What Is Financial Planning Why It Is Important In Business?

Tax Planning

Do you need a financial plan for your small business? Creating these types of plans is a crucial step for any business owner. Financial planning can help you to make daily decisions for your business. By comparing numbers to actual results, you can make those crucial decisions regarding your financial future. Even with a one-person company, you should have a financial plan in place. Why are financial plans so important? Keep reading to learn more.

Financial Planning for Your Business

Financial planning is very vital to the success of your business. This planning usually allocates funds to specific areas of your business. Also, financial planning will determine how a company can achieve different objectives and goals. While you might think establishing a business is hard, creating a financial plan can be just as challenging without the right help. Businesses in all industries need to focus on financial planning. However, many small businesses will not use a financial planner because they think those services are too costly.

Financial planning is essential to the overall business operations. Small businesses can’t be financially stable and operate without confidence in their financial plans. Unfortunately, many companies will fail. In some situations, those failures are tied to a lack of financial planning.

What Can Financial Planning Do for Your Business?

There are many ways that a financial plan can affect your business. Small business accounting services can help implement a plan for you. Here is a look at a few of these benefits to financial planning.

Cash Management and Budget

When you have a financial plan in place, you can help organize your short-term budget. Many small businesses will experience variations in revenue on a monthly or seasonal basis. In simple terms, that can translate to a period when there is strong cash flow or a time when a shortage occurs.

Budgeting is a critical task for any business. When you plan out a budget, you can make those financial decisions and allocate funds for different projects. A smart budget will help generate profits while cutting losses and costs. Creating a reasonable budget without a financial plan can be challenging.

Financial plans can assist those struggling small businesses in getting a handle on their budget. Additionally, that financial plan gives companies deeper insight into funds, making it easier to see the bigger picture. You can even break down a complicated budget into more manageable, smaller steps.

Small business owners can consider these cycles by building a solid financial plan. During those slow times, these businesses can monitor those expenditures for low revenue periods. In many cases, poor cash management results in negative consequences, such as not making payroll for your employees.

You should structure your financial plan to have a cash cushion in case of downtimes. With a cash cushion, your small business can take advantage of special opportunities, including purchasing reduced-priced inventory from suppliers.

Long-Range View

On a daily basis, your small business may have to deal with issues or crises. It can be easy to focus on those problems, but that leaves you not thinking about any long-term goals. Unfortunately, that can take away from planning for the future, preventing businesses from growing. A financial plan allows a small business owner to see what expenditures are needed to keep the company on track and stay ahead of the competition. Think of a financial plan as a blueprint to implement the company’s performance for both short- and long-term goals.

Spot Trends

Over the course of a month, a business owner must make critical decisions. Often, it can be hard to tell if those decisions were successful. When you prepare your financial plan, you can set those quantifiable targets to compare with actual results throughout the year. For example, the owner can see if their increase in advertising expenditures led to more sales for the business. These sales trends for individual products can help the owner make decisions about allocating money for marketing.

Prioritizing Expenditures

When you allocate your capital and conserve those financial resources, it can lead to a successful business. These benefits of financial planning can help owners identify their most important expenditures, which can help improve efficiency, productivity, and marketability. Those decisions are often only made when cash is plentiful for the business. Even those well-capitalized corporations will prioritize their expenditures.

Measure Progress

During those early stages of the business, many owners will deal with numerous changes and have to work long hours. Sometimes, it can be difficult to tell whether any progress is being made or if serious problems are on the horizon. Seeing those actual results help small business owners to feel more confident in their decisions. On the other hand, if there is an issue, the owner can take the appropriate steps to correct it. A chart displaying steady revenue growth for each month is a great motivating factor for both new and experienced business owners.

Talk To an Experienced Accountant

If you need help with your financial planning, turn to TMD Accounting. We are a family-owned and -operated business that focuses on helping companies in all industries plan for the future. We offer a flexible, affordable, and convenient way to handle those financial responsibilities. You need to focus on growing your business, and we are the ones to help you.

Need a South Jersey accountant for my small business? Our accounting team is ready to help. Schedule your consultation by calling 1-856-228-2205.

Why Does my Small Business Need an Accountant?

