Cutting The Wrong Costs To Save Money
Most people believe that accountants are very tight spenders so many people avoid accountants because they think they can not spend. However, in business, you must spend to build the business, and eligible business spending will lower taxes in the process. Taxable income is based on your net profit, and if you do not spend the money for eligible business expenses, you will have a larger net profit and will pay more taxes. Spending has to be related to the business you are using to reduce the taxable income. You can not take expenses from business A and apply the expenses to your most profitable business to reduce your taxable income.
Most people go for free or low-cost workers/labors in an effort to save money. But paying people such as payroll for employees or contractor or hired firms for services, such as this accounting firm, are deductible expenses. The payroll taxes for employees are deductible expenses. What do I mean by deductible expenses? Deductible expenses are business spending deemed eligible business expenses by the Internal Revenue Service (IRS). You can claim them on your taxes without issues. The Internal Revenue Service can deny expenses if they are not related to your business (personal expenses) or if it is not related to the business you received income (you can not claim expenses for business B on business A to reduce taxable income for business A.)
Most of us enjoy having a large bank balance but earning revenue without spending will result in higher taxes. I have seen people use debt instead of their money in the bank. Perhaps this is a fear of a low bank balance, but debt is the promise of future income. I would rather purchase what I need for the business to grow the business without debt and pay lower taxes. I can then see the business sustain itself and eventually support my family and me as well. A business is meant to contribute to society and serve as income streams for a business owner because I use my skills to bring us income.
Also, planning your spending by purchasing the services, software, products, equipment, etc., that will support the business and maintain your business will help keep you off the money rollercoaster. Avoid spending on unnecessary expenses, and sometimes it’s hard to admit something is unnecessary but make sure you are paying your people that work for you and with you first. If you need to receive payment, make sure you can meet your own salary before hiring people. We want to learn to function within our means while slowly building our businesses.