With expectations for an increase in the federal interest rate and a forecast for rising earnings and consumer spending, this could be a promising year economically. And a new survey shows small business owners and their accountants are more confident about the financial health of their businesses, compared to last financial year.
Among these groups, Millennials are the most positive about the business economy, with 62% reporting they’re more confident in the financial health of their business than last year. Gen Xers and Baby Boomers agree, 59% respectively report that they are more confident about the financial health of their businesses, compared to 2015. These results are from the 2016 Xero to Sixty Tax Time Study.
Overall, 2016 is shaping up to be a good year. Nearly 60% of small business owners are already having a stronger year, and a staggering 78% say they expect to be more profitable in 2016.
It’s not just small business owners who are experiencing the bright spot in the economy. The findings were backed up by accountants, where 70% said they are more confident about the financial health of their firms, compared to last year.
“Comparing small businesses who use an accountant to those who go it alone, those with a trusted advisor are much more confident about their business position,” Xero U.S. President, Russ Fujioka, said.
“With more small businesses moving to the cloud, having the right tools and right people is helping them be more confident about their businesses in the year ahead.”
More than 65% of accountants and small business owners surveyed listed either the economy or consumer sentiment as top factors having the most impact on the financial health of small businesses in 2015.
Tax time is when many small business owners set financial goals for their operations. According to the findings, when it comes to financial management, the top focus areas for small business owners are keeping books up-to-date (57%), invoicing (39%), setting annual financial growth goals (38%), and organizing all receipts and tracking expenses better (37%). Accountants caution small business owners against missing opportunities such as: having real-time insight into financials (31%), speaking to your accountant outside of tax season (31%) and linking financials to business goals (18%).
Of the accountants surveyed, a staggering 39% said mixing business and personal expenses in deductions is what most commonly triggers an IRS audit.
“Many small business owners use the same accounts for their business and personal transactions so it’s a very easy thing to muddle up. Just 14% of those surveyed said their financial focus for 2016 includes separating their professional and personal expenses,” Fujioka said.
“Xero recently launched TaxTouch, an app that helps freelancers and small business owners sort out their expenses, drawing in data from your bank accounts and credit cards so you can simply swipe left for personal and right for business transactions.”
Of the hundreds of accountants Xero interviewed, 60% said clients often claim deductions that actually may not be allowed, while 41% said many small business owners are missing out on deductions because they didn’t realize they were entitled to the write-off. By not working with a trained tax pro, small business owners risk either missing out on lowering their taxable income or end up making a mistake on their return, which winds up getting them audited.
“Using technology to keep good, clean records not only helps you keep track of what your take home income is or what your tax bill may be, it also makes it easier to collate the right information when tax time rolls around,” Fujioka said.
The 2016 Xero to Sixty Tax Time Study was an online survey fielded to small business owners and accountants who work with small businesses. The questionnaire was completed in March by a sample of 773 respondents, including 307 accountants working with small businesses and 466 small business owners.
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Tags: Accounting, Small Business, Technology