Small Business

You just started your own business. Do you need an accountant, or should you handle those responsibilities yourself? Many successful companies work closely with an accountant. These professionals will be able to guide your business through every financial stage. Here are a few reasons why your small business needs an accountant.

When To Work With an Accountant

Working with an accountant saves small businesses from lost time and money. Plus, they can alleviate some of the headaches when tackling financial responsibilities. Business owners should ask for help right from the start. Take a look at these vital points in your business when you need an accountant.

Forming Your Business

You should work with an accountant during those first stages of your business. These professionals can help you write a business plan. A plan can put your goals down on paper rather than taking the wait-and-see approach. Along with that, the accountant can advise you on the best entity structure for your business. You might think that a sole proprietorship is the best option, but an LLC could have additional benefits. Many accountants can even assist with bookkeeping services or help you set up the right software for the job.

Compliance and Tax Issues

After you have your business plan and bookkeeping software, you still need help from an accountant. Many businesses have to worry about compliance issues. These problems can be stumbling blocks for many owners. You might want to ask for assistance from an accountant. Sales tax compliance is a sore spot for many businesses. You must comply with local tax laws if you are shipping any products over a state line. While some bookkeeping apps can help, you need an accountant to get started.

Payroll is another consideration for many businesses. Labor and wage compliance issues have been known to sink profitable companies. Tax programs and apps can ensure you are always compliant with these issues. However, you will want an accountant to check in on a quarterly basis.

There are other reporting requirements to consider. You must send those reports to local licensing agencies or creditors. For those with complex tax issues, you might be liable for other types of taxes or fees. If you need to report on your financial position for credit purposes, make sure to work with a firm offering small business accounting services.

Do You Need an Accountant?

You might think that you can handle these responsibilities by yourself, but accounting is not a DIY task. Small businesses are more successful when they work with an accountant. Yes, you might be able to take on those basics, but you should consider working with an accountant for those complicated matters. These individuals are financial professionals who can help keep your business on track as you plan for the future.

You will want to work with an accountant throughout the year, not just during tax time. Many accountants will meet with you at the end of the year. They will go over your finances and discuss any issues concerning your taxes. Tax planning is not the only reason an accountant needs to meet with you. Specific compliance issues, such as payroll tax underpayments, are easier to fix before filing those year-end reports.

Don’t forget to take advantage of your accountant’s expertise throughout the year. Planning for your business should be a year-long process. It could be too late to prepare your small business for penalties or fees when tax time is nearing.

Accountants are there to help every step of the way. You should meet with your accountant on a quarterly basis. These meetings will ensure that everything is on track and that your business is growing correctly. Sometimes, a company can grow too fast, leading to problems down the road.

You always have to worry about your quarterly tax payments. As the income increases, so do tax liabilities. Your initial estimated tax payments may not be sufficient if you experience a surge in your business. By scheduling regular meetings with an accountant, you can avoid those underpayment surprises at tax time.

Often, business owners are too close to some problems. Yes, business owners know their company better than anyone, but looking past those blind spots can be difficult. With an accountant’s help, you can take a look at the big picture, which can help the business continue to grow.

Find a Small Business Accountant

Now that you know the importance of working with an accountant, you need to find the right one for the task. Even if you want to handle your finances by yourself, you should have an experienced accountant on hand to get solid advice. Think of an accountant as a small investment for your business. With their help, you can make the right decisions for your business. Remember, many successful companies work with an accountant for their financial needs. Now is the time to find a qualified accounting professional to assist with those financial duties for your small business.

Need an Accountant for My Small Business?

At TMD Accounting, we understand the needs of small businesses. Our family-owned and -operated accounting firm has been serving the residents of Gloucester County for over 40 years. We provide you with affordable, reliable, and convenient options for your small business accounting needs. Our team can help with taxes, bookkeeping, and payroll services. Don’t handle those essential responsibilities by yourself. Schedule your consultation by calling 1-856-228-2205.

Where Can I Find Accountants in South Jersey that Specialize in Small Business?

Small Business

Do you need an accountant for your small business in New Jersey? Some owners might think that a software program or an app is the less expensive alternative. However, you need a seasoned professional to help with those expenses. An accountant helps save you money and makes your life so much easier. Now that you know the importance of a small business accountant, where can you find one in South Jersey?

