If you’re like a lot of people, you stuff receipts, donation letters and other tax-related documents in boxes and plastic bags, then attempt to put your financial history in order to prepare for your tax return. This lack of organization and preparation can lead to costly oversights on your tax return, not to mention, it’s stressful and eats up a lot of valuable time.
Business owners have additional considerations when it comes to tax preparation, including accounts receivable, inventory, financial statements and hard assets. And, they have precious little time to devote to sorting through that infamous box.
If filing last years taxes was a nightmare, you’ll want to avoid that mess when you prepare to file this years taxes. There’s still time for business owners to get organized and be better prepared (your tax preparer will thank you!). So, get your records out of that box and start getting your company’s finances in order.
● Financial reports must be run and reviewed. Without these, you lack a road map to guide your business goals and ensure your operation is on track. Tap into your bookkeeping software and run income & expense reports and monthly profit & loss statements, maintain an updated balance sheet, and review all of these with your accountant.
● Missing receipts make it hard to document expenses. This goes back to keeping good financial records every step of the way in your business. You will need receipts to document and corroborate certain types of purchases or other expenses. Try to identify what’s missing and ask the vendor for a copy for your files.
● Reconcile all bank accounts and credit cards. Reconciliations provide a clear picture of where your company has been during the past year. Is all your income properly recorded? Are your business expenses correctly categorized in your accounting program? Reconciling your accounts can also help identify where those receipts you need are missing.
● Address receivables that are past due. This affects your cash flow and profitability and must be addressed. Your business is not a bank; your customers need to pay you on time. Do you have an accounts receivables policy, such as offering a small discount for quick payment, or do you add a percentage to invoices that are not paid within 30 days? It’s never too late to implement one.
● Take a physical inventory of your goods. This should be done on a regular basis (weekly, monthly, quarterly depending on your business) to make sure your inventory levels align appropriately with your sales. Doing inventory will also reveal theft or loss which affect profits.
○ Make sure you have receipts for what you bought for the company.
○ If you are in warehousing or manufacturing, do you have an accurate count of what is on your premises, and is this reflected on your balance sheet?
○ For capitalized expenses for equipment, you cannot depreciate the assets if you don’t know what they cost and when you bought them.
○ You cannot calculate your cost of goods sold (COGS) if you don’t know what you have and what it cost.
If emptying out that box and trying to update your reports is causing you stress, CFO Your Way can help. We’ll organize your financial paperwork, identify what’s missing, set up your accounting software correctly, and prepare all the reports you’ll need to make filing your tax return a smooth transaction. Schedule a Complimentary Consultation to discuss your needs—and see how much easier it is to file your corporate taxes when you work with a virtual CFO.