It’s totally tax time! Last year I had my act together and was sitting on my accountant’s couch with my spread sheets in hand before the end of January. This year… well, I’ll call her tomorrow to make an appointment! The good news is that I have relatively little to do to get ready for my tax appointment because I kept my ducks (somewhat) in a row (aka organized blob) all year.
I am not the queen of organization. Ok truth be known, I’m a borderline hoarder and my purse barfs receipts every time I open it. It’s not something I’m proud to admit, but it should give you hope if the idea of organizing your finances gives you nightmares. Here are a few easy tips to make taxes less–er, taxing!
- Start Right – The very first dollar you make should go into a bank account that is separate from your personal account. Really, you should register your business name with the state (We’ll talk more about this another time) and open a business account with that name. Every single dollar you spend should come out of this account too. You might not think you’re a “real business” now, but it is so much easier to start as a legitimate business than to go back in time and try to sort things out. Having a separate bank account that’s used just for business allows you to go back and look at your deposits and withdrawals later (at the end of the week, month, year, whenever you get around to it) and not have to wonder “was that $100 trip to Michael’s for my business or just a weekend Pinterest craft binge?”
- Bookkeeping Software – Once you’ve opened that account, link it to some type of bookkeeping software. I use GoDaddy Bookkeeping (used to be Outright). It pulls all of my transactions from my bank, paypal, and my online shops. It even tries to categorize expenses for me! (I’ll admit, I have to go in and change some of them to other categories, but it’s helpful nonetheless.) I like it because it’s free and I don’t have to do a lot of thinking. There’s also a paid version that magically whips up tax documents if you really don’t want to do any thinking! I have friends who swear by FreshBooks, others who love QuickBooks, and others who use Xero. They all offer free trials, so it’s just a matter of trying them out and seeing which works best for your business and your style (and your budget). I also have a friend who doesn’t use any software at all, she keeps an organized spreadsheet and enters every purchase when she comes home from making it. I love that about her. I wish I was that type of person, but I’ve accepted that I’m not. So I let a computer be that type of person for me and at the end of the year, I don’t have much math to do!
- Routine Reviews – I used to love balancing my checkbook. When I was 9 and didn’t actually have any expenses, just an old blank check register my parents were throwing out. Today, with the magic of the internet, checkbooks don’t really need balancing, but it’s wise (crucial) to review your accounts once in a while to make sure everything’s looking like it’s supposed to. Depending on the size of your business, you may want to review monthly, weekly, or even daily! What works for me is to check GoDaddy Bookkeeping on Mondays (they send an email telling me my profit each week, so it’s a good reminder) and categorize any uncategorized expenses. I check to see that overall I’m making more than I spend and then call it done for the week. At the end of each month, when I’m working on my goals for the next month, I pull my sales report from Paypal, look over my income and expenses in GoDaddy Bookkeeping, and check against my bank statement to make sure everything looks like it’s supposed to. And that’s it. Nothing fancy, nothing time-consuming, just routine. Making it a routine makes it no big deal, and prepares you for easy tax prep at the end of the year!
And that’s really it! You can handle that right? You can. Now get out there and make some dollars to put in that business bank account of yours!