It's that time of year again -- tax day is right up on us. As I'm sure many of you can probably understand, tax and accounting concerns can be a serious pain-point. It can be difficult to find a professional who is more than just a technician when it comes to filing taxes and providing tax advice. Ultimately, many of us are looking for and expecting a lot more from an accountant or bookkeeper; especially because you're trusting your financials with them. Ultimately, you want someone who can understand your business as well as you do.
For this reason, I went back to one of my previous columns and decided to bring it back to life in the spirit of tax season. Many fitness entrepreneurs and independent trainers are facing uncertainty and it's important that we are vigilant with our finances. Here is a checklist you can refer to in order to assess your current accountant or to use when evaluating a potential accountant.
1. Business Entity Evaluation. If you are a sole proprietor, the first of the year is the perfect time to consider the benefits of changing your status to a business entity (i.e. LLC, C-Corp, Subchapter S-Corp, etc.). Ask your accountant about the costs and benefits of each type of entity based on your current business structure. Simply changing your business entity could save you money and offer other significant benefits.
2. Tax planning and projections. With the tax code ever-changing on both the state and federal level, it is important to ask your accountant about tax changes or pending legislation that will take effect in the coming year that will affect your business. Even the smallest changes can have a significant impact on your business, your tax liability and ultimately your profitability.
3. Cost-accounting. If you have multiple revenue streams, for example if you sell personal training, online training, t-shirts and fitness equipment, you will want to have your accountant analyze the profitability of each profit center individually. Though your business may seem profitable overall, there may be one or two profit centers that are actually costing you more than you’re making. You will want to evaluate how to fix any inefficiencies or consider eliminating the profit center all together.
4. Understand your financial reports. It is critical that you know what type of reporting you need for your business and more importantly, that you understand how to read the reports. Your accountant should be able to help you determine which reports are most illustrative of your business' financial standing (i.e. Profit and Loss (P&L), balance sheet, cost-accounting, etc.) and he should also walk through each report to be sure you understand the context of the numbers.
5. Assess your accountant. It may not be easy, especially if you have had a relationship with your accountant for several years or if they are a personal friend, but it is critical that you periodically assess your accountant and ensure that you feel entirely confident with the relationship. Do you receive your accounting on a timely basis? Do they respond in a timely manner? Do you feel as though they adequately explain your financials or advise you appropriately, or are they simply processing your numbers? Are they organized and thorough?
If you have any doubt, do not hesitate to change accountants; you can receive consultations from a few other accountants to give you some perspective. Think of your accountant as your business partner; they are a critical lifeline of your business.
Regardless of your current income or status, if you are not yet working with a qualified accountant or professional consultant to help you with your business and tax planning, I encourage you to seriously consider the costs of not working with someone who understands business planning and can interpret state and federal tax codes as they apply specifically to your business.
