Starting a new business? You’ve got all sorts of ways you can complicate your accounting and your taxes. But if you want to keep your small business finances clean, lean, and low-cost, follow these five tips:

Accounting Tip #1: Don’t Incorporate

Yes, incorporation may reduce your taxes (in same cases). And, true, incorporation typically reduces your legal liability. But unless you really need a standard, old-style corporation, you should keep your accounting and your taxes simple and more straightforward by staying “un-incorporated.”

Here’s why: Incorporation means annual corporate income tax. And even if you’re the only person working in the business, incorporation means annual and quarterly payroll tax returns. That’s just too much paperwork for your new business.

By the way, if you are concerned about your legal liability, know that you have another great option for protecting yourself. You can set up a limited liability company. You should get the same legal protection. And if you’re a one-owner LLC, you’ll be able to treat your business just like any other sole proprietorship, which means no corporate income tax returns and maybe no payroll tax returns.

Accounting Tip #2: Setup a Simple Accounting System

If you own and operate a business, you really do need a simple accounting system. Don’t fool yourself. Invest the time (an hour?) and the money (about $100?) to get a simple accounting system like Quicken Home & Business or Microsoft Money Home & Business.

You’ll need an accounting system to track your profits anyway. That’s actually the law. Furthermore, by starting out with a good accounting system, you’ll much more effortlessly capture tax deductions that will later save you money.

Accounting Tip #3: Use a Separate Bank Account for Your Business

You don’t want to co-mingle your personal and business accounting. Get your business its own business bank account. Use that account for your business’s deposits and for your business’s payments.

Only bad things happen, accounting-wise, when you pay personal expenses out of your business account and business expenses out of your personal account. For example, you’ll miss tax deductions. You’ll inappropriately count personal expenditures as business expenses. And you’ll lose your ability to precisely measure how much money you’re making or losing.

Accounting Tip #4: Make Quarterly Estimated Tax Payments

One of the responsibilities you shoulder when you become self-employed is paying quarterly tax payments using the 1040ES form (both form and instructions are available from www.irs.gov). But this makes sense.

Someone who is an employee doesn’t have to worry about paying income taxes on their wages. Their employer automatically deducts taxes from their payroll checks and then remits that money to the Internal Revenue Service.

But you need to pay the income taxes on your business profit. And you should do so in quarterly chunks as the year progresses: one-quarter of your tax bill on April 15, another quarter on June 15, another quarter on September 15, and, finally in the next year, the last quarter on January 15.

In general, you’ll owe a combined tax of about 20% to 25% of what your business makes.  So you want to use your accounting system to regularly estimate your profits and then you want to set aside 20% to 25% of that profit in a savings account for later paying your income taxes.

If you make $80,000, for example, you’ll owe $16,000 to $20,000 in tax. And you would pay $4,000 to $5,000 a quarter in estimated taxes.

By the way, the big crisis you want to avoid here is not a penalty. That’s the least of your troubles, in a sense, if you don’t make quarterly payments.

The big crisis is having April 15th roll around and then finding you need to pay a surprise $16,000 or $20,000 tax bill. Ouch.

Accounting Tip #5: Don’t Put Personal Assets into the Business

And a final tip for keeping your accounting clean, simple and low-cost: Don’t put personal assets like cars or home computers into your business and then think or try to write off the purchase.

The accounting rules for expensing these kinds of “easily-used-for-personal-stuff” assets are cumbersome. You’ll find the rules hard to follow and easy to break. And if your accountant charges for the extra work he or she needs to go to on your tax return, the money you save is embarrassingly modest.

As the owner of an accounting business, you know that finding clients is an important task, but retaining those clients-especially once you’ve started to tap your ideal market-is just as important.

You can have the best marketing system in the world bringing in new clients but if you don’t have a client retention system in place, you will not have much growth.
Client retention can be challenging: if you knew a problem was developing, you would fix it. So by definition, when you lose a client, you probably didn’t know a problem was coming.

What we can do, though, is predict what problems are likely to drive clients to seek a new firm and prevent those problems from happening in the first place. The single biggest complaint that small business owners have about their accountants is “My CPA doesn’t stay in touch with me.” That is by far the biggest reason why a client will change their CPA…..because the CPA does not stay in touch with his or her client.

