Running a small business means making financial decisions while managing customers, employees, and daily operations. For Lancaster County entrepreneurs, these seven common questions offer a starting point for stronger cash management, cleaner financial records, and more informed tax planning.
- Should I pay down debt or invest my cash?
Compare the after-tax cost of borrowing with the expected return on an investment, considering risk and timing. First, reserve enough cash for payroll, taxes, operating expenses, and unexpected needs. Paying off debt or pursuing growth can create problems if it leaves the business short on working capital.
2. How does my business structure affect how I get paid?
Partners generally receive distributions or guaranteed payments rather than W-2 wages. S corporation owners who work in the business generally need reasonable wages before non-wage distributions. An individually owned, single-member LLC without a corporate tax election generally follows sole proprietor treatment. Review your tax classification before deciding how to pay yourself.
3. Is my worker an employee or an independent contractor?
For federal employment taxes, consider who controls how work is performed, who bears financial risk, and the nature of the relationship. A contract or Form 1099 does not establish contractor status. Review the actual working arrangement before onboarding; other employment laws may apply different tests.
4. Why does my accountant keep adjusting my books?
Recurring adjustments can signal problems in daily bookkeeping. Record customer invoices, receipts, vendor bills, and payments through the appropriate accounting workflows. Reconcile bank accounts monthly and confirm that customer and vendor balances agree with the general ledger. Investigate discrepancies before closing the month.
5. Why does my financial statement income differ from taxable income?
Financial reporting and tax rules can recognize income and expenses differently. Cash and accrual methods differ in timing, while some expenses are not deductible for tax purposes. Ask your accountant for a reconciliation explaining the differences so you can understand profitability and plan for taxes.
6. Which retirement plan fits my business?
Options include SEP IRAs, SIMPLE IRAs, 401(k)s, and defined benefit plans. Compare your savings goals with employee eligibility, required contributions, administrative costs, and available cash. Before selecting a plan, confirm current limits and deadlines and evaluate the total commitment for both owners and employees.
7. Should I make estimated tax payments?
Estimated payments may be necessary when withholding does not cover your tax obligation. Meeting applicable safe-harbor requirements can help avoid underpayment penalties, but you may still owe money when filing. Update projections during the year and after significant changes in income.
Start with the question most relevant to your business. Bring current financial statements, cash needs, and upcoming decisions to your advisor so you can act before a deadline limits your options.
McKonly & Asbury is an independent accounting and business advisory firm providing strategic guidance and specialized expertise to organizations throughout the Mid-Atlantic region. Led by 19 partners, the firm provides a full range of services, including advisory and business consulting, audit and assurance (including employee benefit plan audits), tax, technology, CMMC, HITRUST, and internal audit. McKonly & Asbury delivers industry-focused solutions to clients in Affordable Housing, Architecture, Engineering, & Construction, Family-Owned Businesses, Healthcare, Retail, Manufacturing & Distribution, Nonprofit, and other sectors.
Headquartered in Camp Hill, Pennsylvania, with additional offices in Lancaster, Bloomsburg, and Philadelphia. McKonly & Asbury is recognized as a Top 300 firm by Inside Public Accounting. The firm has been named a Best Place to Work in Pennsylvania for 22 years and ranked among the Best Accounting Firms to Work For in the United States for eleven consecutive years. McKonly & Asbury was also named on the Best Place to Work for Young Accountants for two consecutive years and recognized as a Best Accounting Firm for Women for three years. As an independent member of PrimeGlobal, one of the world’s five largest associations of independent accounting firms, McKonly & Asbury combines global resources with a personalized approach.
For more information, visit macpas.com.
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Visit their website to learn more about McKonly & Asbury. Read more about Lancaster’s small business community in our latest publication, Small Business Success— A resource magazine for small business owners and entrepreneurs throughout Lancaster County!
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