If you've never had an year-end tax planning meeting with your accountant it could be because you have a very "easy" tax situation. For example, you're a single, renter who has a salaried job, with no side hustles or dependents. Easy. You don't really need a tax planning meeting because you're paying taxes as you earn your income.
What is venture capital?
Venture capital (VC) is funding given to businesses from investors.
It’s called venture capital funding because it’s funding from the specific investors known as venture capitalists.
Investment from venture capitalists can be more than money. In addition to cash, VCs often invest in the form of technical or managerial expertise. It’s not their first rodeo, so they can impart some wisdom.
Accounting is a process of sorting financial data. Through sorting the data, the accounting process creates products. The products are reports. These reports are useful to the management team, business owners and shareholders or investors. The reports also play a pretty vital role in helping your accountant file your taxes.
The funny thing about money is that it’s an artificially limited resource controlled by The Federal Reserve. The Fed tries to manipulate our economy by changing the amount of money in circulation, the money supply. It’s not a precious metal or non renewable resource and it’s not backed by gold. It’s printed on a machine. Most transactions these days aren’t even done in printed cash, they happen through bits and bytes and binary codes going from one bank server to another.
You don’t need to do a lot of digging to determine whether or not your business is doing well. You can feel it by just observing the day to day operations. When you’re able to pay all your bills, pay yourself and your employees and you have money left over in your business, it’s pretty obvious that things are going pretty swimmingly.
But instead of flying by the seat of your pants or letting your socials statistics determine the health of your company, let’s observe some factors that will allow actually you to determine the health of your business. There are a variety of measurements to choose from. They range from simple observations to more complex ratios.
Lately I’ve been working with a lot of small businesses that are growing rapidly. It’s awesome to watch this unfold, but one thing I’m learning quickly is growth comes has a cost. Whether you’re selling products, providing a service or manufacturing something, in order to grow, you need to invest in the business.
As I’m sure you’re painfully aware, business doesn’t happen in a neat timeline. Cash flow timing issues are very real. For example, there’s the furniture designer who is bringing on more staff, expanding to be a bigger storefront and signing new accounts. There’s the retailer who needs to make a purchase from the manufacturing company and the larger order comes at the best price. And then there’s wedding photographer who needs to pay her tax bill during the slow season. A line of credit may be an option to help bridge the gap.
I've worked in financial service since I was in college. In fact, my very first job was as a collections agent for a big, evil bank. For four hours a day, five days a week, I'd sit in a call center in suburban Southern California with a fugly headset on, connected to an automatic dialer. I would speak to people who were past due (bank speak for late on making a payment) on their auto loans. The majority of the time the person on the other end of the line just spaced and forgot to make their payment.
The bank had entire department dedicated to closing the gap between revenue that was owed to them (AKA receivables) and cash. The gap is entirely created because of how, when or if a customer will pay their bill or invoice. As a small business owner, you probably experience the drawbacks of this gap like not being able to pay your vendors or yourself or your other bills. But there are things you can do to help minimize the gap. This is called managing your cash inflow.
If you work for yourself or dream of working for yourself, I'm sure one of the motivating factors is to make a profit. Making a profit can depend on a lot of different factors. Some of those factors are outside of your control like the market and the competition. You can move the needle on other factors like leadership, management, location and the number of locations. But one of the most important factors that have a direct impact on your profit is pricing. Pricing is how much you charge for your service.
Whether you're in business for yourself or working for the man, the woman or the big faceless corporation, the principles of how to earn money are the same. Understanding these principles and applying them consistently are key. Progress comes from consistency.
If you owe taxes to the IRS, but you don’t have the money to pay them, it can be an overwhelming feeling. That sucks. But the good news is, you can totally come up with a plan to pay it off. The IRS is good like that. As scary as their certified mail notices can be, they definitely want you to be able to settle up with them.