your budget
So first, know your budget. 50% of businesses that start in the United States fail within [their] first five years. And the number one reason that they go out of business is [that] they couldn’t get a hold of their numbers. They couldn’t. They were spending too much. They couldn’t build up the muscle and the discipline to have a budget, stick to it, and actually become profitable. So the very first thing you need to do is know your budget, work it, implement it, plug it into your books, and monitor that thing like your life depends on it.
2. Know your tax and reporting deadlines
So second, know your tax and reporting deadlines. So there [are] two things for certain in life, and that’s death and taxes. And while we don’t know what the deadline is for our death—and thank goodness—we do know what it is for taxes. And we have no excuse for not knowing it ’cause we’re just a quick search away, across the different types of tax deadlines that we have, from figuring out what those deadlines are. So you’ve got to know them so that you can adhere to them and not rack up a bunch of penalties and interest by missing them.
3. Know your federal, state, and local payroll and tax laws
So third, know your federal, state, and local laws related to payroll and taxes. Or if you don’t want to do all that homework, partner with a payroll provider or expert who does. Working with someone, who knows those different entities and different reporting authorities that you have to file with and the different laws, is absolutely critical.
4. Know your exposure to liabilities
Fourth, know your exposure to liabilities in other areas related to your employees and managing your workers. You wanna make sure that you’ve got HR laws in place and policies— written policies—[and] you’ve got the proper workers’ comp coverage.
5. Know how you spend your time
Fifth, know how you spend your time ’cause what you measure, you can manage. And a lot of times when you’re running a business and getting a business off the ground especially, it’s 24 hours of chaos every day a week. And all of a sudden, it’s the end of the workday, and you have no idea where your time went. So you wanna make sure that you have the habits and the muscle in place to know where your time is going.
And on that note, how much time are you actually spending on your finances and your systems and your payroll? Is it not enough? Is it too much? If you’re not spending enough time on it, maybe you need to really look at, “Ok, I need to beef up the time. I need to focus, get my systems in place, make sure that I’m actually looking at my numbers, and building up that habit and that discipline.”
If you’re just spending all of your time on it, that’s not good either. If that’s the case—and you’re just constantly logging in to your bank and checking your bank account and looking at your books and pouring over reports—you’re probably spending too much time on your finances. So you need to look at automating it through technology or hiring it out to get that help.
6. Know how your employees spend their time
Number six, know how your employees are spending their time. This is critical for a couple of reasons. Number one, it helps you stay compliant. When you get into overtime laws and proper compensation, you wanna make sure that you’re having people track their time properly and accurately. Second, it helps you figure out where you’re profitable and where you’re not in your business. If you don’t have some sort of software or technology that’s helping you track that, there are some payroll [solutions] that actually have it integrated within the payroll software provider. So make sure you’re looking at that as a factor when you’re going through analyzing your technology and your systems.
7. Know what records and paperwork you need to collect
So seventh, know what records and paperwork you need to collect both from your employees [and] the taxing authorities [and] what you need to send to the IRS and your state. And one thing I know about working with business owners is they’re not usually the types [who] love doing paperwork. That’s not why they wake up every day. Unfortunately, this is that boring but essential part of being a business owner. So either do it yourself or pay an assistant or an admin to make sure you’ve got your records and your paperwork in line.
8. Know your books
Number eight, know your books. The best thing you can do to lower your taxes is actually having a good set of books ’cause it helps you pick up all the deductions and the expenses that you might’ve missed from not being accurate. The other thing it does is [what] we talked about at the very top. Number one was “know your budget.” If you don’t know your budget and have your budget and have that in your books that you’re comparing the actual against the budget, then you’re just flying blind on your business.
So think of your books as a compass. And then, as it relates to payroll, is payroll reflected accurately in your books? Are your records current? When you cut a payroll run, is that going into your books with the right wage expense? Because there’s a difference between actual payroll expense, that gross pay, and what’s actually coming out of the account to go into your employee’s bank account. So we wanna make sure that your payroll expense is accurate as well.
9. Know the requirements for loan eligibility
Number nine, know the requirements for loan eligibility. One of the coolest things about tax planning is that we can make you pay a whole lot less tax than you would’ve if you didn’t do tax planning. But the downside of it is we can tax plan you into the poor house on paper so that you literally can’t even qualify for a car loan if you handed the lender your tax term.
So you wanna know what you need for any loan—if there [are] government assistance programs or just getting a private loan through a hard money lender or the SBA. Make sure that you know the requirements for your loan eligibility so that you have the proper records in place because it’s not just about having the right amount of income. It’s also having accurate, up-to-date, current records. That’s essential.
10. Choose the right payroll option for you
And number ten, choose the right payroll option for you. There are tons of choices out there, and your decision is gonna be different depending on how big or small of a company you are. [You] probably don’t want that DIY option if you’re a massive Fortune 100 company. That being said, you probably, if you’re just getting started, don’t need the option that the Fortune 100 company is gonna choose. So you’ve got to make sure you’re picking the right payroll option that suits your specific needs.
I know all of this might sound like a lot, but there are service providers and softwares and people who can help you through this—specifically on the how to choose a payroll provider piece. In [the] next video, we’ve got an entire video devoted to how to make those decisions and choose the right provider for you. So looking forward to diving into that with you, and we’ll see you next time.