As this blog is posted, we are entering the time of year everyone is thinking about filing their taxes.
For some businesses, this is a peaceful time that only requires them to pull income statement and balance sheet reports out of bookkeeping software and deliver those financial statements to accountants or tax professionals.
For other owners and operators of businesses, it’s a stressful time caused by gathering up a shoe box full of disorganized receipts.
I have owned two businesses in my career and in both cases, I fit into the latter category.
The most recent experience was in 2012 when I dropped a literal shoe box full of receipts on my tax professional’s desk. I clearly remember the look of percolating irritation and anger that slowly spread across her face as her eyes rose from the pile of mess to meet mine.
We’ve all seen the memes: “Don’t be that guy.”
When it comes to preparing for tax filing deadlines in small business, here are some tips.
First, if you want your tax professionals to like you, provide them with internally prepared financial statements from actual bookkeeping software. And no, Microsoft Excel and Google Sheets are not bookkeeping software. It’s also worth pointing out that your child care management software is also not the same as bookkeeping software. When we reference bookkeeping software, we’re talking about programs that help comprehensively track revenues, expenses, assets, and liabilities such as QuickBooks, Xero, Wave, Quicken, Zoho, FreshBooks, Sage, and a host of others.
Second, garbage in = garbage out. If your goal is to minimize tax burden, consistency is key. Setting up your books correctly, categorizing expenses with consistency, and utilizing standardized ‘charts of accounts’ is the best way to have high quality financial statements year in and year out. Complete and comprehensive records of revenues, expenses, assets, liabilities, owner’s draws, and other tracking of cash flow is the best way to ensure your business is healthy.
Third, do not wait until the last minute. Money management should be an everyday task for owners and operators of businesses. There are a number of strategies we recommend that make things easier, watch our training, How to Manage Your Money.
Fourth, if you don’t know what you’re doing outsource tax preparation to someone who does. Every business needs a team of subject matter experts. Often, the best way to do things right is to not do it yourself. And frankly, most owners and operators are not qualified. The job of owners and operators is to ensure it is done correctly, not necessarily to do it.
Fifth, start now. If you happen to fit into that latter category of folks who run their business out of their checking account and don’t use bookkeeping tools, start now. Face facts, this is a cost of doing business and it should be built into the price for your services.
To find tax filing dates for your business’ entity type, check out this publication from the Internal Revenue Service.
Disclaimer: This blog should not be considered tax advice. Please consult with a qualified professional when considering all tax strategies.
– Jason Nitschke is Zero to Five Montana and Montana Child Care Business Connect’s Senior Business Advisor. He can be reached at JasonN@ZerotoFive.org.