As a food business owner, keeping track of your finances and filing taxes can feel overwhelming, especially if you’re new to running a business in general. However, with the right tools, you can make the process a whole lot easier. In this post, I’ll be discussing accounting and tax prep tips specifically designed for food business owners.
This post is ideal for anyone just starting a food business, as well as experienced business owners looking to develop better financial record keeping practices. I’ll provide you with the tools and resources necessary to keep your books in order while ensuring your taxes are filed correctly and on time. By the end of this post, you’ll have a better understanding of accounting and tax prep basics for food business owners like yourself. Oh, and this is all coming from an actual accountant who has helped food entrepreneurs (exclusively) for almost a decade.
5 Accounting and Tax Prep Tips for Food Business Owners
- Research your accounting and tax obligations
- Stay organized and keep detailed records
- Use accounting software
- Set aside funds for taxes
- Consider working with a professional
1. Research your accounting and tax obligations
As a food business owner, it’s important to understand your accounting and tax responsibilities. Depending on the type of business you’re running—whether it’s a cake business, cookie shop, wedding cake business, restaurant, or home-based (cottage food) business—you’ll face different accounting and tax obligations.
Before you get started, it’s essential to research the requirements and regulations for your business on both the federal and local levels. Doing so will help you stay organized and ensure you’re compliant with all laws. This will help you avoid any costly fines or legal issues down the line. Items to consider include: monthly sales taxes, quarterly income taxes and other estimated taxes along with key filing deadlines. Visit your state's department of revenue’s website to get a better idea of what may be required of you to remain on the “up and up.”
2. Stay organized and keep detailed records
Organization is key when it comes to managing a successful food business. Staying organized and keeping detailed records of all transactions and expenses will help save time and money. As a busy food entrepreneur, keeping track of everything can be tricky. However, if you develop a system or schedule that fits in with your existing workload it can be manageable.
For example, create a weekly admin day where you take pictures of your receipts from the previous week’s purchases and organize them on your computer or within your accounting system. On that same admin day, set aside time to take care of any other bookkeeping items for the week including paying vendors and organizing paperwork. Also, by taking the time to organize your financial records upfront, you will make tax preparation easier in the future.
3. Use accounting software
Accounting software can be a game changer for food business owners, no matter the size or age of your business. Whether you run a platinum wedding cake business or you run a food prep business from your home kitchen, accounting software will make your life easier.
Don’t forget that using a payment processor such as Castiron will only show the income part of your financial story. You need to use an accounting software to allow you to see the full picture of your business' financial health which includes your expenses as well as income. Software like QuickBooks Online, Xero, and Wave Accounting provide automated bookkeeping, allowing you to quickly and easily keep track of your income and expenses. Additionally, many of these programs offer features like invoicing and payment processing, so you can easily collect payments and pay your suppliers all in one place.
4. Set aside funds for taxes
As they say, only two things in life are certain…“death and taxes.” Therefore, even if you discover that your business is not required to pay estimated taxes throughout the year, it’s a savvy business practice to set aside tax money along the way. Better to not be surprised by a large tax bill at the end of the year, right?
Instead, set aside a certain percentage of your income each month and hang on to it to cover your taxes for the year. This can help avoid costly fines and late fees, as well as the stress of scrambling to cover the tax bill at the end of the year. Setting aside funds for taxes can be a critical practice that will help keep your food business running smoothly.
Also, don’t forget that you can charge and collect sales tax in your Castiron store. For more information, make sure to follow the steps here.
5. Consider working with a professional
As a busy food business owner, bookkeeping and taxes can be difficult to manage on your own. You already have so many other tasks “on your plate.” Trying to teach yourself how to become an accountant may not be the best use of your time. Therefore, to avoid any potential issues down the road, I recommend that you consider hiring a professional for bookkeeping and/or annual tax prep activities.
A bookkeeper can help organize your financial records while you focus your energy on the areas of business in which you are more knowledgeable such as recipe development and customer service. A professional tax preparer can help you to navigate the various taxes to which you may be subject, ensuring that you stay in compliance with all regulations and maximize your deductions.
In conclusion, in order to run a successful food business, you have to pay attention to your company’s financial records. Using an accounting system, saving receipts, tracking expenses, filing taxes on time and paying estimated taxes all work in conjunction to help your business run smoothly. However, it’s important to remember that these practices are not just to keep the government happy. They are also tools to help you monitor the financial health of your business. Use these systems to create your financial records, and then review them to make sure that your business is in good financial shape. Cut expenses when you need to, and make investments when you have the extra funds. Also, if you need help, reach out to an expert. Consult a professional if needed. They will help you stay up to date on the latest regulations and tax laws. As much as I know you have the tools and software available to you to do “all of the things” yourself within your business, why would you want to? Lean on an accounting professional to free up your time and decrease your stress levels.
About the Author
Cyd N. Mitchell, Freelance Business Blogger, Castiron Ambassador
Cydni N. Mitchell (aka Cyd) is a Bakery Consultant and the Sweet Business Coach behind Sweet Fest®. Based in Atlanta, GA, Sweet Fest® is an online company that supports the business needs of the Sweet Community in the areas of professional development, marketing, branding and web design.
By trade, Cyd is an accountant & financial analyst with a Masters from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. She is the Founder of the Sugar Coin Academy, an online business academy for business owners in the baking and sweets industry, and she is also the organizer of The Ultimate Sugar Show, Georgia’s Largest Annual Baking and Sweets Expo in Atlanta. She is also the Business Blogger for the Retail Bakers of America and the Business Columnist for American Cake Decorating Magazine.