When running a business, one of the first people most entrepreneurs hire is a bookkeeper. In many cases, when the business is very small, hiring a bookkeeper is not a possibility that the owner / operator is willing to entertain. However, the cost of improper, inadequate of faulty bookkeeping can be much higher.
It is very important that someone organizes and properly structure all your tax paperwork, invoices, bills, etc. Having proper organization will help maximize your tax management and possibly end up resulting in large savings. Additionally, if you are ever audited, you are more likely to come out of it in good stance than if you have bad paperwork. Anything the tax man doesn’t like, they will disallow and you will be on the hook for those taxes, plus penalties and interest!
Still not convinced that the best tip is to have a bookkeeper, then here are some tips to help you on your way and hopefully you won’t be in as bad shape as you could be.
Copy / Scan all your expense receipts
There are many expense receipts that get erased over time. To avoid this from happening, make sure to create a copy, attach it to the original and scan a copy to save digitally. Even if the original receipt gets erased over time and eventually ends up looking blank, the copy attached to it is valid.
Properly record every meeting with its receipt
If you have meetings with clients at coffee shops or restaurants and want to claim business meal expenses, then make sure to note on each receipt who you were with and what the meeting was about. If you can’t explain the reason and who you were with, the tax man will invalidate your deductions. Also, these restaurant receipts are quick fragile and get erased over time, so apply tip 1 above every time!
Set your expected taxes aside
This is one that trips many entrepreneurs when starting. You get money and charge taxes, and know you have to set taxes apart, but somehow, you feel you can use it and then reestablish the amount with your next income. That never happens. What usually ends up happening is you have a tax bill so large that you end up taking credit to pay it. So, no using taxes to finance your business or pay for anything, take it off your income and put it in a savings account until such time as Mr. Taxman decides to collect.