A usable business plan isn’t static and can be easily updated for changing priorities and market conditions.
SIX MID-YEAR SMALL BUSINESS ESSENTIALS
Things that will keep you on target and growing
For small businesses, best practices are often borrowed from bigger companies, sometimes even competitors. Large companies often have quality control departments for which a best practice initiative would be a natural assignment, but small businesses often must engage management and key staff to develop best practices. These team members typically have a full plate already and may not have the time to develop these fully, making borrowing them from sources attractive.
So, here are a few implementable best practices you can borrow now to yield results in 2018 and beyond.
1. Automate most of your bill payments. A lot of recurring payments such as rent, utilities, phone, and business loan payments can be set to automatic payment from either your business checking account or credit card. Payroll can be set up for direct deposit. The tools have been available for a while to free the small business owner from checkbook drudgery while still maintaining proper financial internal control.
2. Use that freed up time to make a plan. I think a solid business plan is key to business success. I’m not talking about some dry, dusty document that sits forgotten in a bottom drawer. There are a wonderful assortment of business plan packages, many that link directly with your accounting software. A usable business plan isn’t static and can be easily updated for changing priorities and market conditions.
3. Never “borrow” from sales and payroll taxes payable. Never. I’ve seen it too many times; the easiest way for a small business to get sideways with the tax authorities is to treat collected sales tax and withheld payroll tax as available for other more pressing bills. The problem comes when it is time to pay the taxes and the funds haven’t been replenished. Then the temptation is to not file the sales or payroll tax returns as the funds for the taxes aren’t present. That just compounds the bad situation as late filing penalties accrue.
4. Adequate capitalization. The best way to avoid tax due nightmares is to have adequate capital or access to short term borrowing for slow cash flow periods, as those periods will certainly occur.
5. Entities and elections. New corporations and LLCs are very easy to set up on the Florida Department of State’s SunBiz website. A great many business owners do this on their own, but don’t realize there are necessary filings with the IRS beyond obtaining your employer ID number. For LLCs, an entity selection must be made in the first 75 days of formation of the LLC, telling the IRS if you wish to be treated as a corporation, partnership or disregarded entity. Then, for corporations and LLCs electing to be treated as corporations, a decision must be made whether to elect to be an S corporation; such election required in the first 75 days of a corporation’s tax year. The new tax legislation has complicated that decision process.
6. Get your business in saleable condition, even from the start. By this I mean setting procedures in place that can automate the daily mundane but critical tasks, setting the business up to generate cash flows without the owner’s constant back breaking involvement, freeing the owner to concentrate on high level planning priorities. When the owner can accomplish this, an asset has been created, not just a back-breaking job.
So how do you begin developing your own best practices? Start with your industry associations. Market research, survey results, white papers and special reports are often part of membership dues or participation. Direct networking, trade conferences and conversations with colleagues can be very helpful in identifying common problems and solutions that may have worked for them. Lastly, small business management should reach out to its employees for suggestions and conduct its own market research. ◆