We’re already halfway through 2021, business owners. Can you believe it? The year seems to be going by so fast, especially as pandemic-related restrictions begin to lift.
Just last month, many small-business owners were scrambling to get their taxes done by May 17. Can we ask: How much time did you spend on your tax prep this year?
A few hours? Days? Multiple sleepless weekends in a row?
Maybe you spent hours upon hours trying to gather and organize your financial documents and reports as well as hunt for some obscure information for your CPA. Or maybe you simply gathered everything together in a box and gave it to your CPA to sort through. (If so, she probably had some words to say about that!)
As we head into the second half of 2021, it’s a good idea to get your financial books and reports organized now so that you can avoid that tax-prep nightmare in 2022.
How? We’re so glad you asked. Here are some top tips to make next year’s tax prep a breeze:
1. Keep track of your receipts.
No, we’re not talking about collecting your receipts in a shoebox. Receipts have a sneaky way of fading quickly. Within even a year’s time, some receipts can become hardly legible.
The best way to keep track of your receipts is to store them online with your accounting software. We recommend QuickBooks Online because of its many helpful features for small-business owners like you. This is the software we use for all our clients.
Still doing your accounting offline? If you’re ready to digitize, we can help you transition to QuickBooks Online. Schedule a call to get a free quote!
2. Reconcile your books every month.
Yes, every month! We know it’s tedious, but keeping your books clean is absolutely essential to make things as easy as possible for next year’s tax season.
Start now. Don’t wait until you’re closer to the end of the year. The longer you wait, the more of a headache it will be.
Need help cleaning up your books? Our professional bookkeepers and accountants can help. Click here to find out how we can help you get organized.
3. Review your bank transactions.
Reviewing your bank transactions often prevents inaccurate monthly financial reports (which can be dangerous and lead to overspending). It also protects you from fraudulent charges.
Recently, we discovered a $750 fraudulent charge while reconciling one of our clients’ books. Apparently, a vendor she was working with wasn’t happy with her rate and decided to give herself a generous tip by charging our client’s credit card.
If we hadn’t reviewed this client’s transactions, she likely wouldn’t have found this issue. Or it would’ve taken her much longer to notice the error. Because we caught it early, she’s in a much better position to dispute the $750 fraudulent credit card charge.
4. Keep up with your accounts payable and receivable.
Do you keep track of what you owe to vendors and what clients owe you? If not, you could accidentally forget to pay a supplier, or you could forget to follow up with an invoice you previously sent a client.
Keeping up with accounts payable and receivable ensures that (1) you keep a good relationship with your vendors and (2) you actually get paid!
This might feel like a juggling act sometimes. That’s why it’s a good idea to automate processes wherever possible. Many good online accounting software tools allow you to set up automatic payments as well as automatic follow-ups on late invoices.
Are you following the tax-prep tips we just shared? Comment below with which of these you struggle with most!