4 Ways to Plan Ahead For Tax Season Next Year
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Tax season is finally coming to an end, and for many small business owners, it’s a major relief. For some, stress levels have skyrocketed as employers scrambled for misplaced receipts and documents, dodged audits and attempted to claim overlooked deductions. While many are anxious to turn the page on tax season, now is actually the best time for employers to correct bad habits and get organized so next year’s returns aren’t as painful.
Here are four bookkeeping tips that entrepreneurs should make a habit of now to get their businesses in good shape for the next financial year:
Plan expenses for 12 months. Business owners should plan fixed expenses year round, not just on a monthly basis. It’s important to take seasonality into account and other potential downturns to ensure that your minimum expenses are covered. This may mean saving more money during the business’s peak sales months to cover times where sales see a drop. Knowing the fixed business expenses will provide a clear understanding of the business’s future and how to appropriately plan for taxes.
Track expenses daily. The days of manually tracking expenses are over, and there are multiple technologies that allow for tracking 24 hours a day and budget planning months one to two months out. So take advantage of the financial tracking tools available on a daily basis to keep you informed and save you time. Maximizing these tools can help give you a near real-time idea of how your money is spent and the records to prove it.
Set aside money for taxes. Meet at least twice a year with a CPA -- once in May and once in October -- to get a sense for what your business’s taxes will look like for the coming year. Understanding how your financial picture is evolving can help you keep pace with how your business is changing and how much you’ll need to cover what you’ll owe.
Planning for emergencies. It’s always important to set money aside for any major, unexpected expenses, such as losing a major client, economic downturns and other crises. Think long term and stay abreast of economic conditions to predict how your business might be impacted.
How much should be saved? This depends on the minimum expenses necessary for business survival. In general, however, set aside at least six months of expenses.
What if I cannot afford to save any extra money right now? Reach out to a financial institution and have line of credit set up so that if the unexpected does happen, money is available to keep the business afloat.