Tax Expert Shares How Bookkeeping Can Make or Break Small Business Success

bookkeeping
Image: Andresr/Getty Images.

The COVID-19 pandemic presented a devastating blow to businesses throughout the country. In places like New York, once the epicenter of the United State’s health crisis, nearly half of all Black businesses shuttered under the unprecedented financial pressure. 

Though the country is now moving past the worst days of the economic turndown and regaining its footing amid job growth, vaccinations, and relaxed mandates, small business owners, are facing a new challenge: inflation. The rising prices on virtually everything from groceries to healthcare to goods and services are negatively affecting their bottom line and presenting a hurdle that many will be unable to mount. 

Research from Block Advisors, a small business-focused team within H&R Block, confirm that the biggest challenge small businesses expect to face this year is inflation/rising cost of goods. Jamil Khan, Chief Strategy and Small Business Officer at H&R Block notes that minority-owned small businesses are more susceptible to this level of economic turmoil for various reasons. For one, these businesses often lack early-stage financing, and lack access to lending institutions. “While there are many different loan options out there, without the proper support and insight into what each option includes, these loans remain inaccessible to a majority of small business owners,” Khan tells EBONY.

Starting off at a disadvantage has made the financial instability of the pandemic and now inflation a hard pill to swallow for many entrepreneurs, especially for those who found it difficult to pivot when changing times called for it. “The ability to pivot and change direction is crucial for any small business,” says Khan. “Businesses that were able to go from in-person to a more digital landscape during the pandemic were able to not only stay afloat, but also grow.”

For many of those who kept their doors open during this time, drastic actions were taken to stay financially afloat. And while it shouldered the business in the short while, these actions could prove detrimental to their longterm economic stability. Khan notes that overextending lines of credits or credit cards can set back a small business due to high interest rates and make it difficult to recover.

Instead of being reactive to turbulent financial times, Khan suggests that small business owners implement tools to help stay on top of cash flow, like leveraging a provider or using a service to track income and expenses. “Most small business owners—77 percent— are already outsourcing for their tax preparation, but reaching out to professionals for bookkeeping help is also a valuable investment to save time and gain peace of mind.”

Khan explains that a dip in sales or an unexpected large business expense can throw a small business off track. Making sure that bookkeeping is up to date can help an owner keep their finger on the pulse of their business to make strategic decisions in real time. As we’ve all learned over the past several years, it’s important to prepare for the unexpected, whether that be job loss, a health challenge, or a global health crisis. 

From a business standpoint, Khan says that 80 percent of small business owners do not outsource or use a service to track income and expenses. However, taking advantage of bookkeeping software and having an expert on-hand can help provide insights and advice along the way. “Also, speaking to an industry professional about your specific situation guarantees you are getting professional advice from someone who understands you and your business’ needs,” Khan adds.

Come tax time, this professional help could make the difference. Because quarterly payments are a tax requirement throughout the year, Khan strongly urges that small business have up-to-date bookkeeping on income and expenses to help ensure that owners pay the right amount. “Cash flow is the life blood of a small business owner,” says Khan, “so knowing the right amount to pay as their business ebbs and flows is critical to help manage their cash flow.”

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