Most small business people figure they will worry about taxes in April. However, if you can take a step back and manage your records better, it could make for a whole lot less hassle, as well as a smaller bill from CPA.
Here are some quick and easy ways to improve your recordkeeping, allowing you to breeze through tax season focusing on growing your small business.
Receipts, Receipts, Receipts
Despite the bad reputation, receipts can actually be a lifesaver for the small business owner. Yes, all those receipts are annoying, but they are the documentation that your business had a legal expense. Lucky for you, there are many machines and programs that will help you digitized those receipts with ease. A desktop scanner like NeatDesk can de-clutter your life. Yet, it will retain all the expenses for your business, allowing immediate access to a whole year of records.
Categorize everything with Mint
Mint is a renowned budgeting and general finance software tool. However, many of its features are underutilized by its users.
One of the best, which is especially helpful for small business owners, is categories. This feature allows you to categorize every single expense, charge, income, or any other transactions as a specific type. You can even assign multiple categories to one item or make your own categories. For example, you can categorize “gas” as your personal gas and make a new category for “business gas” for a company vehicle. This can be further slapped with a “tax deductible expense” category.
The idea behind this is come tax time, a quick push of a button and Mint will show you every single expense in any category for your desired timeframe—say for the past year. There has never been a faster way to find all your deductible expenses in a flash.
The only downside is that throughout the year the recordkeeping is time consuming. However, it will save you time and money when figuring up taxes.
Not only is cash less secured then a digitized form of payment such as Android Pay or a credit card, it is incredibly hard to track. More specifically, it is incredibly hard to REMEMBER to track cash expenses. Consider that most days you will be juggling multiple meetings or other items. Will you be able to remember every expense that goes with each meeting? A credit card print out, while not as full-proof as a receipt, can serve as a safety net for when you forget to ask for a receipt. With cash, there is no safety net.
Store your digital records on the cloud
Nothing could be worse than a computer failure causing the loss of all your records. If you forgot or neglected to back up the files, you will be hard pressed to recover records. Digitizing records is convenient and efficient, but only if you can access them in a timely manner. The cloud now makes this a reality. Consider storing a copy of your records on a cloud-based platform like Dropbox. Remember to regularly update the cloud records, we suggest at least once a month.
That way if you do lose everything, you won't have to piece together but a few weeks or a month at most.