Tax season can be a stressful time, especially for small businesses. If you’ve had trouble keeping your company’s finances in order in past years, it may be time to put some new systems into place that will make the burden to you—and your accountant—a little bit lighter. Try out these new organizational techniques now to make your upcoming tax year run much more smoothly:
1. Get physically organized
It’s important to organize your financial and tax documents in a neat and logical format. That way, when it’s time to file your taxes, you’ll be able to easily locate any document by its category and date. Your tax preparer might be able to recommend an organizer, which can be purchased at any office supply store. Or you may prefer to go electronic by scanning your documents and organizing them on your computer.
2. Use accounting software
There are many types of accounting software that work well for small businesses, such as QuickBooks and Sage 50, when it comes to tracking income and expenses. When it’s time to file your taxes, you will be able to print off a profit-and-loss statement to share with your accountant. If you don’t feel able to spend the money on accounting software right now, try using a simple Excel spreadsheet to track your income and expenses.
3. Keep business and personal accounts separated
By keeping your personal and business spending separated, you’ll be able to track your business income and expenses much more easily. Plus, you’ll make it easier to document your business activities in the event that the IRS has questions about your tax return or accounting.
4. Save your receipts
It’s important to hold onto any employment tax records for at least four years after the tax is due or becomes paid. You can simply keep all of your paper receipts in a storage container, or consider scanning them and storing them electronically.
5. Create a chart of accounts
A chart of accounts is a list of your company’s credit card and bank accounts, liabilities, assets, expense and income categories. Even if you’re not using accounting software, setting up a list of accounts will be helpful. To determine which categories to track, think about which ones you’ll report on your tax return.
6. Update your records daily or weekly
Updating your expenses and income frequently will help you gain a better idea of your company’s financial health at all times. This is important when it comes to making wise business decisions, and will also make it easier to produce all necessary data when tax time comes around.
We hope that this spring finds you financially healthy and prepared for a new tax year! Contact Kristina's Abacus if you have questions or would like to get ahead with your accounting and bookkeeping.