Compliance with business regulations is so important no matter what industry you are in, but business owners are often strapped for cash and think that they can adjust things “later” only to get too busy and not revisit these important matters. What advice do you have for entrepreneurs regarding any or all of the following areas of expertise in business: HR, legal, accounting/finance or other?
Supporting Strategies | Southland Chicago
Compliance with business regulations is key for entrepreneurs because in the end, not complying will always cost more financially than doing things the right way from the beginning. There are three things I always discuss with the business owners I work with. First, separate the business and the personal; file for a separate tax ID and establish separate business bank and credit card accounts right from the start. Second, hire professionals when you need them. Entrepreneurs tend to think they can do it all – but building a business plan that includes hiring professionals where needed will relieve frustration and stress and give the added benefit of the outsourced professional’s expertise and unbiased point of view. Third, “know your numbers” … it’s cliché, but true. Understanding profit margins and keeping track of them is of utmost importance. Also keeping clean, up-to-date books makes for better planning and decision making, and will always lead to a less stressful tax time. Then when it is time to raise capital, their financials will tell a story that investors will respond to positively.
As a fellow entrepreneur, I would recommend to pay attention to any new laws or regulations that are relevant to your business, or at least news articles that cover changes in business practices.
As a woman in tech and web development, I would suggest reviewing your privacy policies on your website, as well as compliance with accessibility standards. The Department of Justice cites recommendations from Web Content Accessibility Guidelines (WCAG) created by W3C to promote more accessible web development and design for people with disabilities. Since companies can potentially face lawsuits for non-compliance with ADA regulations, I would strongly advise checking your web content to at least be assured that you meet necessary standards.
As the Founder and Executive Director of Polished Pebbles Girls Mentoring Program, there are many regulations my team must be sure to follow and comply with when serving youth, who are our most vulnerable population. Whether you are working with a funder, business or community partner, schools or a client, it is important to pay attention and communicate with your partners to understand their needs and stay in compliance with all necessary requirements. It’s critical to have strong organizational leadership that keeps up with these relationships and compliance changes. You can never undervalue having the right people on your team to assist you with HR, legal and accounting/finance matters. I hired a business manager for Polished Pebbles who brought experience in each of these areas and played a large role in building out our business in the last five years. As an organization, we work hard to continuously build and strengthen relationships with our clients and partners and stay informed on their communications and policy updates. Consequently, our partners become champions for our organization, providing us with more business, building our capacity and deepening our impact with girls.
Entrepreneurs wear a lot of hats and have ultimate responsibility for many things: growing the business, generating sales and managing customers and employees. However, compliance with tax laws is another critical area that can’t be overlooked. The business owner is responsible for the withholding and payment of employment taxes or the collection and remittance of sales tax. These are referred to as “trust taxes” because they really represent someone else’s liability but we as the company have the obligation to collect these funds and pay them to the tax authority – we are “trusted” to do that. If you don’t, then you have violated this trust which can carry serious consequences as holding these trust funds is the same as theft; the ultimate consequence is criminal prosecution. As the responsible party (the owner), it comes down to you as the person, and you can be held personally liable. It is important to understand your obligation of these critical financial responsibilities. Collection and not remitting is something you should never do. However, it is also important to know when you are required to collect or withhold. Treating an employee as a contractor when they are actually an employee or failing to collect sales tax when you have an obligation to do so can be costly too. Understand the rules and reach out to trusted financial specialists to keep you in compliance!