Just like last year, prices are still continuing to rise to crazy prices, and yet we still have to somehow save to pay that tax bill coming up, on top of gas and groceries. If you’re not prepared, it can get a little scary. So, are your accounts ready?
Profit First Prep
Profit First can help you keep your head above water during tax season. Instead of dreading that final number from the tax preparer, you can feel confident when you’re able to write the check without flinching. There’s no worrying or searching the couch cushions to get the money and cover the bill. So how can you get some of that control in your life? It’s not as hard as you might think!
It’s All About Location
The first thing to do is set up a bank account specifically for taxes. This will be a checking or savings account that is specifically for your federal and state income taxes. Property and sales taxes will come out of your OpEx account, so you don’t have to worry about those.
When those Amazon settlements come in, take out the money you’ll need for taxes and add to your tax account. Location matters, and if that money is set aside from everything else specifically for your taxes, it’s easier to leave it alone until it’s time to make your quarterly estimated payments or at year end.
Now, how do you know how much money to add to your tax account? I always recommend looking at the previous year’s tax return and figure up the percentage of taxes to revenue. This is a good baseline, but you’ll want to test the number throughout the year to make sure it’s still making sense for your business.
Last year may have been extremely profitable for you, but this year may not be hitting those same marks. If this year’s profits are growing better than last year’s, you’ll need to recalculate again. It’s always helpful to check in with your CPA and see if a recalculation makes sense. September is normally the time of year I find best to have this talk.
Don’t Get Stuck
You may only have to “settle up” with the IRS one time a year, but taxes are really a cost of doing business. Like you would any other operating cost, you need to put money aside to cover it. If you redisperse the money back into the business, it is just acting as a crutch that will be pulled out from under you on April 15th.
Believe in the Benefits
All of our Profit First clients tell us every year that the bank account system provides such a relief by being able to pay taxes with money that’s already there to be used for it. A favorite story to tell is the look on their accountants’ faces when they say, “Write the check for X amount? No problem!”
Using Profit First, you can reduce the dread and stress that comes with tax season and be ready to write that check without hesitation next year! Profit First is one of my favorite things to implement, and my team would love to help you start on that path. Reach out the bookskeep team and start taking your Profit First today!
If your ecommerce business isn’t where you’d like it to be in terms of profitability, check out my book, Profit First for Ecommerce Sellers. It answers important questions about how to implement Profit First in an ecommerce business. Take control of your money and your business, and put Profit First to work for you!
You can also sign up for the Profit First for Ecommerce Sellers Online Course. As a Mastery Level, Certified Profit First Professional, I will teach you why Profit First works so well for ecommerce businesses and the particular challenges for businesses that have physical products requiring inventory management. You will learn how your behavior drives your money management habits for your business and how you can set up your business bank accounts to work with your habits.
Check out all our ecommerce accounting and profit advising services here!
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