For the third part of our Challenge Accepted series, we are going to shift our focus to compliance. (If you haven’t read Part One and Part Two of this series, definitely check those out as well!) Exactly what do we mean by compliance when it comes to your small business?
According to Merriam-Webster Dictionary, one definition of “compliance” is “conformity in fulfilling official requirements”. When we say a business’ finances are “compliant”, it means that the business’ records and reporting obligations meet the required rules and standards set by federal, state, or local agencies.
Here are a few examples:
- The IRS requires businesses to report income on their annual tax returns
- Federal, State, and local jurisdictions require businesses to file quarterly and annual reports on payroll wages
- Insurance adjusters may perform annual audits on business records to determine premium rates for insurance coverage
All businesses are subject to some compliance obligations. Depending on the industry of your business, you may have additional licenses, audits, and registrations that are required. Staying on top of all of these compliance requirements can be daunting. What practical things can you do to stay compliant?
- Know your deadlines and where to report
- Use technology to automate compliance
- Have regular discussions with an accounting professional about compliance
- Maintain good daily business habits
Know your deadlines and where to report
Create a list of all the compliance deadlines your business has. Start with the basics: When is your income tax return due? If you collect sales tax, how often are you required to file? Approximately when does your insurance carrier request an audit? Then build on the list from here. Once you have compiled your list, add these dates to your calendar. We recommend creating reminders in your calendar 15-30 days in advance of the deadline. That way, you can prepare any needed documentation ahead of time.
More state and federal agencies require business owners to sign up for online services for filing reports and making tax payments. We highly recommend signing up for these services where possible. Often, online services provide instructions on how to submit information, offer secure methods of payment and provide confirmation codes to verify the information has been received.
Use technology to automate compliance
Keeping track of your compliance deadlines is good, but wouldn’t it be better if the software systems you already use took care of these issues for you? There are several platforms for small businesses that can do just that.
For an example, let’s look at Gusto, an online payroll service solution. Any business owner who hires employees knows that staying compliant with state and federal agencies is a huge challenge. In today’s virtual landscape, this can be amplified if you have remote teams in various locations, as wage and labor regulations vary from state to state. A solution like Gusto takes all of those challenges off the small business owner’s shoulders. Not only does Gusto seamlessly onboard all of your employees virtually, but they have a dedicated payroll tax team that will file returns and remit tax payments to all required agencies on schedule. Who doesn’t love that?
Have regular discussions with an accounting professional about compliance
Even if you are a business owner with a strong background in technology, having a regular dialogue with an accounting expert is important. Most business owners meet with their CPA or tax preparer once a year. Just one meeting a year is not enough for many of your compliance issues as the deadlines will have come and gone by this point. If you are partnered with an accounting professional, ask to schedule additional meetings throughout the year. This can help your business stay compliant both in the short term and in the long term. Your accounting expert should be able to offer practical suggestions to assist you and may even recommend tools to automate some of your compliance issues.
Maintain good daily business habits
It’s easy to feel overwhelmed when it comes to staying compliant, but it doesn’t have to be that way. Really compliance comes down to having good daily business habits. Think about your daily routine as a business owner, or as a team, and create some practical workflows to help you to stay compliant. For example, have a process for tracking receipts for purchases, set up boundaries to keep your business and personal purchases separate, and keep good records when you withdraw or borrow funds from the business.
Remaining compliant is a huge challenge for small businesses, but taking a few practical steps can help you manage your compliance requirements.
Need help? If so, feel free to contact us at firstname.lastname@example.org to schedule a complimentary call with one of our accounting experts to see how we can help you with your compliance and bookkeeping needs.
Be sure to check back to read our next installment of this series on Setting priorities to focus on.