Finding an Accountant That Specializes in Small Businesses

There are a lot of reasons for hiring a business accountant. When it comes to finding one that specializes in the needs of a small business, it can be a challenging task. You want to work with someone who has your best interests at heart. Also, they need the right experience to help manage those finances.

Search for a Small Business Accountant

If you do a quick Google search, you will see plenty of ads for small business accountants. While the internet can help kickstart that search, you don’t want to see the first person and hire them. An experienced accountant needs to provide you with sound advice about how to manage your business and money. You need the right type of small business accountant for those vital duties.

Consider looking for an accountant through referrals. You can ask your lawyer, banker, or business advisor to recommend a great accountant. Remember that not every accountant is a Certified Public Accountant (CPA). For an accountant to be a CPA, they must pass a specific exam. When you work with a CPA, you can be confident that the person is experienced and well-trained. CPAs need to renew their certification regularly. Those re-certifications provide their clients with the best up-to-date knowledge.

Hire Someone With Small Business Experience

Yes, hiring someone with small business experience makes all of the difference. Managing the finances of a small business can be complex. When you work with a business accountant, they can help you handle any complications that come with a small business.

Also, you will want to know if the accountant has experience in your particular industry. Some accountants will specialize in certain types of businesses. If your business is in a specific sector, you want to work with an advisor who can meet those needs. Always ask if the accountant has experience working with structured companies like yours. LLCs, sole proprietorships, and corporations all have different accounting requirements.

Ask About Other Services

Many accounting firms will offer both tax and auditing services. However, others may assist customers with bookkeeping, budget, payroll, risk assessment, and business valuation. Some highly qualified accountants will do more than those basic services.

You should think of your accountant as a valued advisor for your business. Professional small business accounting services become beneficial advisors. They can help you understand your financial capacity. When you work with an accountant that understands your small business, they can create a financial model from the beginning, helping expand your business in the future.

Discuss Billing

Finally, you need to know how much the accountant will bill for their services. Some will charge by the hour, ranging from $100 to $275. On the other hand, a few accountants do work on a monthly retainer. Like a business purchase, you can always shop around for options. Yes, accounting firms do quote their services. Take those quotes to look for the best one for your needs. Keep in mind that an expensive option is not always the best. However, when an accountant charges more, that individual will usually provide you with more services.

Hire Your Business Accountant in South Jersey

After talking to a few South Jersey accountants, you can move on to the next steps. If you have shopped around, you might be able to negotiate the fees. Remember that many accountants have a set pricing structure. Asking for a special rate is fine, but don’t expect it.

Once you have agreed on the price, consider drafting out the terms of an agreement in writing. With this document, you can outline the exact services, fees, and duration of work provided by the accountant. Detailing the terms will define the relationship between the accountant and your business. That document allows both parties to know what to expect from each other.

Finally, you can grow your business with the help of your accountant. If you want to make the most of your business relationship, make sure to communicate on a regular basis. You should try to talk to your accountant at least once a month. Following up with them can prevent any issues or surprises down the road.

Choose the Right Business Accountant for Your Small Business

With these steps, you can find the right small business accountant to help you save money and provide valuable financial advice. You could try to manage your finances by yourself, but that can take away from growing your business. A small business accountant will help with financial management, taxes, and many more business duties. You can invest your free time in improving and growing your business with their assistance.

Do I need an accountant for my small business? The answer is yes. At TMD Accounting, we offer flexible, reliable, and affordable ways to manage your small business finances. We have been in business for over 40 years in the Gloucester County area. Small businesses throughout South Jersey trust us with their financial services. You can schedule a consultation by calling 856-228-2205.

Tax Planning vs. Tax Preparation: What is the Difference?

Tax Planning

Most taxpayers want to find ways to reduce how much they might have to pay in taxes. A good way to reduce your tax burden is to work with a tax professional. However, many people confuse tax preparation with tax planning. While both types of services are important, they have separate purposes. Here’s some information about the differences between tax preparation and tax planning from the accounting professionals at TMD Accounting.

Understanding Tax Preparation

Most Americans of working age are required to file income tax returns every year. However, the tax filing process can be complicated, leaving many people uncertain about how to file their tax returns properly. Mistakes made on your tax returns could result in you owing more money than you anticipated. Tax preparation services help with filing your tax returns and ensuring they are correct. Most tax preparers will offer help with filing your returns with local, state, and federal tax authorities.