So, if you want to retain your clients, a keystone of your client retention system will be a regular program that makes sure you keep in regular touch with each client. Don’t wait for them to get in touch: be proactive and be in touch often.

You may be asking yourself, how many times do I recommend that you should stay in touch with your customers in the course of say a year?

The answer is: at least 24 times per year. For my CPA Practice it is more like 60-70 times per year.

How in the world do we keep in touch with our clients so often? We have a system with several components. Some of the components go to everyone on our list on a regular basis: a monthly newsletter, a card at Thanksgiving, and a weekly Ezine. (Are you counting? We’re already up to 65 contacts a year.) Other items are personalized and rely on keeping an accurate calendar: a card on the anniversary of our business relationship, semi-annual “Thank you for your business” cards, a birthday card or gift (I advise my clients to spend up to 5% of their revenues on gifts to their clients), a couple of personal phone calls (you could substitute a personal visit).

Put each of these systems into place and look at how quickly the touches add up:

Monthly newsletter12
Birthday card or gift1
Anniversary of biz relationship 1
Thanksgiving card1
Thank you postcard2
Weekly Ezine52
Personal visits1
Personal phone calls 2

That’s 60 – 70 touches per year. Your clients get not only the feeling of a personal relationship but also a sense of value added. Notice how there are components to yield both perceptions (newsletters and Ezines give them solid information; cards and calls make the relationship personal). With a client retention system like this, you can avoid the top complaint clients have about accountants and increase your client retention dramatically.

If you’re a CPA who’s working on improving your marketing, and you’ve already made the time for marketing, positioned yourself as the expert, and packaged your services…and you have a steady stream of leads flowing in–the next step is “meeting with the prospect” and “selling” them on your service, right?

The good news is that closing the sale is actually very simple, when you know how to do it, without feeling pushy and without the prospective client feeling like you’re pushing them to sign on the dotted line.

I’ve been experimenting with the soft close over the last 7 years now on many hundreds of different prospects, and I’ve made every mistake in the book, most of which cost me potential clients. But along the way, I kept getting better and better at it, and started crafting a process that I now consider pretty reliable.

Here’s the process I have in place when a business prospect calls my office wanting to meet with me:

1) When the prospect calls, the admin person in the front office collects all their information on a preliminary interview sheet, including their contact information, how they heard about my firm, questions about their existing CPA relationship and the reason they want to meet with me.

2) Then the meeting is scheduled with me after 5-7 business days.

3) A packet of information is mailed to them before they meet with me. They receive the packet from me that contains several things: a sheet on the team members, special report or my book, testimonials, past newsletters…it’s a thick “shock and awe” packet of information. We also include a “confidential application” in the packet that they must complete.

4) The prospect comes to my office to meet with me. Keep in mind that no one likes to be sold, but everyone likes to buy. With that in mind, I ask the prospect how they heard of my firm. I ask to take a look at their completed application so I can get a better overview of their revenues, their goals, books they have read, etc.

I probe into their needs, what has lacked in their existing relationship with their CPA and why they are looking for a change in their CPAs, what are their major challenges, what are their long and short term growth plans?

All the while I am making notes. I take a brief look at their business and personal tax returns.

I am listening ninety percent of the time and only interjecting to encourage the prospect to dig deeper into their issues. This is important; most CPAs go astray here, because they are not asking good questions and they are not attentively listening.

By engaging the prospect with good probing questions, you have differentiated yourself from the rest of the practitioners in your area. I use my notes to recap the list of things they need help on.

5) I briefly talk about what differentiates my firm from the rest and the service packages we offer and then I go into fees.

And differentiating my firm and me is important because when I come to the portion of my meeting when I talk about my fees, I don’t want the prospect to say “but this other CPA quoted me this.” I have changed the playing field such that the services they will receive are perceived to be very different than what my competitors would offer.

6) I get the appropriate signatures and payment and my firm has now got a new business client.

7) After the client is signed up, I will briefly meet with my Senior Manager to hand off to her the client paperwork. She takes it from there. She will call the client two days later to officially welcome them to our CPA practice and schedule their orientation meeting two weeks later. In the meantime, the admin person will send them a fruit basket and a “welcome aboard” card. I am looking at this as a lifetime relationship and a strong referral source so I am prepared to invest in it from the get-go.

Good closing techniques are very important as the final step in converting a prospect into a client. The good news is that closing the sale is actually very simple when you follow the process I have identified in this article.