We’ve all heard the news. We’ve all seen the change. The economy and small business landscape has been transformed. How so? In this article, we review challenges small business owners are confronting post-pandemic and how your CPA can help.
From the so-called “Great Resignation,” to the clogged supply chain, to inflation, to lockdowns, mask mandates, and fluctuating regulations, the year of covid was a year that fundamentally changed everything. California small business owners—like those throughout the country—face steep challenges as they seek to bounce back and adapt to the new landscape.
Let’s take a closer look at the small business landscape.
Top Small Business Trends in the Wake of 2021
Guidant Financial conducts small business surveys every year to understand and gather insights about life as a business owner during that particular year. In late 2020, their survey revealed a couple of major challenges that were plaguing company owners.
The top takeaways from the survey included:
- Decreased profits. This is to be expected. According to the survey, businesses saw about a 19% decrease in profitability in 2020 as compared to 2019. There is a silver lining, however, small business owners remained optimistic, as 75% of them predicted their business would survive.
- Government assistance was utilized. About 61% of small business owners took advantage of the government assistance provided through Paycheck Protection Program (PPP) or the Economic Injury Disaster Loans. So the question is how those businesses will fare as they are left on their own through the recovery.
- Small Businesses resisted layoffs as much as possible. According to the survey, only 5% of businesses had layoffs, but 10% cut their own profits. So, while it appears to be a small number it could be due to employers cutting hours for everyone to avoid layoffs, using furloughs instead of layoffs, or cutting off their own profits to offset the balance.
Source: GuidantFinancial.com
Challenges Faced by Small Businesses Post-Covid
Even though small businesses held on tooth and nail during the height of the pandemic, there is no shortage of challenges moving forward. Some of the main challenges businesses face include:
- Filling positions & finding talent: “Now hiring” signs have become ubiquitous as states begin to open up. All across the nation, companies are having trouble filling slots and finding talent.
- Transitions to Digital Platforms and Formats: Many industries have had to switch to some form of digital workflows or platforms. The transition comes easier to some and is more difficult to others.
- Keeping up with tax law and regulatory changes: The ever-increasing complexity of tax law only got worse during covid, when government programs, assistance programs, and changing regulations had everyone scrambling.
- Data privacy and security: As workflows and operations go digital and remote, companies have to contend with ensuring network security and data privacy of their customers.
Potential Government Mandates and the Impact on Companies
The 2021 Small Business Profiles indicated that 32.5 million small businesses across the nation employ about 46.8% of the private workforce. That’s almost half of American workers are employed by small to midsize companies. In November of 2021, the Biden Administration announced its plan to impose a sweeping vaccine mandate to private companies with 100+ employees. The rules affect 84.2 million workers, according to Reuters.
For many companies, this means contending with possible fines and/or firing employees who refuse to get the shots. It also might necessitate maintaining employee health records, checking testing status, etc. The action is already triggering major lawsuits, which means uncertainty for many businesses going forward into 2022.
How Can a Trusted CPA Help You Conquer These Challenges?
While uncertainty reigns, the best defense is staying organized and getting help from tax professionals that get paid to sift through government changes on a day-to-day basis. When it comes to conquering some of the 21st-century small business woes, CPAs are part of your much-needed arsenal.
Here’s how a CPA springs into action for your business:
Payroll Challenges
Small business owners reported that one of the most concerning and time-consuming challenges had to do with payroll. Part of this was keeping up with federal, state, and local compliance recordkeeping. Other payroll challenges that a trusted CPA can help you with include:
- Data processing: Manual data processing takes time and is prone to errors. Employing automated payroll solutions helps mitigate that.
- Data security and payroll fraud prevention: As noted above, data privacy is a big deal these days. Data breaches are a threat to companies and pose serious challenges when systems are not equipped to deal with those risks. One report cited that data breaches cost companies up to $3.86 million.
- Payroll for independent contractors: If you employ independent contractors, the rules for tax compliance for these workers are a little different. The government has strict regulations about classifying 1099 workers, so accuracy is important. With many businesses participating in the “gig economy” ensuring full compliance on this is essential.
- Payroll tax compliance: Adhering to all federal, state, and local regulations is necessary to avoid IRS audits and to ensure the integrity of your business.
Tax Planning
Part of staying ahead means planning. Tax planning serves as a way to organize your business expenses to maximize profits and reduce costs or tax liabilities. Having a trusted CPA helping your business with tax planning and strategy helps your company stay ready for unprecedented changes.
Maximizing your profits, timing major expenditures, and taking advantage of available credits or deductions can help your business grow over time.
Get Your Small Business Rolling With a Trusted CPA
If you’re looking to come back strong after a tough year, putting your financial house in order is likely among the top priorities. Here, at Rishi Shah, we can help your small business strategize, plan, and roll with the punches as things start to normalize.
Want to learn more about how we help small businesses? Call Rishi Shah today!