April 15
th has
finally passed and another tax season is “in the books”. If you are like I am, then after you do a “happy dance” you take a little time to review your numbers and plan ahead for next year. It’s also a good time to make any changes in your bookkeeping method so next year is even better. I asked my friend and colleague Scott Rumley, owner of the Bookkeeping Express franchise in Tulsa, to share his top tips for prepping for next tax season.
Top Tips to Make Tax Season a “Breeze” Once April 15 has come and gone, it’s a good time to look ahead to next year and next tax season. Now is the time to get your books in order and set up good habits so next year you can save time – and potentially money. These ten tips are a starting point for effective information gathering that will help your bookkeeper give you better and more actionable information.
Maintain Daily Records If you don’t have time to do a little bookkeeping each day, when will you find time to record a month’s or a year’s worth of records? Different people have different systems, what matters most is that you have a system and use it daily.
Keep Bank and Credit Card Statements Make sure all financial statements come to you unopened. Review them thoroughly before passing them to your bookkeeper.
Start a Petty Cash Fund Set up a petty cash fund for small purchases made by others in order to keep them in check. Make sure you have accurate receipts for all cash purchases and keep them in one safe location.
New Tax Year – New Storage Box Keep all records for one year in one box, including the tax return for the year, bank statements, cancelled checks, paid bills, financial statements and any other backup files in case you are asked to review your books. Generally, invoices for long-lived assets should be kept separate so they can be easily accessed when the asset is sold.
Switching Computer Systems When switching from paper books to computer software or switching between accounting software packages, do so at the end of a year, quarter or month, in that order. This way, there is a clear demarcation as to which system was in place at which time.
Don’t over-categorize When categorizing expenses, don’t make it harder than it needs to be. For example, when categorizing office supplies, you don’t need to separate fax paper, copy paper, letterhead, printer cartridges, etc. All of these items can be listed under ‘office supplies’.
Separate Personal and Business Accounts Have a separate checking account and credit card for your business. Not only will you be able to track expenses more efficiently, but, in the event that something goes wrong or the IRS wants to review your books, you will only need to review the one account.
Save all Receipts By not having a system to capture small expenditures, you could lose track of potential expenses that can be written off. In addition, the IRS requires extensive record-keeping when it comes to meals and entertainment expenses.
Be Sure to Properly Classify Employees The proliferation of independent contractors, consultants, and freelancers has made it difficult to determine who is subject to withholding and who is not. There are different rules and regulations for employees and non-employees. Always check with a professional.
Chart of Accounts When starting a business, determine what expense categories to track by taking a look at the tax return you will need to follow. If you are required to file a Schedule C, list the categories that apply to your business as your expense items on your Chart of Accounts. Follow these tips and next tax season will be a piece of cake.
Scott Rumley is the owner of Bookkeeping Express in Tulsa which provides complete bookkeeping services to small businesses. Scott graduated from University of Memphis where he played football and was a captain of the team. He also earned an MBA from University of Tulsa. Scott is married with two children.
Shannon Wilburn is the CEO & Co-founder of Just Between Friends Franchise Systems, Inc. (JBF), North America’s leading children’s & maternity consignment event. JBF has 150 franchises in 28 states and Canada. JBF is actively seeking franchisees throughout North America. Click here to learn more about owning a franchise. 