Hey! I’m so glad you stopped by today for Brilliant Bookkeeping Tip #2! Today I’m going to give you a great tip on managing sales tax and payroll tax to avoid extra stress and cash flow issues every month.
Keep sales tax & payroll tax as separate items from revenue.
The taxes that you collect from sales is not income for your business. You are simply holding that money for your state until it’s time to pay. The same holds true for payroll taxes (state, and federal) that you withhold from paychecks. Make sure your bookkeeping is set up properly so that those taxes go to a separate liability account that you can keep track of. You can even set up a separate bank account to deposit those funds into so you don’t accidentally spend them and end up scrambling for money when it’s time to pay!
I have seen business owners really fumble through this, creating a ton of unnecessary cash flow issues and stress when it’s time to pay the taxes. It doesn’t have to be that way! Set yourself up for success ahead of time and proactively set the money aside each month.
Did you know? Even nonprofits have to pay payroll taxes! So if you’re a nonprofit be sure that you’re doing this correctly. Also, depending on your mission, or the revenue generated from product sales or a fundraiser, you may also be liable for paying sales tax. Find someone who can advise you on this.
I’ll be back tomorrow with Tip #3!
I love giving you tools to help you do great bookkeeping for your business. If you have a question you’d like to see addressed, be sure to connect through email or social media and let me know!
If you missed Tip #1 be sure to check it out here!
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