Fall is upon us, and that means many businesses like yours are waist-deep in executing your strategies and learning what has worked and hasn’t worked so far this year. Your passion lies in delivering results for your internal stakeholders and providing authentic service to your customers. Some of you may have surpassed certain goals established at the beginning of this year, and others are feeling pressure from hitting their metrics before the year is over.
However, we’ve found that in becoming occupied with finishing this season off strong, business owners can easily neglect one necessary, crucial housekeeping duty: keeping your books straight.
How well do you know your books? How organized are your financials? What processes have you embedded in daily operations to ensure you’re prepared for tax season? Cleaning up your financials doesn’t have to be a burdensome task when tax season rolls around. Here are five tips to get you going:
1. Start now.
Most businesses don’t believe they’ll have compliance issues with their tax returns, yet these issues often arise as a result of misplaced paperwork, receipts, and all the numbers you need to file your forms. This tip has little to do with actual bookkeeping and more to do with re-prioritization. Come tax season, the source of your problem won’t be the inability to find all your paperwork and figuring out which forms to file; it’s the repetitive delays and the excuse we often hear: “We’ll figure out the books later.”
Start immediately, and devote weekly time and energy to putting your books together. Instead of dealing with the chaotic rush every March (for calendar year filers), you and your team deserve peace of mind. Don’t wait another minute to put daily and weekly processes in place. Do it now.
2. Collect all your records and organize them.
Although daunting at first, collect all your transaction records, including costs and expenses, bank statements, invoices, and receipts. If you feel comfortable scanning your physical receipts and keeping electronic copies, do so. But ensure you have these items stored in a secure, backup hard drive. If you use a spreadsheet or a computer program like QuickBooks or Quicken, make sure those sheets are up to date. This will likely take you 10 minutes every single day, but should save you hours of preventable stress.
Treat your records the way you treat your cash inflow—with high value, discretion, and discipline.
3. Draw insights from your books.
Keeping your finances in order not only fulfills administrative obligations, it also creates room for learning. When you’re able to possess a micro- and macroscopic view of your financial track record, you’re essentially taking a pulse of your business’ health. This information can become a treasure chest to inform your strategic moves in the short-term and long-term.
Ask yourself: Where can I cut down on costs? Where can I make investments to produce sustainable results? What can I learn about my customers’ purchase behavior? What operational insights can I draw from my team’s activities?
4. Ruthlessly separate business finances from personal finances.
The temptation to mix your private and professional life is ever-present—and it matters especially with regards to your finances. Using cash inappropriately has the potential to de-legitimize your relationship with both the government and potential lenders as well as negate the protections offered by your business structure.
In the end, successfully compartmentalizing your expenses and using them for their specified purposes will help reduce personal liability. Self-control in this area will help breed positive, long-term outcomes. Moreover, it helps you stay organized and clear-headed for tax time.
5. Don’t be afraid to hire a professional.
Lastly, let go of the pressure of becoming an expert in finance, accounting, or even legal matters. Your job is to execute your mission, build your brand, and provide competitive offerings to your market. Consider an expert who can partner with you in your mission. If you possess the tendency to use inexpensive resources for managing your books, consider the tradeoff: “What potential mistakes can cripple my business?”
As you continue to do your due diligence in mastering and organizing your books, a smart investment is a good CPA or lawyer to hold you accountable to the highest standards. Generating success is usually not a one-man show, and it doesn’t need to be. A skilled accountant can help you develop solid groundwork moving forward, and an experienced lawyer can help you keep your business compliant.
Candace Klein is Chief Strategy Officer for Dealstruck (dealstruck.com), an alternative online lending platform that provides loans and lines of credit to small business borrowers. Learn more at www.dealstruck.com.