If you have an entrepreneurial spirit, starting your own business can often be the culmination of years of dreaming and hard work. When it comes time to hire an accountant to handle your taxes, you can make life easier for the accountant -- and yourself -- by meticulously keeping track of your invoices, receipts and other financial documents. Even if finances aren't particularly your strong suit, some careful preparation will avoid surprises around tax time and beyond. Here are three valuable ways to approach your paperwork before you present everything to your accountant.
Divide Your Expense Receipts Into Categories
Expense receipts are extremely valuable to small business owners. After all, logging these will reduce the amount of your net income and, in turn, translate into you having to pay less at tax time. Instead of simply throwing all your expense receipts into an envelope, sort them into a series of envelopes that reflect their nature. Individual envelopes can relate to office supplies, utilities and travel expenses, for example. In the latter envelope, for example, you can group all your receipts pertaining to hotels, gas and food that you ate while away from home on business. Take this systematic approach with each envelope and you'll be well-organized when it's time to present your paperwork to your accountant.
Sort Paperwork As You Get It
When your time is already at a premium, it's easy to put off organizing your paperwork until a later date. This approach, however, not only puts you at risk of being late on paying an invoice, but can also lead to stress when your desk becomes buried under a mountain of paper. Make it a priority to deal with paperwork promptly; if not the minute you receive it, then at a scheduled time each day. Keeping track of your revenue and expenses also helps you to take a proactive role in the health of your company. If you aren't monitoring your paperwork regularly, you won't have an accurate depiction of the health of your business.
Keep Your Personal Receipts Separate
Many small business owners face the temptation of trying to figure out ways to claim personal receipts, but this strategy can put you at risk of an audit. When in doubt, keep a separate file of all your personal receipts. At tax time, meet with your accountant to determine if any of the receipts can be applicable to your business. It might be possible to use some, but an ethical accountant will advise you against being deceptive with your paperwork in order to save a little money. Contact a tax preparation service, like Jeff Baker & Associates, PS, with further questions.