With that nasty tax deadline creeping up on us all, it’s time to assess the way you handle accounting for your business. Whether you’re a master of bookkeeping or a filler of hastily labeled shoeboxes, there are several resources available to you and lots of different ways to make accounting a manageable task that will keep your money in your pocket where it belongs.
- Create a system to make your own. Categorizing and organizing receipts, bills, and other accounting documents can be overwhelming to say the least. Some keep alphabetical files, some keep files by month and year, and others keep files by kind (mileage, supplies, travel, etc.). There is no one right answer except that you need to choose or create one that will be most efficient for your business. For example, a direct seller of jewelry whose business consists mostly of home parties would be best suited by organizing her files by kind as the bills get paid and receipts come in. This way, all she has to do come tax season is to add up what is in the files to complete the IRS tax form. Bottom line: design a system of organization tailored to your business’s needs.
- Track EVERYTHING. Every expense and every penny of income must be logged in some way. Even though chances are slim that you would be audited, make sure that everything is documented in case you are. Tip: Back up your data. Many banks keep online statements for 18 months, but the IRS can audit you going back three years (up to six if a major error is found). Consider scanning any documents of which you don’t have electronic copies.
- Go digital. For those who want to de-clutter and are looking to deal with less paper, there are many websites that can help you do just that. Shoeboxed, for example, allows you to scan, upload, or mail in documents. Scanning can be done from a printer or from a mobile phone. From here, they will extract the data and categorize it into your own online account. Similarly, The Neat Company allows you to transform documents into a sort of digital filing cabinet. Services like these can be especially valuable for those who do business on the go.
- Be a regular. You should have a regular frequency with which you handle your accounting. Twice a month works for most small businesses, but this would be another thing to assess based on your own needs. Choose and stick to a time when you are going to sit down and pay your bills; integrate that time into your regular schedule. The more regularly you address this area of your business, the more manageable and less time-consuming it will become. As an added bonus, you can catch any errors before they accumulate and cause major damage.
Keeping track of your accounting as you go is the most efficient way to stay on top of all the paperwork. Not having any system in place will result in inaccuracies that will cost you hard earned cash. How do you stay on top of your accounting? Please share with us in the comments section!