30% of Small Business Owners Suspect They’re Overpaying on Their Taxes
When it comes to running a small business, managing money and keeping track of the firm’s finances can often be some of the top challenges that entrepreneurs face. With that in mind, Clutch recently conducted a survey in which they spoke to more than 300 small business owners and managers who were involved with their company’s financial decisions. What they found were some interesting insights into how businesses manage their finances and how they perceive important financial processes.
Clutch’s study found that 30% of small businesses believe they are likely overpaying on their taxes and could be claiming more deductions or credits with another 13% unsure if they were overpaying or not. At the same time 93% of respondents report being somewhat confident or very confident in their ability to file their taxes accurately. Similarly 30% of those surveyed said they feel confident in their financial record accuracy along with 65% who said they were very confident.
Given these results, Wanda Medina of the accounting, marketing, and administrative support services firm Maventri suggests that business owners are better off investing in professional help than trusting their own work. She told Clutch, “It pays to have an actual tax accountant that knows the latest rules, the financial packages, and who has software that is up-to-date with the IRS.” She went on to note, “In the long run, it’s going to save a lot of money versus small businesses trying to do it on their own.”
Aside from the matter of taxes, Clutch’s survey also uncovered some other interesting data regarding small business finance. For example, more than one-quarter of those surveyed said they didn’t maintain separate bank accounts for their personal and business finances. Meanwhile 23% of businesses report they’ve encountered problems in the last year related to mixing their business and personal finances. As a result Basis 365 Accounting co-founder Rhett Molitor warns that all business should keep things separate, saying, “We recommend if you have a small business – I don’t care how small – you should create a separate bank account.” For the record, older businesses were more likely to hold separate accounts as 80% of businesses over five years old did compared to 68% of those businesses that had been around for less than two years.
Overall Clutch’s survey once again highlights the important — albeit sometimes frustrating — role that finances play in managing a small business. Considering the discrepancy between how confident owners say they are about their taxes and how many suspect they’re making mistakes, seeking professional accounting help may prove to be a good investment for business owners who have previously been taking a DIY approach. On top of that, business owners can also attempt to help themselves by embracing best practices such as separating their personal and business finances in order to prevent mistakes (and potentially find those added deductions they believe they’re missing). Perhaps making these small changes could make a big difference in your business’s finances and, in turn, its success.