Tax preparers use your financial information to fill out your income tax returns while complying with relevant laws. They also check to see whether you might qualify for deductions or credits that can reduce your tax bill. If your tax situation is complicated, hiring a professional tax preparation service can be helpful. Doing so can also be important if you have undergone recent changes in your life, including a job or household size change.

Understanding Tax Planning

While tax preparation is completed before you file your income tax returns, tax planning is a service that helps you to plan ahead to optimize your situation to minimize or avoid any tax consequences that you might face as a result of your financial decisions. Tax planning can help you make financial choices that are better for your overall financial situation.

Tax planning is geared toward helping you make proactive decisions about specific areas of your finances, including investments, retirement accounts, inheritances, estates, businesses, and charitable contributions that could impact your tax situation. While tax preparers might give you advice when they prepare your tax returns, their advice is typically general and not intended for you to use for proactive decision-making.

Accounting professionals that provide tax planning services thoroughly research to gain a solid understanding of both your current finances and your future goals so that they can make specific recommendations. If you want tax planning, you will need to ask your accountant specifically for this service so that they understand what you are wanting.

If you already use a tax preparer, you might need to look for a different tax professional for tax planning. many tax preparers are only trained to help their clients comply with their tax obligations and might not know enough about the system to make informed and knowledgeable recommendations.

Tax Planning Vs. Tax Preparation

Since you likely are required to file annual income tax returns, you will likely benefit from tax preparation services. You can either choose to complete and file your return by yourself or get help from a tax preparer. If your tax situation is complex, it might be worthwhile to get professional help to prepare your tax returns. A professional tax preparer can ensure you complete your tax returns correctly and claim the deductions and credits for which you are eligible. This can help you to save money.

While tax planning is not essential for everyone, it is worthwhile for many people. Many decisions you make about your finances could have a large impact on your taxes for years. Understanding the impacts your financial choices might cause can help you make better decisions that can also play a role in your overall financial planning.

Why the Assistance of Tax Professionals Is Beneficial

Tax professionals offer a substantial amount of knowledge about the tax laws and how they can impact both how much taxes you might owe and your overall financial picture. Taxes are complicated, and the federal tax code contains more than one million words. Most people do not have a good understanding of the U.S. tax system and the rules that you can use to save money.

Tax professionals can help to eliminate a lot of uncertainty. Even if you only work with a tax preparer, they can help you claim credits and deductions that you were not previously aware of. If you hire a tax planning professional, you might derive even greater tax benefits. A tax planning professional can help you understand how to plan for retirement, invest, and leverage charitable contributions for the greatest benefits. They can also help you understand how your financial goals might affect your tax situation.

Working with tax professionals also offers you some peace of mind. You won’t have to worry nearly as much if you are selected for an audit. A professional is less likely to make errors on your tax return.

Finally, tax professionals can help to optimize your financial plans. When you work with a tax planning professional, you might find that it is easier to make otherwise stressful financial choices and follow through with them because you will know what the likely outcomes will be.

Both tax preparation and tax planning can offer numerous benefits that you can benefit from. However, they are different services. Understanding your financial needs can help you determine which of these services you might need or possibly help you to determine that you might need both.

Contact TMD Accounting to Find an Accountant for My Small Business

If you want help with tax planning and tax preparation for either yourself or your small business, you should reach out to the professional accountants at TMD Accounting. We offer small business accounting services and individual tax planning services and can help you understand your tax situation and guide you toward reaching your financial goals while minimizing your tax burden. Call us today to schedule an appointment at 1-856-228-2205.

Assets vs. Liabilities: The Complete Breakdown

Accounting

As a business owner, you want to keep an eye on your finances, including your expenses. When you process any transaction, it needs to be recorded in the books. For that reason, you need to know the difference between liabilities and assets. Here is a complete breakdown of these terms and what they mean for your small business.

The Difference Between Assets and Liabilities

Before you can know the differences, you need to understand these terms’ meanings. Liabilities are existing debts that a business owes to a vendor, organization, employee, lender, another business, or government agency. Many of these liabilities will help the business owner finance their company, such as a loan. On the other hand, assets are the resources or sums of value that a business owns. These assets can provide long-term benefits to the owner and also help to generate revenue.

