If your small business doesn’t have its bookkeeping in order when tax season comes around, you may find yourself wading through hours and hours of work.
Having consistent processes will help keep you from scrambling to organize everything when it’s time to submit your tax returns.
Whether you’ve been in business for years or just getting your business started, keep the following tips in mind that will ensure a smooth bookkeeping system and a far less stressful tax season.
Tip #1: Go Paperless As Soon As Possible
There are so many benefits to switching your banking over to a paperless solution.
When it comes to bookkeeping, keeping things online and using the right software can help you save a ton of time and not risk the loss of paper documents.
A big part of tax season is compiling all of your receipts and other financial documents. If they’re all online, you can cut out a large portion of this hunt!
Tip #2: Automate Your Processes to Save Time
The easiest way to save time is by cutting down on manual processes. When it comes to bookkeeping, accounts receivable is an area with a lot of room for automation!
Accounts receivable is the amount of money owed to your business by your customers. It is the account that invoices are implicated in, so accounts receivable processes are deeply related to your business’ bookkeeping as a whole. By automating your accounts receivable, you can reap benefits such as quicker payments, more control, and savings!
Tip #3: Do Quarterly Reviews of Your Finances
If there are issues in your bookkeeping, it’s best to catch them as soon as possible.
That’s why performing quarterly reports is a great idea to ensure that your books are on track and organized. Every quarter, your financial statements such as profit and loss statements should be revised to ensure that there are no mistakes. Quarterly reports are also a good way to stay informed of your business’ financial status at all times, rather than just once a year.
Tip #4: Make Changes Accordingly to Your Business’ Growth
If anything in your business’ financial situation changes throughout the year, it’s essential to let your accountant know.
Any growth or significant changes in your business could make a difference in your tax returns. It’s important to keep in mind the important KPIs that define your business, and use them as a tool to keep improving your processes and cut down on wasted time.
Tip #5: Reconcile Your Books Early & Often
The least recommended action leading up to tax season is waiting until the very last second to get documentation together.
Before preparing your tax return, you first have to get all of your financial statements together and reconcile your books.
Get things ready ahead of time so that you don’t end up rushing to get everything together before the deadline to file taxes. Reconciling your books as you go may be a bit of a challenge, especially if you’re doing your bookkeeping yourself, but it’s definitely worth the upkeep!
Tip #6: Don’t Do It Yourself
It’s important to evaluate whether it’s worth doing your business’ taxes by yourself, or hiring an accountant to do them.
You need to consider both the time (and energy) it would take you to do them yourself, as well as the risk of making any mistakes. If you have a simple and straightforward tax situation, filing your taxes by yourself may not pose too much of a challenge.
However, if you feel comfortable with filing a tax return and you don’t have investments or dependents, doing them yourself is a great option to consider!
Tip #7: Keep Expenses Separate
As a business owner, it can be hard to make a distinction between a business expense and a personal expense.
There are plenty of times that you may be making purchases for your business, and it’s important to ensure that you aren’t making these purchases with your personal accounts.
Purchases related to your business should only be made from your business accounts, so that there is a clear distinction between you and your business when it comes time to file your taxes.
Here’s what we learned:
- How to stay on top of your bookkeeping throughout the year in order to simplify your processes when tax season comes around.
- When to start considering working with an accountant rather than doing your tax returns all by yourself.
- The simple tips that you can keep in mind throughout the year to ensure that you don’t run into complications when it’s time to file your taxes.
Ensuring that every step in your bookkeeping process is done correctly the first time around will ensure that you don’t have to go backwards and spend time fixing old mistakes.
Bookkeeping nowadays can be simplified by using automated online systems for your accounts receivable. The more you are able to keep track of your finances, the more you will be able to save time and stay organized!