Tax Time Bruises Still Hurt? 3 Accounting Habits to Implement Now
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Remember the old adage when pigs fly? Your parents would mutter it in response to your allowance increase request. You think it when you receive a random, unsolicited email guaranteeing your business 5,000 new customers. And you definitely think it when it you’re charged with improving your business’ accounting practices.
The latter doesn't necessarily require winged beasts to take flight, however. The key to improving your tax season experience is preparation throughout your entire fiscal year, not just at filing time. And since we’re only a few weeks removed from tax season, the numbers are likely still fresh in your brain and for better or worse, so now's the time to burnish your accounting practices.
Here are a few good habits you can form now that will pay dividends come next tax season:
1. Say goodbye to your clunky accounting system.
If this year’s filing was a mess of receipts and invoices and other documentation, there absolutely is a better way, and it’s up in the cloud. From the ability to upload pictures of expense receipts to real-time bank sync, simple cloud-based accounting tools not only helps you maintain solid record keeping but it will also make your accountant happy.
And now is the time to implement it. Think about: we’re only five months into the year. That’s only five months of data to remember and migrate to the cloud. Sure beats trying to gather a year’s worth of financials a few weeks out from next year’s Tax Day, right?
2. Commit to staying current.
Procrastination is the bane of all accounting—and virtually every small business owner is guilty of it. We don’t do reconcile our cash accounts with what's in the bank because it’s annoying. We don’t categorize expenses because there’s not enough time in the day.
If you think about it, accounting isn’t time-sensitive until it becomes a borderline emergency. But regular, consistent record keeping is the key to preventing next year’s tax season fire drill.
Set calendar reminders to review your books once a month (or even more frequently) and make sure the alerts are duplicated. The pop-up, email, text message combo should be annoying enough to keep you on track.
3. Stop using your own cash.
Using personal cash for business purchases can regularly result in forgotten expenses that end up never being reimbursed. If you’re guilty of using personal cash for “little things here and there,” it adds up fast over the course of the year.
Break the habit now and stick to using a business debit or credit card. Doing so creates a paper trail for bank reconciliation and eliminates the whole reimbursement process entirely. And come next year’s tax time, you won’t be trying to match business expenses with personal transactions.
If you implement these three habits now, you may not prove that pigs can fly. But you will rest easier knowing you're prepared for next year’s tax season. And who knows? You may even dream of flying pigs.