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Tax season is over, and you may be relieved, thinking you do not have to worry about that again for another year. If this is you, I want you to step back a few months and think about the stress and anxiety you were facing this tax season. If you do the same thing this year as you did last, you will be faced with that same stress and anxiety.
Make a change now to make this part of your business stress-free. This anxiety can be avoided; you just need to be willing to put in a little leg work throughout the year. I am going to outline changes you can make inside of your business now to take control of your bookkeeping and tax situation.
Bookkeeping: What is That?
If the word “bookkeeping” is rather foreign to you or you think of a spreadsheet and bank statements, this section was written for you. Bookkeeping is the recording of all your business transactions and categorizing them to produce business financial statements.
Luckily for you, there is software out there that makes this process easier. We recommend a software called Xero to all of our clients. With Xero, you are able to connect your bank and credit card accounts directly to the software, which allows Xero to download all your business transactions.
Once the transactions are downloaded to Xero, you are able to categorize them, which will produce both an income statement and balance sheet for your business.
Not only will this make tax season painless but it will provide you insights on your business throughout the year, which can help you spot cost savings and trends.
Complete Your Bookkeeping Monthly
At our firm, we do bookkeeping for all clients on a monthly basis, at the very least. This ensures that you do not get too far behind. The last thing you want to do is categorize thousands of transactions at one time. This is what can trigger that nasty thing called stress.
Doing the bookkeeping at least once a month allows you to break this task you may not be too familiar with into small and manageable instances. The data your bookkeeping will provide not only helps during tax season but allows you to do an analysis of your business performance.
You can compare month to month to see if there are any trends that could be hurting your business or costs that could be cut. You can look at months where you started a marketing campaign and see how that performed and if you should do another. This is all valuable information that every business owner should be looking at regularly.
Ensure Your Entity is in Good Standing
Whether you organized your entity in Florida, California, or somewhere in between, there is likely an annual filing requirement. Be sure to set this in your calendar each year so you can renew and file any necessary documents with the state to ensure your business stays in good standing.
Avoid those unnecessary late fees that you may be used to paying year after year. This can also be important to ensure you stay protected by the liability your entity may provide. Having an expired entity in the middle of legal issues is the last thing you want!
Keep Documents Organized
Running a business means you have documents all over the place, stacked in every corner of your office or overtaking your computer desktop. Take the time now to get all of those documents and receipts organized strategically in a safe and digital place.
Take a picture or scan your receipts and file them in online folders that are easy to search and find if needed. Put a recurring task on your calendar each week to spend a few minutes uploading everything that came in that week.
This will keep you organized should you need anything in the future while also giving you peace of mind knowing everything is in a safe, easy-to-find place.
File Estimated Taxes
Now that you are doing bookkeeping on a regular basis, you know exactly what your profit is at any point in time. This makes paying estimated taxes a breeze.
You can take your profit along with other activity and calculate what your tax liability is and get a payment in the mail for both the IRS and State. Stop waiting until the tax filing deadline and paying a huge chunk at one-time while also eating late fees and interest.
Split those payments up throughout the year, make tax season less painful, and keep fees in your pocket instead of sending them off to the tax man. Estimated tax payments are due on the following schedule:
- Quarter 1 Estimate – Due April
- Quarter 2 Estimate – Due June
- Quarter 3 Estimate – Due September
- Quarter 4 Estimate – Due January
In conclusion, gathering everything and doing your bookkeeping at one time of year is not only stressful, but it is actually hurting your business. Take a deep breath after tax season and make a promise to yourself to be more organized this year.
Regularly schedule time on your calendar to complete bookkeeping, file necessary entity renewals, and upload important documents and receipts. While you are doing that, do not forget to make regular estimated tax payments.
By doing this, it will feel like a rock was lifted off your shoulders. If you do not have time to do these tasks on your own, hire a professional. They will take care of all of this in the background while you are growing your business instead of worrying about it.
Cheers to stress-free accounting and taxes!