Small businesses have survived yet another tax season. And every year small business owners vow they will be more organized for the next year — but that never happens.
One of the reasons for this is because small business owners, especially those who run solo businesses, do not have actionable steps to ease the pressure of taxes and record-keeping.
Here are 5 simple tips to keep your business organized year round and for tax season:
1. Buy an accordion file folder.
An accordion file folder simply allows you to keep multiple folders in one large file and keep it pretty portable. Some accordion files have lots of slots, and some only have a few. Which do you need? Take a look at the IRS Form Schedule C. There you will find the categories the IRS has for business deductions. Label your folders accordingly so that you will always place your receipts in the right folder. When you hand your files over to your tax preparer, bookkeeper or accountant at the end of the year, it will be easier for them and for you now that things are organized.
2. Keep an official mileage log.
Many small business owners use their personal vehicles as their business vehicles. And that’s fine. The thing you want to do is keep a mileage log in your vehicle so that you can properly account for personal miles and business miles. You did know that’s on the tax form, right? Just remember that the IRS loves it when you can separate personal and business items and show proof of everything you claim. You will still need to keep your receipts for other vehicle expenses such as repairs, maintenance, tolls, parking, etc.
3. File receipts at the end of each month.
If, by chance, you weren’t keeping up with your filing on a daily basis, be sure to do it at the end of each month. Even though you have an accountant, bookkeeper, or tax preparer, it is your business and your job to make sure you know what is going on. Part of this is knowing if you are making or losing money. While many business owners rely on yearly earnings and expenses, it is more prudent to know what is going on month to month. Knowing this information helps you make the correct decisions in terms of your business. You can also quickly see if there is an area of your business that needs to be fixed or is doing really well. Know your numbers.
4. Set a new budget for the next month based on those receipts.
And when you have figured out how you did the previous month, make a new business budget for the next month. Just as in personal finance your budget will change from month to month, so will your business budget. There are just some things that will not be the same each month. Also, you may find that a particular ad campaign is not working and you may want to take that out of the budget. Similarly, you may need to pay professional or association fees that only come up once per year. It is extremely important to keep on top of these numbers.
5. Hire a bookkeeper and/or tax preparer.
Your bookkeeper, tax preparer, or accountant does not need to be an employee. You can hire this person as an independent contractor just for the work you need. A bookkeeper’s services may only be needed monthly as you figure your business numbers. A tax preparer or accountant may only be needed once per year during tax season until and unless you plan on making some financial decisions that will affect your taxes personally and in your business and you may need advice before making those decisions. Just be sure to do the previous steps so that you can and your financial team member can work easily and quickly so that you can get back to running your business.
By following these five simple tips for organization, you, as a small business owner, can spend less time doing paperwork and more time building your business.
IRS 2009 Schedule C