Most people just wing it. They don’t keep receipts and at the year-end gather all their information and drag it to a CPA or Tax Preparer to calculate their tax return. While those professionals gear up and prepare all year to handle it, processing all of a person’s information for one year in a month (at best and a couple of weeks at worst), there is a lot work involved. That’s where you cost come in for tax preparation. Either the CPA, Tax Office had to hire additional people to handle the extra work, commonly known as a bookkeeper or accounting clerk.
Monthly bookkeeping is crucially important. It means that everything is documented in a timely fashion and timeliness makes the documentation more accurate and believable. I always explain to those for whom I prepare taxes, that your deductions must make “sense”. You cannot make six figures and have almost no income or make six figures and not write anything off, the request, the things clients want range and can be quite absurd. Quickly, I let them know that I do not honor request like a DJ. Preparing tax returns is a profession and I take it seriously and honestly. I don’t do things that require the IRS to look at my clients or myself, knowingly. Having provided that disclosure, let’s move forward, bookkeeping provides timely numbers, gives the client, businessperson an idea for just how much they have made, the source of the income and other information crucial to running a successful business. It additionally provides the backdrop for estimating the amount that he or she may have to pay in taxes for that year. By the time, most people finally make an appointment to even bring his or her information to the accountant, it is too late to take advantage of any tax deductions that he or she may have been eligible to receive.
1) APPLY Elite’s 80/20 rule – set aside a day that you separate receipts business from personal. Gather information to give to your bookkeeper for recording. Procrastination of providing that information to a bookkeeper is how a person goes a whole year and never knows what he or she may owe or may not owe in taxes. The key right here though is set a day and time to handle the paperwork of your business!
2) Location – Either file them in a file cabinet or buy an expandable file to keep all receipts. You should never be at the last minute gathering them. Each week, empty your purse or wallet in a specified place to ensure that all information is kept in order.
3) Separate money – Co-mingling of funds for entrepreneurs is too common! Many miss the importance of keeping business and personal funds separate! If you own a business, have a business account. It is imperative and believe it or not, it will help your business grow. Co-mingling of funds is also illegal. People do get away with it, but still it’s wrong and if you are caught, it could cost you, your business and much more. You’ve worked too hard, invested too much to let something simple kill your dream.
4) TIMING – when one records his or her activities make all the difference. Records that are kept on a timely basis are always more accurate and carry more weight than financial statements prepared at year-end. As mentioned before no accountant has time to comb through information at the year-end thoroughly, he or she under time constraints will paint the most general picture you’ve ever seen and rightly so. You cannot expect any professional to take serious your business when you have failed to do all year.
Remember that all information recorded must be verifiable and reliable in order to be considered and received seriously. You cannot just provide a group of invoices/costs that your business incurred, without proof of payment. Incurring cost alone doesn’t make or mean you have deductions. For that reason again, your business should have a separate account. Most accountants will also record information from the bank account because it is reliable. Anyone can make up stuff but that’s not our goal, the goal is to record the actual dealings of a business for good business decisions in the future.
Maybe this is you and you have been procrastinating all year, promising that next year, you will do better. Call today and let your next year begin now! Remember the New Year’s beginning is the old year’s ending balance so end it right!
From Queen “B” of doing Business Better
