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Are you one of those who wait until March to gather all of your bank statement, credit card statements, receipts, invoices, and bill statements? Do you wait until your accountant has called you repeatedly asking if you are going to make your appointment this year? Well stop. Chances are you might be missing something very important by waiting until the last minute. Being rushed puts stress on the body. Stress puts the brain into high access mode and you are not thinking clearly. No one wants to forget an expense or other important piece of tax information. Here are some simple tips for your business that you can get started on today to save you the stress headache during the next tax season.
Set up a file system
Most people don’t like to keep a paper trail. I can certainly understand why. It takes time to set up a file system and it takes up space to keep papers. In the world of taxes, it is always better to be safe than sorry. If an audit should ever arise you will want to be armed with your papers as proof of your deductions.
To quickly get set up you will need a file box or a filing cabinet for larger businesses. The first section should be invoices. It is up to you whether you want to write PAID and the date on them. It is also up to you to decide whether you want a separate folder for each client. The second section should be bills/expenses. It is here you want to keep the internet or cell phone bill as well as credit card statements (with the expense highlighted). Again it is your choice if you want to put these all in one folder or separate them by company. The final section should be for your bank statements. When a new one comes in you should highlight work income as deposits and business related deductions as expenses.
What about receipts?
Receipts can be a pain to keep track of but you need them as proof of payment. I carry an envelope in my purse and place my receipts in there. Every few weeks I empty the envelope. Receipts generally get stapled to the appropriate bill when using a credit card, or filed with the appropriate bank statement.
These are the things you need to pack up and take to your accountant at tax time. The better organized you are, the easier it is for everyone.
At the end of the year you can shred what you don’t need and the rest gets filed with your copy of the tax return.
Set up a form of recordkeeping immediately.
Do not wait until we are half way through the year to pick up a copy of Quickbooks , Quicken Home & Business, or any other accounting software you decide to use. Unless of course your business is new. In that case, start right away. Having a accounting program at your fingertips will serve as a backup copy to your paper trail and do all of your calculations for you. With accounting programs you can bill clients by sending them invoices, reconcile your bank and credit card statements, place expenses in the appropriate categories and prepare financial statements. With a software program all of your needed numbers are available with the click of a mouse.
Starting these few simple tasks today can put your business on the right track to avoiding any disaster that could occur later. Start with 10 minutes a day preparing your files, and then moving on to sorting the papers. Once those tasks are set up you only need to spend minutes a day entering the bills, invoices, checks, deposits, etc. as they cross your desk.
Chrystal Mahan resides in Michigan. Mahan is a current college student working on a (double major) Bachelors in Accounting and Business, with plans to continue forward with a Masters.
She has 20 years of experience in the Accounting industry and over 10 in the field of Tax.
Mahan has been writing short stories since the age of nine and professionally since 2005. Mahan owns her own freelance business and writing appears on various blogs and websites.