Remember the old saying ‘when pigs fly’? You may have heard your parents mumbling this phrase in response to your allowance increase request. You may also recall it when you saw a casual, unwanted email promising your business 1000 new clients. And, you have possibly even said it when someone recommended that you improve your bookkeeping habits in your business.
You might consider tax preparation for a part-time job. However, the key to refining your tax season experience is continuous preparation for the entire year, not just at the time of filing. Developing healthy financial habits should be engraved in the entire culture of your organization. Someone who has suffered from a heavy tax burden would surely understand that ignoring financial responsibilities always misery. Bruises may still hurt, but they remind you to embrace clever accounting habits, which will ensure your business’s success.
Get Rid of Outdated Accounting Systems
If you have been struggling to manage the chaos of sales receipts, invoices, and financial reports, you need to redefine your bookkeeping model from scratch. Cloud-based accounting software offers a realistic solution as they allow you to generate, send, and receive receipts and reports in real-time. You can also synchronize the software with your bank account to send or receive payments. All of this is possible remotely, from anywhere. Developing healthy accounting habits should always be a top priority.
As these cloud-based platforms have easy accessibility and functionality, your business will habitually adapt and develop healthy accounting practices that are key to surviving the tax season.
Develop Contemporary Accounting Habits
Most top businesses today have invested in developing a sagacity among their employees to stay current and engaged. Staying in touch with the latest laws and tax changes is crucial for any business, and you must know about them in time so that something could be done before it is too late. The latest tax reforms are a contemporary example that needs to be thoroughly investigated by a seasoned team. Though you might be outsourcing your business bookkeeping, you should still put effort into learning about the changes so that you can comprehend things.
Developing contemporary accounting habits also means that you stop procrastinating and start categorizing your expenses weekly. Leaving things on the back burner only cause them to add up and, when it’s time to file taxes, the situation becomes a fire drill for your whole team. Keeping a regular and consistent record of your financials will ensure that you avoid any situation.
Separate Personal and Business Expenses
Using your business account for personal use is never a good idea. The expenses will continue rising without you noticing, and eventually, they will add up to your tax bill. You may not consider it a big deal and think of it as a one-time thing. However, over a year, the expenses may accrue to be substantial. This is one of the worst accounting habits you can adopt.
When you use business debit and credit cards only, it will create a paper trail for bank reconciliation, eradicating the reimbursement process. Don’t stop with only reconciling your bank accounts. All accounts that have an ending balance must be reconciled. Your bank accounts, loans, lines of credit, credit cards, and payroll liabilities must all be reconciled daily or weekly and shouldn’t wait until the end of a month.
Have your Books Reviewed by a Professional
You may consider hiring a CPA an expensive and insignificant endeavor. However, that decision can prove to be one of the most valuable accounting habits that save you from a hefty tax burden. Just because your books are reconciled, it doesn’t prove that they are also accurate. Having another set of eyes looking at your financials won’t hurt you. Instead, a CPA will offer critical input, which could reduce your tax bill considerably. Because these are professionals who have the experience of looking at thousands of financials, they will surely catch any ambiguities. They can offer you valuable advice to manage your taxes in the future.
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