Tax season is upon us! It may seem like the deadline is still a distant speck in the horizon, but we all know that’s not true. There is always ample prep work that needs to be completed before important financial information can be recorded into the necessary tax forms. Even if you plan to hire someone else to do the brunt of your taxes for you, there is still information that you need to first compile in order for them to accurately fill out the correct paperwork.
Avoid the horrid tax headaches by making the organization of your business’ finances a top priority. Here are a few strategies that have helped entrepreneurs and business owners avoid the dreaded chaos around tax season:
Talk to a professional.
Unless accounting is your field of expertise, there is just some information that you won’t be well-versed in – that’s what the professionals are for. So many entrepreneurs and business owners think that they are doing themselves a financial favor by saving money and doing their taxes independently. What many people don’t realize is that, while they might not owe extra money out-of-pocket every year, they could still be losing money. Accountants are cognizant of various deductions and credits that you may be eligible for that you wouldn’t think to opt for on your own.
Set aside time in your schedule.
You have a schedule for all of your important meetings, phone calls, and tasks. Use your schedule as an aid for staying on top of your finances as well. Formally set aside a chunk of time every week – this can be anywhere between 10-20 minutes – to sit down and organize your finances. Not only will you be more aware of the day-to-day of your business’ finances, but everything will be in order come tax season. Being prepared will prevent you from fumbling around for weeks trying to organize everything on time.
Keep track of who you are paying.
This may seem like an obvious strategy, but you would be surprised at how many entrepreneurs or business owners are not keeping careful tabs on labor. The main costs that you should be mindful of are wages, benefits, and any overtime costs. By tracking this information, you could find that you have extra money to play around with in your budget or, on the other hand, you could find that you have been overspending and need to cut back.
Separate your personal finances from your business finances.
In some cases this is mandatory, but it’s great to get in the habit of this even if you are a sole proprietor. Applying for a business credit card and opening up a separate checking/savings account for your business will help you keep better track of your finances when it comes time to report it.
This might feel a little time-consuming at first, but you will start to find how easy managing your finances can be once you start making these good practices a habit.