That Schedule C you filled out to report your self-employment income was a hassle, wasn’t it? Sure the online software from GoDaddy Online Bookkeeping made things easier, but it was still took a little time to make sure everything is in the right spot.
But now it’s time to put away your tax return, and get back to building your business.
Not so fast! That schedule C contains a lot of information that can help you boost your business. Let’s take a walk through it to see how a few good questions can help grow your business in the coming year.
Problem Solve and Project Next Year’s Sales
Let’s start with line one, Sales. How did the sales number for the year match your expectations? Did you sell more than last year? What activities did you do that caused sales to go up or down? If you sold multiple products, which ones were your best sellers? What could you do this year to increase sales?
Line two is returns and allowances? Did you experience a large amount of customers returning products? Why did they return so much? What can you do this year to cut down on this number?
Tighten Up Your Production and Processes
For cost of goods sold, you need to analyze the Cost of Goods Sold section on page two. Like you did with sales, you need to look at what items were your best sellers, and if you think that trend will continue for the future. Additionally, if you used labor, was the amount you spent for labor enough to meet demand, or are you paying too much for too little production. Did you have other costs? Will these costs increase in the future based on how much you sold? For purchases, did you get the best price for the items, or do you need to find a new supplier?
Analyze Your Expenses for a Leaner Business
In Part II, you have listed various types of expenses that you may incur while conducting business over the course of the year. The thing to do is look at each line and ask yourself whether the amount you spent got the results you had hoped would materialize. For instance, look at advertising expenses. Did you amount you spent bring you any new business? If you used multiple channels, which one brought the best results? Once you know the answers to these questions, you can plan your activities for the year, and come up with a budget for what you plan to spend. Do this line by line and you can come up with a good plan for your business for the coming year.
The schedule C is not a document that only needs to completed at tax time and sent to the IRS. It can also be a tool to help you grow your business. Set up a meeting with your accountant to go over the schedule C can help you set up a plan for the coming year. If you have a particular question, leave it in the comments, and I will get you an answer. If you don’t want to leave a comment, shoot me an email at email@example.com.
Chris Peden, CPA, CMA, CFM has over 15 years in the corporate world helping companies meet their regulatory compliance requirements. He also assists small business owners with organizing and making sense of their finance information. You can reach him at firstname.lastname@example.org, or check out his blog at www.theaccountingscribe.com . In accordance with Circular 230 Treasury Department Regulations, we are required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code. If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.