3 Small-Business Tax-Time Worries and How to Eliminate Them
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If only new opportunities and increasing sales were as certain as death and taxes! Unfortunately, few things are as certain for small business owners as the annual quest to organize financial records. Loathed by 40 percent of entrepreneurs as the worst part of running a business, tax preparation and bookkeeping can easily eat up more than 80 hours every year.
Whether an entrepreneur prepares and files his or her own taxes or works with an accountant, the first step to less time-consuming and stressful tax preparation is getting organized. New technologies make it easy for small business owners to gather all their important documents in a single location, but a recent survey of accountants indicates that these tools may be underutilized: Tax preparers have reported that two out of five clients lack up-to-date financial records at tax time.
How (and Why) to Use Technology to Prepare for Tax Time
When small businesses don’t use technology to organize financial records, receipts remain scattered in back-office shoeboxes, employees’ laptop bags and email archives. Getting all of these important documents into the same place is the first step to processing the important data hidden in the paperwork; and one of the best technologies for this task is a smart scanning and organizational software system.
Technology can make it easy for any team member to add important documents to a central digital location simply by scanning papers or emailing files. Smart identification software extracts important information from scanned and uploaded documents (including amounts, vendors and dates) and makes creating tax reports easy.
Tools like Neat allow items to be tagged with the same tax categories that the IRS uses. Thanks to cloud-based delivery models, it’s also easy to integrate data with other tools, such as QuickBooks Online and Dropbox.
For small-business owners who spend much of tax season worrying, one of the biggest benefits of digitizing important records in a smart organizational system may be the alleviation of some of that stress -- and the fact that they’re no longer burdened with the following three worries:
1. 'I’m not 100 percent sure that all my data has been entered correctly.'
Accountants and bookkeepers enjoy a reputation for fine-tuned attention to detail, but even the most meticulous number-crunchers still make the occasional typo. By eliminating manual-data entry and automatically extracting important data from documents, smart organizational software eliminates the opportunity for human error.
2. 'I don’t know if I’m getting all the deductions I deserve.'
Entrepreneurs invest in their businesses and count on recouping some of those investments as tax deductions. Not only does a habit of scanning bills into smart organizational software help ensure that all deductible expenses are tracked and accounted for, but technology can also enable easy itemization of costs by tagging them with the same tax categories that the IRS uses.
3. 'I don’t know how I’ll handle an audit.'
Being forced to justify each and every deductible expense may be a headache, but having all information available in one place can make the nightmare of being audited a little less painful. Technology enables entrepreneurs to search a cloud-based system by amount, vendor, date or other keyword instead of searching through papers by hand.
Make tax time easier today and bookkeeping easier tomorrow.
Tax day is right around the corner, which means that now is the time to get organized. Small business owners who start leveraging technology to organize paperwork will enjoy a tax season with fewer worries -- and clearer, more streamlined bookkeeping all year round.