Small businesses have to cut their business expenses if they want to survive. It doesn’t matter if a small business has a great idea or is always in demand because it will struggle to make a profit. Even the best businesses didn’t turn over a great deal of money in their first year. As such, an SME needs to cut expenses to stay afloat. But, which ones do they cut? Every expense they pay out is vital to their survival, apart from tax. Tax is a legal requirement, but a business doesn’t have to pay as much as it might think. Businesses that follow these tips will cut their tax bill in half.
Consider A Tax Agency
Companies like BC Tax deal with tax issues on a regular basis. As a result, they are much more likely to help an SME achieve their goals than if they did it alone. For some reason, bosses hate the thought of outsourcing their tax problems. But, they shouldn’t because a small company needs as much help as possible. And, that is where outsourcing comes in handy. Plus, the people that come in are experts with years of experience and a wealth of knowledge. How can a company not benefit from this decision?
Set Up Books And Records
Any firm that doesn’t want to use an external agency needs to get organized. ‘Taking care’ of the business’s books isn’t like taking care of an individual tax return. Although it might not seem that way, individuals get a lot more flexibility. If a business wants to apply for tax breaks, it will have to provide every single requested document. To do that, they need to keep their books in order just in case the IRS knocks on the door. For starters, a business should install software to track their income and expenses. Next, there is the small issue of receipts. And, finally, they need policies for record keeping. If you use your car for business, for instance, you need to track your business mileage.
Don’t Hire Too Many Employees
A small business doesn’t need a host of employees because it doesn’t need to expand too quickly. When businesses talk about expansion, they talk about it in terms of supply and demand. But, there is another reason to hold off on growth: tax. The more employees a firm has, the more it will pay in tax. There is even more than one type of tax that a firm has to pay with regards to its staff. If a business doesn’t need them desperately, they shouldn’t be on the payroll.
Make Smart Tax Options
There are ways for a business to avoid paying tax by making tax elections elsewhere. It is simple, it is easy, and it isn’t illegal. Well, it isn’t illegal as long as they don’t go overboard with their expenses. Everything that a business makes is deductible from their tax bill to a certain degree. With that in mind, a business can use their expenses to cut their tax bill. For example, a business can claim for the cost of buying equipment. With Section 179, the firm might qualify to cut the expense from their bill within the first year.
One final note: always keep up to date with changes to the tax system. An SME that doesn’t is one that won’t be able to benefit from the changes.