You must list all liabilities and assets on a balance sheet, which is a vital financial document for any business.

What Is a Balance Sheet?

The balance sheet is one of the three fundamental financial statements for a business, along with a cash flow statement and income statement. The balance sheet lists the business’s total assets and how those assets are financed. Balance sheets could be called a statement of financial position or net worth.

The balance sheet will be divided into two sections. All the company’s assets remain on the left side. A list of the liabilities and equity stays on the right. The liabilities and assets are separated into two categories: current and noncurrent. Liquid accounts, such as cash and inventory, are considered part of the current category. Property, equipment, and long-term debt will end up in the noncurrent categories.

Liabilities Examples

Liabilities are either long- or short-term. As previously mentioned, short-term liabilities are current liabilities, and those long-term ones are considered noncurrent. Current liabilities often include credit card balances, accrued expenses, unpaid invoices, and payroll taxes. Noncurrent liabilities are leases, deferred tax payments, and mortgage loans. You must pay those short-term liabilities within one year of incurring the debt. Long-term liabilities are often paid over several years.

Examples of Assets

Similar to liabilities, businesses can also have noncurrent and current assets. A current asset is known as a short-term one, while noncurrent assets are long-term. Current assets include investments, accounts receivable, cash, and inventory. Those noncurrent assets include equipment, trademarks, and patents. All of these items provide continual, long-term value to the businesses. However, you cannot convert noncurrent assets into cash within a year. Additionally, these long-term assets tend to depreciate over a period of time.

Along with that, assets are intangible or tangible. Intangible assets are non-physical items you cannot convert to cash, including trademarks, business licenses, logos, and patents. Tangible assets are physical items that you can easily convert to cash. These assets include bonds, equipment, and inventory.

Assets, Liabilities, and Equity

Once you figure out what you owe compared to what you own, you will want to know how much value is left over. That term is known as equity. You can figure that out by totaling your assets and subtracting those liabilities. For small business owners, your equity is the business’s net worth. If you have a partnership or sole proprietorship, the equity is often called the “owners equity” on the balance sheet. In a corporation, this equity is referred to as “shareholders’ equity.”

No matter the name, equity is vital to your company’s relationship between liabilities and assets. On the balance sheet, the assets equal the total returns plus the total equity. There are several accounting equations to use to determine these figures, such as:

  • Equity = Assets – Liabilities
  • Assets = Liabilities + Equity
  • Liabilities = Assets – Equity

With those equations, your small business accounting services can determine if the business finances through debt or uses its own funds to operate the company. However, these equations will only work for those who use the double-entry bookkeeping methods for their books.

Equity can affect both sides of these equations. If the business only has figures for equity and assets, it can easily calculate liabilities with no issues. Remember that bookkeeping and accounting can be tricky for any business owner. For that reason, hiring a professional to help calculate your assets, liabilities, and equity may be a good idea.

Do These Calculations Matter?

Liabilities, assets, and equity are essential for your business accounting system. With these numbers, you know how much you own, how much you have, and what is left over for your business. You will know where your money is at any given point in your business. These numbers ensure you do not make mistakes in recording those transactions.

Balancing liabilities, assets, and equity is the foundation of double-entry bookkeeping. Without knowing these calculations, you will not be able to understand your business’s finances. As a result, you could have a strong cash flow, but you may have an outstanding debt that eats away at your profits. With a better understanding of these terms, you can confidently know the financial health of your business.

At TMD Accounting, we help you track your assets, liabilities, and equity. Our experienced team can assist with your small business’s accounting, bookkeeping, and tax matters. We are a family-owned and -operated business that has been serving the Gloucester County area for over 40 years. You can count on us when you need an accountant for my small business. Schedule an appointment by calling 1-856-228-2205.

The Ultimate Guide to Independent Contractor Taxes – New Jersey

Accounting, Bookkeeping, Payroll, Small Business, Tax Planning

Independent contractors have to worry about federal income tax, self-employment tax, and local and state taxes when they file their returns. Sole proprietors use Schedule C with Form 1040 to report their business profits and losses to calculate the taxes they will have to pay. To avoid an underpayment penalty, independent contractors must also submit quarterly estimated tax payments each year. When you begin working for one or more companies, they should determine whether you should be treated as an independent contractor or employer based on several factors. If you are classified as an independent contractor, you will be responsible for paying both your portion and the employer’s portion of your taxes and will receive a 1099-NEC at the end of the year instead of a W-2 for your annual earnings. Here is what you need to know as an independent contractor about taxes from TMD Accounting.

