How to Avoid Audits & Keep Your Small Business Compliant

June 10, 2021

Business Owners have a tough job. With the freedom of being your own boss also comes great responsibility, especially when it comes to maintaining your small business finances. Even the most seasoned small business owners hate dealing with taxes and legal paperwork, and for good reason. Business laws and compliance regulations vary widely from state to state and are constantly being updated, so staying on top of it can put a huge load on an already busy mind. Are you running into this problem? If the answer is yes, read on to find out why it might be time to enlist the help of a bookkeeping professional like KGC Consulting

Why it Matters

Keeping financial data organized is not something that comes easily or naturally to everyone. You can be a very successful business owner and still rely on a system that involves tossing receipts into a shoebox until it’s tax time. And while this method might have worked well enough at the beginning, as your business grows- and your financial records start spanning years instead of months- it’s important to consider putting a more refined system into place. 

Not keeping organized books can lead to serious issues for a small business. Reporting inaccurate business information, even accidentally, can set off red flags to investors and authorities. If you ever face a potential audit from the IRS, not having properly maintained books can compound the issue and quickly turn a minor annoyance into a full fledged nightmare. To avoid this, it’s best to keep your books current and up to date at all times. That way, if the IRS or any other financial institution comes knocking on your door, you can procure the appropriate, up-to-date statements right away. 

Keep on top of the day to day 

Do your future self a favor; don’t neglect your day to day small business responsibilities, and make a habit of regularly updating your financial records. Set a dedicated time to work on it periodically, whether it’s 30 minutes every week or 2 hours a month, and use this time to develop, streamline, or refine your processes. This prevents the task from turning into a huge, monster project in the form of a stack of papers and receipts glaring at you from the corner of the room. Practice tackling your finances habitually, a little bit at a time, and your future self will thank you. 

Use Professional Reporting Formats

Generally accepted accounting principles, commonly abbreviated as GAAP, is a standard format of reporting finances so that they can be universally understood by other finance professionals. This aspect of compliance is important as it indicates you are following the rules when it comes to your small business finances, and can communicate that information appropriately. If this isn’t something you are comfortable or familiar with, then hiring an accountant or bookkeeper like the professionals at KGC Consulting will be your best bet. 

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Avoid Getting Surprised by the IRS

As we mentioned earlier, there’s literally nothing that business owners dread more than potentially getting audited. If your financial records are a mess, the process could be dragged out for years and result in hefty financial penalties. By keeping accurate financial records, you will have an accurate overview of what you might owe on your quarterly business taxes, and can plan accordingly, protecting yourself against any surprises come tax day. 

Cover your Responsibilities as an Employer

If you have any number of employees, that means you are responsible for payroll taxes that eventually go toward funding services such as medicare, social security, and unemployment compensation. While this responsibility is typically shared between employers and employees via payroll deductions, it is up to you as a business owner to make sure that these taxes are being processed correctly. There are many payroll services that utilize software programs which calculate and take out the appropriate deductions automatically. These are great options for business owners who want to make sure they are following the law and meeting their legal obligations as an employer.   

Any successful business owner will tell you that one of the key contributors to their success was hiring the right people for your job. KGC Consulting specializes in bookkeeping for small businesses, and offers services from payroll management to sales tax preparation. If you’re concerned about keeping your small business compliant, managing invoices or payroll, or just need help keeping on top of your day to day small finances, reach out to us today for a free consultation.

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