How much to set aside for taxes in your business
One of the most common questions we hear from business owners is how much they should be setting aside for taxes. Many of our clients come to us feeling unsure, overwhelmed, or surprised by their tax bill because they were never taught how to plan for it throughout the year.
Once we walk them through a simple system, they feel more confident and more in control of their finances. You can use the same approach in your business. Here are a few simple ways to plan ahead for taxes.
1. Set aside a percentage of every payment you receive.
A common starting point is 15 to 30 percent depending on your income level and business structure. For example, if you bring in $8,000 in a month and save 20 percent, you would set aside $1,600 immediately. This helps you avoid scrambling for a large lump sum at the end of the year.
2. Review your financial reports each month so you always know how your income and expenses are trending.
This helps you adjust your savings if your income changes. For example, if your revenue usually sits around $5,000 but jumps to $12,000 during a busy season, increasing your tax savings for that high revenue month gives you a stronger buffer and keeps you prepared.
3. Create a separate bank account specifically for tax savings.
This helps prevent mixing your tax money with your operating expenses. Many clients have told us that before setting up a separate account, they kept accidentally spending what they intended to save for taxes. Once the tax funds were separated, it became much easier to stay disciplined and avoid surprises.
Setting money aside for taxes is not only about compliance. It is about building stability, predictability, and peace of mind as you grow your business.
If you would like support staying organized, keeping your books accurate, and preparing for tax season with confidence, we are here to help you. Reply to this email if you would like us to take the stress of your business finances off your plate.
Cash flow mistakes business owners make and how to avoid them
Cash flow is one of the biggest challenges business owners face, and most issues come from a handful of habits we see over and over again. The good news is that these mistakes are easy to fix once you understand what is causing them. Here are the most common cash flow problems and how to avoid them:
Avoid: Depending on inconsistent income to cover consistent monthly expenses, because it creates unnecessary stress and makes cash flow unpredictable. Many business owners wait for invoices to clear before paying rent, software, or contractors, which leaves them constantly stressed about timing.
Do instead: Build a one-month cash buffer so you can pay your bills on time even if client payments arrive late. For example, if your monthly expenses are four thousand dollars, aim to keep at least four thousand dollars untouched in your account for stability and peace of mind.
Avoid: Letting overdue invoices sit without follow ups. When payments are delayed, cash flow slows down, and many owners end up with thousands of dollars sitting unpaid simply because they were too busy to check in with clients.
Do instead: Schedule or automate invoice reminders so payments come in consistently. A simple follow up every seven days can significantly improve cash flow and reduce stress.
Avoid: Making financial decisions based on your bank balance, since the balance does not show upcoming bills, taxes, payroll, or subscription renewals. This often leads to overspending and unexpected cash shortages.
Do instead: Review your monthly cash flow report before making decisions. This gives you a clear picture of what is truly available after future expenses are accounted for.
Avoid: Waiting until tax season to save for taxes, because it creates a sudden cash flow crunch that can disrupt your business. This is one of the most common challenges we see new clients face.
Do instead: Set aside a small percentage of every deposit so your tax savings grow throughout the year. This keeps you prepared and prevents last minute financial stress.
Avoid: Mixing personal and business expenses, which makes it difficult to understand your true cash position and creates confusion during bookkeeping and tax season.
Do instead: Keep personal and business accounts separate so you always know what is happening with your business finances. Clear separation makes cash flow easier to track and manage.
Cash flow issues are not always a sign that you are not earning enough. Most of the time, they are simply habits that need adjusting. When you put the right systems in place, your cash flow becomes steady, predictable, and stress free.
Ready for more clarity in your finances? Partner with us to organize your books, track your cash flow, and keep your business running smoothly with confidence.
When to move from DIY bookkeeping to professional support
Many business owners start out doing their own bookkeeping. It is practical in the beginning and helps you stay close to your numbers. But as your business grows, there comes a point when DIY bookkeeping starts slowing you down.
These are the same reasons clients come to us again and again. We see the same patterns repeat, and they are usually a clear sign that it is time to bring in professional support. Here are some examples:
1. You are spending hours each month trying to stay caught up. If you are constantly behind on categorizing transactions or reconciling accounts, this is a strong sign your time is better spent on client work, marketing, or operations. A bookkeeper can complete those same tasks in a fraction of the time.
2. You are unsure if your numbers are accurate. Maybe your bank accounts are not reconciling, or your reports do not look right. Inaccurate books lead to inaccurate decisions. A bookkeeper brings clarity and ensures everything is coded correctly.
3. Tax season feels overwhelming every year. If you find yourself scrambling for receipts, past invoices, or missing information as deadlines approach, professional bookkeeping can remove that stress completely. Clean books mean smooth tax filings.
4. You are ready to grow and need better financial insight. As you scale, you need real financial information to plan ahead. Profit trends, cash flow patterns, and spending habits become essential. A bookkeeper provides accurate reports and helps you understand what they mean.
5. You are mixing personal and business expenses. This creates confusion, frustration, and potential tax issues. A bookkeeper helps set up a proper structure, so everything stays organized.
If any of these feel familiar, it may be the right time to move from DIY to professional bookkeeping. Reply to this email if you would like help getting your books cleaned up, caught up, or professionally managed each month. We are happy to walk you through the next steps.