As an accountant that helps out a lot of small business owners, I know how stressful tax season is for start-ups trying to establish a routine. Creating a system to manage your finances as a small business is arguably one of the most difficult parts of getting started. Whether you use accounting software like Xero, Quickbooks, rely on the help of an in-house accountant, or outsource your accounting to someone like LucidBooks, you’re still going to have a lot on your plate when tax season rolls around. In order to make your life easier, here are a few things I recommend all of my clients do throughout the year so that things are nice and organized when it’s time to file.
Go to the Cloud
Something I recommend to all of my clients is using the cloud in order to manage financial documents. The beauty of the cloud is that it’s so accessible, making it that much easier to upload receipts, documents, and bills. One of the major parts of accounting is simply staying organized, and I notice that clients are so much more likely to keep track of their expenses if they use cloud accounting software like Xero.
Keep Hard Copies
That being said, there are a few things I always recommend my clients keep hard copies of: but the most important thing is expense receipts. Especially when filling out expense forms, keeping original receipts that are dated and filed in an organized way is really important if you ever get audited. Keeping personal expenses separate from company-paid dinners and hotel stays is tough if you let too much time pass and get everything jumbled up in your transaction history. Keep hard copies to protect yourself and to protect your company, and be generous with the notes that you put on these hard copies such as the date and reason for the expense.
Use Your Categories
If you use accounting software, you have the option to categorize your expenses as soon as you input them, and it’s very helpful to get in the habit of doing this in the moment so that everything is correctly categorized when you need it. Our memory gets foggy over time, and it’s very difficult to categorize things at the last minute right before filing. Use the categories that are offered to you, and create your own as well. It will save your accountant a lot of headache and keep your finances clear and easy to understand.
Connect Your Bank
Again, accounting software has a lot of features that can help save your sanity during tax season. Many accounting software programs allow you to link your account with your bank account, making tracking payments and expenses that much easier. As mentioned above, categories are important, and it’s often possible to streamline these categories with your bank account categories, making life that much easier.
Taxes and finances are all about organization and honesty. Keep yourself organized throughout the year, and you’ll see that filing taxes really doesn’t need to be all that complicated.