National Federation of Independent Businesses Features Pete Bush

December 28, 2015

Originally Published on 12/28/2015 by

A new year is here, and experts say now is the perfect time to start thinking ahead about getting your small business finances in order. We talked to two small business finance experts who share what you need to look at now to make sure you come out ahead next year.

Get Your Taxes in Order

Consult a tax attorney or CPA as soon as possible—before January—to make sure you minimize your business’ tax liabilities while taking full advantage of tax credits and benefits. For example, small business owners who work from home may not know they can deduct a portion of their housing and utilities costs from taxes, says Harrine Freeman, a Washington, D.C.-based financial expert and CEO/owner of H.E. Freeman Enterprises.

A tax pro can also make sure you stay out of trouble with the IRS. One common slip-up: Businesses that use online payment services such as PayPal “are supposed to take out sales tax, but a lot of times, they don’t,” Freeman says. “That can get business owners in a lot of trouble.”

Consider Refinancing

Take a look at your small business’ debt and consider refinancing soon because interest rates are likely to rise in the future, says Pete Bush, a certified financial planner at Horizon Wealth Management in Baton Rouge, Louisiana. “This can set you up for a much more profitable cash flow,” he notes.

Shop around with local banks and see what they can offer your business. If the rate you pay is more than a percentage point higher than the current fixed rates and you know you’ll be holding the debt for a long time, it’s worth paying the closing costs now for improved cash flow later, Bush says.

Create an Emergency Fund

You may have a personal emergency fund, but does your small business? If not, creating one should be a priority in the new year, says Freeman. An emergency business fund should be enough to cover bills and expenses for six to nine months.

“During high-earning months, set aside money to put back into your business,” Freeman says.

Opening an account at your primary bank is fine, she says, if you know you’ll be disciplined enough not to touch the money except in dire circumstances. If not, open an emergency account at another bank or credit union, or check out online options, such as EverBank or Bank of America, that allow you to earn interest on a checking account.

Plan for the Unexpected

If you have business partners, review your buy-sell agreements, which stipulate what will happen if one partner dies or leaves the business either by necessity or choice. (Don’t have a buy-sell agreement? Make it a priority in the new year.)

“‘What if one of us didn’t wake up tomorrow?’ and ‘What if one of us couldn’t come to work tomorrow?’ are tough questions, but they demand answers,” Bush says. “The cost of the solution is usually a fraction of the cost of the problem.”

Buy-sell agreements should be funded with a logical cash buyout or life insurance.