If you don’t prepare your business for tax season, it will usually end up stressful at the last minute. I know many pet business owners moaning and groaning wishing they hired that bookkeeper or kept better records. Personally, for quite a few years it was opening a bottle of wine, printing out every bank statement, and recording a year’s worth of expenses in about 5 hours of time.
Ok, so it might have been more than one bottle of wine… 🙂
In the process, I am sure I missed a lot, classified in the wrong categories, and “forgot” a lot of other items. Doing an entire year in one session is never recommended.
So how do we not fall into this trap and how can we prevent this from happening ever again? Here are some
Best Practices To Prepare Your Business For Tax Season
By “starting early” I mean doing it as the year goes on. Every single month, as soon as that bank account statement is ready, reconcile it with your Quickbooks or Freshbooks account. Keep on top of it while the expense page is fresh in your mind. Was the Amazon delivery for groceries or new business card holders? Doing this will eliminate another step of having to go research it in Amazon. It will help you prepare your business for tax season little by little.
Get The Right Categories Set Up
Each business will differ, with no two the exact same but getting the typical categories set up early will help you prepare your business for tax season. Examples: Meals and Entertainment can be broken down into: personal, staff meetings, interviews. Or taxes: FICA, SUTA, etc Having the right categories will help you do projections for your business and potentially let you know where you might be bleeding money. Was all that money you spent with one company on advertising really profitable?
Consider Getting A Bookkeeper
If you don’t have a background in accounting, my best piece of advice would be to contact a local bookkeeper that you can trust to keep things checked and balanced. If you are a cash and check business this is HUGELY important because sometimes payments fall through the cracks. You are so busy running your business, you don’t realize that you missed collecting a $60 check from Mrs. Green. A bookkeeper can help you project, predict, and strategize your cash flow. When tax time comes he/she will already have a lot of your books taken care of so there will be no scramble as you prepare your business for tax season!
Find An Accountant You Can Trust
Most people only see their CPA once a year. Sometimes they just work virtually. As a small business, it is important to see your CPA a few times a year, especially for tax planning purposes. When your business grows, there are different types of corporations that you can file as that would help keep your tax bill lower than if you didn’t. A good CPA will give you options, if there are any, and be able to strategize with you. I would recommend asking your local networking groups and other small business owners who you trust who they use to get a recommendation.
So to sum it all up, you can wipe away the crazy tax prep planning in March and replace it with a steady plan that works for your business throughout the year. Doing so, you will have less stress, ease of planning, and potentially less of a tax bill to pay because you have accounted for all your expenses and collected all your accounts receivable! Do just a little every month and you can always be preparing your business for tax season!