In looking for the secret that makes accounts simple for every business, the most basic tip gets overlooked. This weeks Tax Tips covers the basics that every business needs to follow.
- If you have not opened a separate account for your business, do so immediately. Mixing personal and professional finances is a recipe for trouble. Separate the payments coming in and going out that are business specific.
- Keep accurate records. Some choose to use one credit card only for business and others for personal. Others use the bank account for their business records. However, you do so, keep your records as you go. Waiting until tax time to label expenses can allow mix ups and delays.
- Keep Every business related receipt. This includes donation receipts. Label your business receipts explaining the purpose of the expenditure. No one wants to be audited, but being able to explain the why of every expense protects you and your business. Scanning is allowed, but whether paper or electronic, make sure you organize those receipts by category of expense.
- Learn how to invoice correctly. Record the details of the transactions. Clients are more willing to pay timely if they can see immediately what the expense was. Never add to existing invoice. Make a new invoice with the new charge. This will keep it from confusing you, your customers and your accountant.
- Create Profit and Loss Statements. This is not just for others analyzing your business. A P&L gives you a snapshot of how you’re doing. This can help you make better business decisions.
- If your business is a retail operation that owes taxes on its sales, make your life easier and collect taxes at the time of sale. Otherwise, you will owe out of pocket in a large lump sum.
- Get a tax ID. This will trigger reporting requirements, but is important.
These simple seven steps are basic, but imperative to steering your business in a healthy forward direction from the start. If you do not already have a tax professional, Check out NMS.