By Lilac Bar David.
It is no secret that nearly every small business owner wears multiple hats. Small business owners are often the CTO, CFO, CMO, and more of their businesses, despite many of them not having the proper training. Case in point: a recent Lili survey found that 80% of business owners handle their own finances and accounting, in part because many small business owners either cannot afford to hire outside help or struggle to navigate a complex web of fragmented financial tools.
But preparing and filing business taxes – on top of doing everything else to ensure a small business runs smoothly – can quickly become a time-consuming, complex, and costly endeavor. Small business owners cannot do this alone; this is where financial tools can help.
A recent survey from American University’s Kogod School of Business found that a third of small businesses did not know whether they needed to pay quarterly-estimated taxes. Further, a quarter of small businesses reported not knowing how to pay their taxes at all. Many small business owners simply are not armed for success when it comes to financial management and accounting.
According to SCORE, 82% of small businesses fail due to issues managing cash flow. If money has not been set aside for taxes, an unexpected rise in expenses can cause their business to fail. As a result, personal savings can be wiped out, and those with small business loans can go into debt.
In other words, proper year-round bookkeeping that helps small businesses monitor their cash flow and withhold money for taxes can be the difference between thriving and failing. But when full-time bookkeepers and accountants are too costly, there is a strong substitute: financial tools.
In the past, tools that helped small business owners with their taxes were not integrated with small business owners’ bank accounts and credit cards, requiring significant manual input. Further, these tools did not help small businesses withhold money throughout the year, so small business owners could find themselves owing more than they expected.
But now, this is beginning to change. New financial tools are integrating accounting, bookkeeping, and banking tools, meaning that small business owners can now start to see the full picture of their finances and automate manual tasks.
Financial technology platforms have the power to significantly change how small businesses manage their finances. When a banking platform doubles as an accountant and bookkeeper, small business owners can spend less time manually inputting transaction data, make more informed and strategic business decisions, and focus on meeting their goals.
Tax season for small businesses may be year-round, but financial tools can help make managing taxes easier, every day of the year. As financial technology continues to evolve, small business owners now have the opportunity to adopt integrated tools that lighten the burden of financial management, making tax season more manageable and fostering their long-term success.
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Lilac Bar David is the co-founder and CEO of Lili.
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Tags: Small Business, Taxes
