TAXES & ACCOUNTING • April 12, 2016
2 minutes Read
If you’re running a small business, perhaps there’s nothing so intimidating or soul crushing as a pile of receipts, expense reports and statements. When it’s time to do your taxes, they just sit there, staring you down, all menacing. It needn’t be this way. In fact, if you take the time to form a few accounting habits and practice these six “good housekeeping” techniques, doing your taxes will be a breeze.
Track every expense
Even if you’re just meeting for coffee to discuss a new computer program for your business, keep the receipt and file it away. At times it may seem like recording every minor business-related expense takes too much time, but these expenses can add up to a big break in your overall tax burden.
Categorize expenses immediately
The IRS has categories for business-related deductions, such as transportation, office supplies, travel, Section 179 deductions, labor and so forth. It’s a good idea to make a spreadsheet and a receipt folder for each type of deduction. You may end up with a lot of folders and a lot of separate spreadsheets, but you’ll be fantastically organized.
Be diligent in recording every sale you make and every loan you receive. Any kind of money you come across and put into your business should be tracked. Further, it’s a good idea to keep any loans you take out separate from payments received. Do this to ensure you don’t lose track of what needs to be paid back.
Schedule quarterly meetings with your accountant
You may be very precise in your accounts, but there’s someone who does it better. Even if you hire an accountant only for a few hours every few months, their services can do wonders for your financial planning and management. Not only will this force you to keep your records up to date in preparation for the meeting, but your accountant will give you an idea of potential fees, as well as loopholes and deductions you should be taking advantage of.
Most small business owners know to expect the unexpected, but you can do a lot to mitigate some of the surprise by factoring maintenance costs, equipment upgrades and other repairs into quarterly or yearly outlooks and then planning around them accordingly.
Track bills and invoices
Don’t just assume you’ll get paid because you send an invoice. Set up a reminder system that shows outstanding balances. Needless to say, getting paid is the life blood of your company. Additionally, delinquent accounts can wreak havoc on your books, causing major accounting headaches.
When it comes to keeping up with your accounts, the devil is most certainly in the details. Fortunately, a little organizational handiwork is all it takes to keep those details in order so you can avoid the anxiety that causes so much stress to small business owners during tax season.
Photo credit: Zadorozhnyi Viktor/shutterstock.com
IMPORTANT INFORMATION: This is not investment, tax, or legal advice. Should you have questions, please consult your own attorney, tax accountant, or other appropriate expert having expertise in the area of your question or before making important decisions in these areas.