How to keep excellent tax records for your business

Edna B. Shearer
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As a law-abiding and devoted member of society, you are ethically and legally obliged to pay taxes. However, to make sure you are paying the right amount of tax, a well-maintained and organized financial record system is required.

Keeping good financial records is essential in order to know how much tax you need to pay. This will help you to not only avoid underpaying your tax and getting into trouble with the authorities, but will also make sure you get all the deductions you are entitled to and so don’t pay too much.

We’re urged to save all of our receipts, but doesn’t mean you can stuff all your receipts in a draw throughout the year and expect tax time to go smoothly. You need a comprehensive bookkeeping system to manage your business’ finances and ensure that you are a company that pays its taxes on time.

The fundamental goal of bookkeeping is to keep track of every transaction that occurs on a daily basis. However, there are a few things to keep in mind in order to maintain a well-organized financial management system, which we’ll cover in this article.

Please keep in mind these are designed as general tips to help you prepare your taxes, and certainly not tax advice.

Choose the right system for your business

Because bookkeeping is something that you need to do regularly, it is critically important that the system you choose is not only time-efficient but also simple to use. You will have two main options when implementing a bookkeeping system: to keep records on paper or invest in accounting software. Accounting software is undeniably the way to go: not only does it help simplify your processes and save you tons of time, but you can easily back up your records and keep these vital information safe.

Keep a routine

Bookkeeping is a chore that must be performed on a daily basis. Missing even one day throw off all your financial records. Therefore, it’s critical to make bookkeeping a priority and make sure that you keep your records up to date.

Daily recordkeeping is also an essential part of proper tax planning. This is a valuable tool in allowing businesses to save a significant amount of money by making sure they claim all possible deductions.

Take advice from experts

Financial management isn’t as easy as it may seem. It can be a difficult task at times, and you may spend hours pouring over you business’ books. Furthermore, every little detail matters, as a single financial error can drastically disrupt your entire record system.

This is where having a professional tax accountant like Hodge Bakshi on board who is a specialist in accounts and knows everything there is to know about tax and its legal ramifications can be a huge help. Consulting the experts will help you to prepare your taxes as accurately as possible.

Keep your bank statements in order

Matching transactions with your bank statements is one of the most important good bookkeeping. This is done in order to keep track of all financial records, as well as ensuring that each record is current and nothing is missing.

Accounting software can make this faster and easier. All you have to do is manually upload all of your bank statements, and the application will process and compare the records you’ve supplied with your statements.

All eyes on invoices

Accounts receivable is just as crucial as accounts payable when it comes to cash flow and efficient operations. Set up strict processes and policies for making timely payments, as even a minor delay can have big implications for your business.

To ensure that you receive your payments on time, it’s important to send your invoices in a timely manner. If your customers are late with their payments, follow them up and ask them why. You can also impose extra fees for late payment, as long as this is legally permissable. This way you’ll be able to compensate for the delay and you’ll probably not have to deal with the same problem again.

Develop your understanding

As a business owner, you have a range of responsibilities. It’s important to delegate as many of these responsibilities as you can, especially those things that are outside your realm of expertise. At the same time, even if you hire experts to look after your accounting for you, you remain ultimately responsible for your business’ financial management.

Therefore, it’s important to educate yourself to have a basic level of understanding needed to oversee these processes. Inquire and learn about how accounting works and what efforts can be made to ensure that all of your financial records are in order. You should also familiarize yourself with the software used to maintain your business’ records.

Study the data

Your business’ financial data can be extremely helpful if you want to expand your business because it allows you to understand your business better. It can help you increase your revenue, set plans to save and invest more, and improve your tax planning tactics.

It can be tedious and time consuming to sit down and tally all the numbers. This data, however, are more than that – it is key to working out if your business is profitable or not. Based on these assessments, you can easily make further decisions on how to expand your business.

Story by Sohail Khan

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