Small Business Tips – How to Avoid Common Mistakes When Writing a Business Check

Many business owners struggle with figuring out how much they should charge for their products or services. One of the first things that most owners will do is to get business expenses and sales reports from their accountant. However, an owner who wants to know more about his business can also make an effective use of other sources of information to get the answer he wants. Here are some tips for owners to think about. They may prove to come in handy when it comes to making business decisions regarding pricing, marketing strategies, and more.

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Small Business Tips – How to Avoid Common Mistakes When Writing a Business Check

Many business owners struggle with figuring out how much they should charge for their products or services. One of the first things that most owners will do is to get business expenses and sales reports from their accountant. However, an owner who wants to know more about his business can also make an effective use of other sources of information to get the answer he wants. Here are some tips for owners to think about. They may prove to come in handy when it comes to making business decisions regarding pricing, marketing strategies, and more.

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Annual receipts: This is basically the gross revenue (or total income) minus the cost of sold items. These figures can usually be found on the yearly IRS tax form for your small business. To calculate this, divide the gross revenue by the number of days in a year (usually 30 days). Then multiply the result by 52 weeks to arrive at the average daily revenue for your business. If a business has never been in business, multiply the average daily revenue by 30 to get its average daily revenue.

Employee compensation: This includes wages paid to employees, as well as any tips. The total can be figured out by dividing annual salaries by the number of days in a year. For small businesses, this will include the proprietor, partners, and any one-time employee that signs on with the business. These employees may not receive tips; however, they usually are entitled to payroll deductions of a certain amount each year. Calculate the annual salary of each employee before calculating the payroll taxes of each employee.

Annual business loans: All business owners should carefully consider the guidelines set forth by the SBA for S-Corps. The Small Business Administration explains these guidelines in detail on their website. Before finalizing business loan agreements, small business owners should ask their creditors what percentage of the loan is considered S-Corporate.

Annual receipts: All employees should bring in all business related receipts for the year. All sales, income, and purchases should be documented. Include all invoices and payments made to customers. This also includes business credit cards used to purchase goods or services. In order to determine if a small business has excessive receipts, it may be necessary to obtain additional documentation.

Other expenses: All employees should report all travel and hospitality expenses, including mileage expenses incurred. Many small business owners do not properly track these types of expenses. Estimate the mileage based on the normal commute for employees, if possible. Otherwise, divide the annual receipts by the number of employees to get an approximation of business travel. Be sure to keep copies of every expense.

Allowable expenses: All business owners need to track and document all transportation related expenses. Expenses such as gas, car rental, vehicle maintenance, insurance, and tax expenses are allowable expenses. It is important to keep records of all deliveries. Also include mileage, taxes, and brokerage fees. Again, all business owners need to document the amounts they charge their employees for mileage used to commute to and from work.

These are just a few of the many expenses small business owners incur that can be documented. However, there are many other items related to running a business that cannot be captured. All employees should be aware of expenses that are not included in the annual budget. Catching small business owners by surprise is the best way to ensure they don’t go on a spending spree. By being organized and proactive, small business owners will avoid unnecessary expenditures.

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