Originally created 12/31/01

Starting the year off right



NEW YORK -- The arrival of Jan. 1 can mean a fresh start for small business owners - it's the beginning of a new tax year and usually a time for some financial housecleaning.

Certified public accountants suggest more than a change in ledgers - they say many small business owners could do with a shift in attitude about handling money, their companies and their personal lives. That means doing more planning, exercising some discipline and perhaps getting some financial help.

Gordon Spoor and Bob Doyle, partners in Spoor, Doyle & Associates in St. Petersburg, Fla., say a common mistake many business owners make is to look at company and personal finances separately. These owners don't understand that personal goals need to be considered along with company revenue and earnings projections.

"Don't just look at your taxes. ... You've got to look at your overall financial plan," said Spoor, who along with Doyle is a certified public accountant and personal financial specialist. "Are you saving for retirement? Are you saving for your children's education?"

A related problem is procrastination. "We get so many people who say, 'We're putting it off a year,' and then 10 years go by," Spoor said, noting that many entrepreneurs who poured their money into the business suddenly find they have very little time to get college tuition money together.

Doyle said part of the problem is that many business owners try to do all their financial planning and bookkeeping themselves instead of turning to a professional. While admitting he was being self-serving in suggesting business owners use accountants, Doyle questioned whether the do-it-yourself approach makes sense.

Although hiring an accountant is an added expense, it "can give you an additional 10 hours a week to do with as you choose - for more family time, more marketing, more planning," Doyle said, noting again that personal issues need to be considered along with the business.

Of course, delegating work - which is what hiring accountants, lawyers, human resources companies etc. is all about - is crucial for a business owner trying to build or expand a company. Management experts preach to entrepreneurs that they should focus on their strengths, and let other people do the adminstrative chores.

Spoor advised business owners that if they're going to seek financial advice, that they do it soon.

"If you hire an accountant at the beginning of the year, we can help with tax planning throughout the year and business planning," he said. "It's frustrating for us when you bring in a proverbial shoebox (filled with receipts) in January ... think of all the things we could have done for you the previous year."

"Do it now" is a recurring theme with accountants, who note that putting off business decisions can end up costing company and owner dearly.

For example, many business owners put off until later in the year setting up a retirement plan for themselves and employees (procrastinating, again). They reason that it doesn't matter when the plan is funded; the money the company contributes is deductible whenever it is paid.

But, said, Doyle, "You should fund your retirement plan early instead of late. It may otherwise never happen and this way, you'll gain a year of tax-free growth."

The accountants noted that under changes in the tax law passed by Congress last spring, taxpayers are able as of Jan. 1 to contribute more money to 401(k) and other retirement plans, making these savings vehicles even more attractive as employee benefits.

Plunking down thousands of dollars to match retirement fund contributions in one swoop might be daunting - and even impossible - for many companies. So the accountants urged business owners to try the installment plan, making a schedule of regular contributions and sticking to it throughout the year.

That might sound hard, and Doyle agreed that it can be for many business owners.

"It means using some financial discipline," he said.

Spoor, however, likened the process to dealing with a porterhouse steak. "I didn't think I could eat a 32-ounce steak until I ate it one bite at a time," he said.