There’s no denying that brutal and pervasive economic conditions are taking their toll on America’s small business community. consumer price index report published on June 10, 2022, shows that inflation rose by 8.6% in May, the largest 12-month increase since December 1981. Rapidly rising costs have not only reduced profit margins, but also disrupted the ability to make accurate business plan projections. The Internal Revenue Service is currently delay in processing tax returns, leaving millions of American business owners without their much-needed income tax refunds. The confluence of events also resulted in credit issues, including debts to the IRS and financial hesitation. It is difficult to approach lenders when pessimism about the future reigns.
It is therefore not surprising that the National Federation of Independent Businesses Optimism Index reported that in April 2022, optimism among small business owners was at its lowest level in nearly 50 years. And now the stress of those financial issues has led to serious mental health issues, as they come right after homeowners have just battled the pandemic.
How can small business owners weather this latest round of storms? The first is to deal with inflation concerns, says Dr. David Phelps, entrepreneur, investor and author of Inflation: the silent killer of retirement. The price to pay for doing business and borrowing money has increased, which has lowered profit margins. Bringing fast, precise and impactful changes is essential.
“Entrepreneurs now need to do things differently,” says Phelps. “Look for cost reduction measures. Review your operating budget and determine methods to simplify or digitize the way you deliver products and services. You may need to reduce staff or reduce employee time. Leverage your ability to make instant, short-term adjustments that will keep your doors open. »
While it’s impossible to know exactly when inflation will slow or reverse, the general forecast is that economic conditions will smooth out and small businesses could see a return to normal over the next six to 12 months. With a few significant cash flow changes, many struggling small businesses can survive until the economic reset.
Phelps expands on this by saying that “this is a time when people have to be careful because in a market where the stock market and real estate are generally up there are a lot of people who will offer to teach others how make money. It’s like, ‘Go here, buy this here, buy my program, come here, no money down. It’s easy, easy, easy,’ because that’s what people want to hear. But what we need to remember is that we are talking about investing, and investing means planning for long-term speculation. He says that this also applies to investing in assets as well as in your own business.
The tax situation must also be navigated, starting with the amounts due. According to Lawrence Levy, president and CEO of Levy & Associates, Inc., a tax resolution, auditing and accounting defense firm with multiple offices across America, it’s critical to be proactive on these issues. Questions. Business owners need to deal effectively with past tax obligations and not ignore communications from the IRS.
“When you get that awful letter in the mail saying your comeback has been selected for testing, you definitely want to seek professional advice,” Levy says. “You never want to embark on this adventure alone. You want to be represented by someone who knows what they are doing. Levy recommends against relying on accountants for this process as they lack the necessary expertise. A tax professional may even be able to help you pay less than you owe with the best offer in compromise.
“You definitely want to seek professional advice. You never want to go into this alone because there are some things the IRS can do and some things they can’t do so you want to make sure you have representation from someone who knows what he’s doing. Very often CPAs, even though they may be the greatest CPAs on the planet, do not specialize in audit defense. You want to make sure you consult a firm that specifically deals with audit defense, which is different from preparing overdue tax returns, or if you owe back taxes. So three things you want to focus on; if you haven’t filed in a few years, you need to catch up on your deposits, if it ends up leading to liability, you need to take care of the collection element of it, or if you’re audited, the looking at the collecting side of the taxman is markedly different from the collecting side of the taxman,” says Levy.
Since the IRS is late in issuing refunds, you may also need to assert yourself to get the money owed to you. Keep up to date with the status of your refund using the IRS where is my refund tool or IRS2Go mobile app. Check once a day, as it is updated every 24 hours.
It is important to manage trade obligations and manage credit products well during this time. To maintain operations, borrowing funds may be necessary, but exercise care and caution. Identify the loans, lines of credit and credit cards that offer the best terms and borrow only the amount you really need.
Payments from creditors must also match your means. Falling behind will hurt your credit rating, which will then impact financing options. If you are unable to meet payments on any of your liabilities, contact the lender immediately before becoming delinquent and work out an alternative plan. Many offer hardship arrangements where you can suspend payments for a few months. On request, they can even suspect interest and fees.
Finally, pay attention to any anxiety you may be feeling, says Dr. Christy Wise, psychotherapist, coach and CEO of Life Sauce. A Capital One Business Survey January 2022 found that 47% of business owners feel drained and drained of physical and/or emotional energy, and 53% have experienced at least some mental exhaustion in the past year due to management stress of their business.
“It’s unlike anything I’ve ever seen,” Wise says. “The amount of depression and health problems is exaggerated. It’s rare. Small business owners have been through so much. Open, close, lose confidence. Now I notice that people make choices out of fear. I have a client who owns a restaurant and he serves smaller portions, cutting back on quality ingredients even though he knows it hurts his long-term goals.
Some common mental health warning signs to watch out for, Wise says, are an inability to find joy, a lack of appreciation for friends and family members, and drinking or eating too much.
“Sleep issues are huge for small business owners,” Wise says. “Maybe you wake up in the middle of the night, or can’t fall asleep at all, or you always feel exhausted. This can lead to substance addiction, causing more problems.
Wise recommends first seeking support from loved ones, confiding in a partner, or reaching out to friends. However, if you’re really struggling, contact a therapist or life coach who specializes in your concerns. Interview a few, and if money is tight, ask if they’ll work with you on a sliding scale.
With the right strategy, support, and focus, small business owners can overcome the final set of challenges. There is also reason for optimism. The Capital One Business Survey found that despite recent challenges, most business owners say they are even more motivated to grow their business today.
“Remember why you’re in there,” Wise says. “You started your business because you felt passionate about it. Now bend over. Business owners can now experience exponential growth. You will be fine. Allow yourself to go all the way and you will land in a better place.
This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.