As a business owner I’m required to pay taxes and keep good records. Since you are a business owner, or desire to be an entrepreneur, it’s important to be aware of what is required of you so that, if there is a gap, you can stop the chaos in your business accounting.
Running a business requires that you wear many hats, and for many business owners it’s easy to get sloppy with paperwork and lose valuable documents, like receipts, airline tickets or vouchers for business travel, and so forth. Being disorganized can make preparing for your appointment with your accountant or bookkeeper a nightmare! Or your appointment may be with yourself and your accounting software. Either way, running around searching for receipts is not fun. It’s energy-draining, and robs you of time you could be spending on your business.
Two things can happen when we fail to keep good records:
From the law’s viewpoint:
- You lose legitimate deductions because you have no proof – written records to support the deductions you want to take
- In the event you’re audited, you could be charged additional money because of having insufficient proof to support any claims or deductions you may have made.
From your business’ viewpoint:
- “If you don’t know where you’re going, any road will get you there.” Lewis Carrol. In order to know if you’re meeting your monthly, quarterly, semi-annual and annual goals, you must be able to track them. Having a money goal, you should have a way to know where you are in relation to your goal, and what you need to do if you’re not on track.
- An easy way to do this is to use a post-it note, a note card, or a sheet of paper. Prior to the beginning of the month you write your money goal for the month: $1,000, $5,000, or $10,000. That’s your monthly income goal. You would have your Marketing Plan for the month so that you know what you need to do to achieve the goal. Each time you make a sale or a client pays you money, you subtract it from your starting figure. You then either make an entry into your accounting software or record the transaction in a book or register.
- By keeping track of your finances through your accounting software, manually, or through your bookkeeper or accountant, you will know if you’re happy with where you are, or if you need to make adjustments. You can determine if you should be doing more marketing, sales, and striving for better client and customer retention.
Removing the chaos from your accounting means better organization. Here are three easy tips you can start implementing today.
- Make Bookkeeping a Regular Part of Your Routine
You may choose to do your bookkeeping once per month, but I’d strongly recommend you not do that unless you have a secure filing system where you keep your documents dated and in order. The reason is that it’s easy to forget to enter certain debits and credits if you’re trying to rush through and do a bunch of bookkeeping at once. What’s more, it’s much harder to find a mistake if you have multiple months or even a month of entries in front of you. Remember that you want to take the chaos out of your accounting or record-keeping.
Instead, make time to take care of your bookkeeping on a regular basis. I know the angst and headache for failing to keep to this routine. Wading through boxes of receipts and trying to sort through papers I did not remember storing. At the very least, get into the habit of taking care of your bookkeeping regularly. Enter all debits and credits into your software the same day they come in. At the very least, you should do this on a weekly basis.
2. Print Your Receipts and File Them Immediately
Many of us shop a lot online; we purchase airline tickets online, and we pay for training online. So we often don’t print the receipts as we know which vendor we purchased items from. But, why wait? This is something I personally have to start doing because I store the receipts online for most of my purchases. Since I’ll need them for tax purposes, it makes sense to just go ahead and print then file them immediately thus eliminating the process at the end of the year or whenever I have to present them to my tax preparer. How about you? How do you currently handle this part of your purchases? Do you need to make changes?
- Know the Tax Deadlines for Your Country of Residence
For example, in the United States, the tax deadline is April 15 of each year. However, as a self-employed business owner, you should also know the deadline for paying estimated quarterly taxes. Visit www.irs.gov for accurate information. If you live in another country, it’s important to know the tax requirements there as well. Become familiar with the dates and deadlines and make sure to prepare ahead so you reduce stress and anxiety.
Having your own business is wonderful, but it’s almost impossible to do it all alone without wearing yourself out or getting burnout. Removing the chaos from your accounting by staying organized and using the services of a professional will go a long way in helping you keep your sanity and have fun in your business.
How do you personally keep organized? Please share your tips in the comments below. If you found this post helpful, please share with your friends.