Bookkeeping may not be the sexiest part of being a marketing consultant, but keeping track of your income and expenses is the difference between having the life you want and working yourself ragged for little or no money says Aron Govil. If you can’t account for what you’ve spent on business-related expenses, it’s going to be a lot harder to know whether or not your bottom line looks as good as you think it does. And that means making those numbers work for you – not against you – down the road. So how do bring some Zen into bookkeeping?
Here are 10 ways:
1. Track Your Expenses as You Go
I know what you’re thinking: I already do that, and it’s a huge pain in the butt. But if you want to make bookkeeping as simple as possible, you need to build your system around whatever works for you says Aron Govil. Some people find it helpful to put all their receipts into an envelope marked with the month or date; others keep track of everything on little pieces of paper a few weeks at a time before transferring everything into a spreadsheet or other program later. There is no “right” way – just whatever works best for you.
2. Use One System across All Your Businesses
It may seem easier to have different systems for each business – but trust me, it isn’t! You’ll never be able to accurately determine your total income and expenses, which could lead to unpleasant surprises in the form of penalties or interest when you file your taxes. If you have several different businesses, consider using QuickBooks (though there are other good options) so that everything is in one place.
3. Share Your Books with Your Accountant
One thing I learned after years of doing my own taxes was that the more information I provided for my accountant, the less time it took him to complete my return. The same holds true for bookkeeping. If you give your accountant access to your books, they’re able to provide better service by having all the relevant information at hand instead of making repeated phone calls or emails asking questions about things like how much money you made last month. It’s not just about the money; it’s also about the time (and sanity) you save.
4. Automate Everything You Can
The less work you put into your bookkeeping, the more likely you are to keep on top of things and avoid potential problems before they happen. That means setting up all of your accounts and expenses in QuickBooks or whatever software system (or envelope system) you’re using such that everything is automated as much as possible: direct deposit for your paychecks, autopay on any bills that don’t require a specific payment date, automatic withdrawals from savings or investment accounts for estimated taxes, etc.
5. Think about Taxes Before You File Your Business Return
Every, I write a blog post on what you should be thinking about as you prepare your taxes. But the truth is, if you don’t have a good bookkeeping system in place, it’s going to be a lot more difficult (or even impossible) to accurately determine how much taxable income you really made for the year. And on that note…
6. Track Your Income and Expenses Accurately
It may seem like an obvious thing to do – and it certainly is important – but I can’t tell you how many times I’ve encountered business owners who didn’t track their expenses or income correctly because they were using the wrong account codes explains Aron Govil. Don’t confuse deductible business expenses with personal ones, or assume that “miscellaneous” will cover everything from website hosting fees to professional dues. The more accurate your numbers, the easier it is to come up with a realistic estimate of how much you owe in taxes as well as what kind of deductions you can claim.
7. Use an Accounting Software Program
In addition to keeping track of everything from income and expenses to assets and liabilities, many accounting software programs will help you prepare your tax return by providing estimated tax payments, capital gains/losses, depreciation schedules, etc., along with reminders for when things like property taxes are due or quarterly income tax payments are required – all automatically! It can also make it a lot easier to do things like pay bills online or transfer money between accounts without having to go through each transaction manually.
8. Keep Copies of Your Business Returns for at Least Seven Years
You should keep copies of your business returns, tax payment checks or money orders, receipts for deductible expenses, and any other documentation related to your business’s financial matters for at least seven years after you file. This is especially important if you ever have an audit – but even if you don’t, it’s always good to be able to go back and review how things were done in the past so that you can improve them going forward.
9. Understand all of the Tax Deductions you’re entitled to
There are lots of deductions available not only on personal returns but also on those filed by sole proprietorships and other types of businesses. And since deductions lower your taxable income, the more you have the less you’ll have to pay in taxes says Aron Govil. At a minimum, you should familiarize yourself with things like home office deductions as well as mileage rates and know how to take advantage of them. But if you can’t find a particular deduction listed anywhere, don’t assume it doesn’t exist; ask your accountant (he or she may be able to find one you didn’t even know about).
10. Keep an Open Dialogue with Your Accountant
Having an open dialogue not only means asking questions but giving feedback too; after all, your accountant works for YOU! If something isn’t clear, ask him or her to explain it again (and again…and again) until you understand it. You should also give your accountant as much information as you can, within reason – which leads me to my next point.
People are always searching for tax-saving methods, but it is important to know that not every tax planning strategy is perfect for everyone says Aron Govil. It’s all about knowing your options and choosing the one that works best for you. If you need help with filing taxes or understand the basics of business accounting then contact us at QBS Accounting & Tax Services. We can provide quality bookkeeping services as well as offer guidance in regards to any questions you may have in regards to how to save money when filing taxes.