For those of you that have been hiding under your rock, yes, last week (the 15th to be exact) was the deadline to get your personal tax returns or extensions filed. I hope most of you have gotten with your tax CPA and finished up those taxes. Since it is still fresh in your mind, I wanted to give you a few tips to make next year’s process a thousand times easier!
I know your dirty secret – your accounting system consists of shoe boxes! I’m not calling you out to make you feel bad. It is great that you are at least keeping your records somewhere. But, I do want to open your eyes to a few things that can make your life easier.
Backup your shoebox!
Here is a “what-if” for you. What if something happened to your shoe box? What if there was a fire or flood? What would you do to substantiate your expenses? First, I suggest everyone invest in a desktop scanner and scan all of their receipts. Then, I suggest you use a free online file storage service, like dropbox.com to have a safe and secure place for those files virtually so you have protected your records from fire or flood.
Systemize!
There is no reason you shouldn’t be keeping track of your accounting with an actual accounting program. It’s cheap and easy! Did you know that QuickBooks has a FREE version for businesses with less than 20 clients? They also have a really easy online program starting at just $9.95/mo. Yes, I’m a certified QuickBooks ProAdvisor, so I’m going to recommend those products, but there are a lot more options out there and I’m sure they are just as inexpensive.
Why should you get an accounting system? Well, if you have it all in a system when you hand it over to your tax CPA, I bet your tax bill from him will go down. He (or she) is no longer going to have to spend hours trying to make sense of your shoe boxes. And, if you’ve been the one doing it, you’ll no longer have to fret over putting it into an understandable format.
I just think that if you are running a business, you should run your business like a business, and that includes having an accounting system. You can make too many errors with just a shoe box or even just Excel, and that could be costing you money when it comes to tax time!
Organize!
How often do you enter your transactions into your accounting system, even if it is a ledger book or Excel? Do you do it quarterly or even wait until the end of the year? I bet there is a lot of heartburn associated with that practice. I tell my clients to get into a routine of entering all of their transactions each month. Give yourself a deadline and stick to it. Not only will this make providing information to your tax CPA a TON easier, but you’ll also be able to start tracking your actual operations against your goals. You’ll SEE that you spent more than you made last month!
If it is too much for you to enter all of your transactions monthly, consider hiring a professional to help! I have a “Hands Free” solution for solopreneurs or micro-businesses with less than 100 transactions per month.
Install Double-Checks!
The last thing I want you to do, at a MINIMUM, is prepare a bank reconciliation every month! This way you can truly know how much is in your bank account. I would also suggest preparing reconciliations for your credit card statements monthly. I’m a little crazy, so I reconcile my accounts every other week.
Here’s the reason. Everyone makes errors! It could be you, your bank, or credit card company. But, if you aren’t preparing these reconciliations, then you can’t be 100% sure that your accounting information is accurate. Without a reconciliation, it may take months to figure out that you deposited a check into the wrong account and you are now racking up bounced check fees!
Reconciliations reconcile what you have recorded with what the financial institution has recorded. You may have different balances between the two showing on a specific day, but the point is to verify that transactions are clearing properly. Here’s another example: You see your bank has plenty of money in it one day so you plan to make a big purchase, but you didn’t know that the big purchase you made last month with a check still hasn’t cleared your account. In other words, the person hasn’t gotten around to depositing the check you wrote them. Now, will you have enough money in your account when everyone starts depositing those outstanding checks? If you were reconciling your accounts, you wouldn’t have to worry about it! You would know what is outstanding!
In review, I encourage you to make a few changes to take your shoe box accounting to the next level. I want you to backup your receipts and transaction support, I want you to invest in an accounting system, I want you to organize your bookkeeping efforts, and I want to double-check your work. If you do all this, by the time your taxes are due next year, I assure you that the process will be a million times easier!
If you have any questions or find out more about my accounting services, please go to my website, www.CathyIconis.com or email me CathyIconis@gmail.com.