Taxes Self-Employed People Must Pay

Independent contractors must pay federal, state, and local taxes and the federal self-employment tax. Here are the taxes self-employed people must pay:

  • Federal income tax at a rate ranging from 10% to 37% based on the total income for the tax year
  • Self-employment tax to pay into Medicare and Social Security with tax rates of 15.3% for net profits of up to $147,000 and 2.9% for net earnings above that amount
  • Additional federal taxes in some situations such as the net investment income tax, alternative minimum tax, and additional Medicare tax
  • State and local taxes, including income tax, registration and licensing fees, and business tax
  • Sales tax if you sell goods
  • Excise tax if you sell items such as guns, cigarettes, alcohol, or telephone services

Understanding the Self-Employment Tax

The self-employment tax includes a 12.4% Social Security tax on your net profits up to $147,000 and a 2.9% Medicare tax on all net earnings. This means you will pay a total self-employment tax of 15.3% on your earnings up to $147,000 and 2.9% on any earnings above that amount. If you have net earnings of more than $200,000 as a single taxpayer or $250,000 as a joint filer, you might also have to pay an additional 0.9% Medicare tax.

Available Deductions for Independent Contractors

There are many different deductions that might be available to independent contractors, including the following:

  • Home office deduction for contractors who work from home and use the office space solely for business purposes on a regular basis
  • Health insurance premiums
  • Retirement plan contributions
  • Depreciation of your equipment, machinery, and furnishings for your office and business use
  • Truck and auto expenses if used for work
  • The qualified business income deduction
  • Expenses for outside services and contract labor
  • Miscellaneous business expenses

Preparing to File Your Taxes as an Independent Contractor

Before you file your taxes, it is important for you to organize everything. You will need to know the gross amount you made as an independent contractor and how much you spent on tax-deductible expenses. Gather your 1099-NECs, profit and loss statements, expense statements and bills, receipts, and other relevant documents together.

Report Income and Deductions on Schedule C

When you fill out your Form 1040, you will use Schedule C to report your business income and deductions. You will report other sources of income, including rental income, dividends, and interest on Form 1040.

Report Net Self-Employment Income on Schedule SE

Once you complete Schedule C, you will then carry over the self-employment income to Schedule SE to calculate your self-employment tax. The self-employment tax will then need to be entered in your Form 1040 tax section.

Complete Form 1040

On your Form 1040, you will include all of your other non-business income. You can also claim non-business deductions on Form 1040, including things like student loan interest, charitable donations, self-employed health insurance, itemized deductions, and others.

Calculate Your Federal Taxes

When you enter everything into your Form 1040 and perform the calculations, you will see your total federal tax obligation. After you subtract your estimated tax payments made during the year, you will either owe taxes or have an expected refund.

Estimate Your Taxes for the Next Tax Year

As a self-employed person, you will need to estimate the taxes you’ll likely owe in the next tax year so that you can divide that amount into quarterly estimated payments to send each quarter throughout the year.

Complete Your State Income Tax Return

Once you have completed your federal tax return, you will then need to complete your state return.

What Happens if You Can’t Pay?

If you can’t pay your taxes in full, you can complete Form 9465 to request an installment arrangement. However, you can’t owe more than $25,000 and must show that you do not have the means to pay your taxes. You will then have three years to pay. The IRS will penalize you for waiting to pay your taxes after the deadline. If you fail to file a tax return by the deadline, you will be assessed a 5% penalty for each month of the outstanding amount you owe but haven’t paid. If you submit your return on time but do not pay what you owe, the late payment penalty will be 0.5% of the tax owed for each month you are overdue.

Find an Accountant for My Small Business

Small business accounting services can help to make filing your taxes simpler. If you are self-employed, working with TMD Accounting might help to ensure your taxes are filed on time and correctly and that you claim the deductions that are available to you. Contact us today to schedule an appointment at 1-856-228-2205.

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