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Posts Tagged ‘receipts’


Creating a Financial Workflow

March 25th, 2010 :: Thursday Bram

When you run a small business, bringing in someone to handle bookkeeping and similar tasks just isn’t always an option. The cost of hiring help can make it necessary to do that sort of work, although it doesn’t hurt that keeping your own books guarantees that you’re familiar with every aspect of your business.

The biggest problem for many business owner when it comes to updating financial records is actually getting around to it. It’s easy to put off tasks like tracking expenses — after all, you can always catch up at the end of the week. Then a week turns into a month, which turns into a quarter, which turns into a year before you even notice. It’s easy to focus on tasks that directly make you money, rather than figuring out where that money goes. Having a financial workflow in place, though, can help you manage your business’ money in such a way that it doesn’t get out of hand.

Your Financial Workflow

A workflow is a series of steps, each one following the next so that you can complete a larger task — usually a task that you must complete on a regular basis. It can make sense to write down the steps you need to keep up with your finances: from reconciling your bank statements with the receipts you have to entering information into your bookkeeping software, having a checklist makes the process smoother. It’s easy to say that you already know what you need to do, but it’s easy to miss a step or put things off entirely because you feel like there’s so much to do. Having it in writing lets you build a habit of handling your finances, making it easier to stay on track.

Determining just what steps you need to take can be a longer process. Before you try to create the perfect workflow, discover what you’re already doing that works. Follow the approach you normally take to get your books up to date and just write down the steps you take. If you’re not the best about doing so on a regular basis, you may have to actually spend some time on your books to start getting an idea.

Once you have a list of the steps you generally take in place, you can look for opportunities to tweak the process. You may find that you have to take information off the same piece of paper multiple times — that can be an opportunity to improve your system because if you can arrange things so that you only handle each piece of paper once, you can speed things up. There are also many tools that will help you speed up the process, such as receipt scanners.

You may find that you need to keep adjusting your routines as you go through them. The first couple of times, it’s possible to miss a step, especially if you haven’t practiced the habit. But having a list that you can work down on a daily or a weekly basis will help you to build the habit, as well as make things much easier when you are in a position to hand the bookkeeping off to someone else down the road.

Image by Flickr user ben_onthemove

Last-Minute Tax Tips

March 23rd, 2010 :: Thursday Bram

The due date for federal income tax returns is just around the corner. If you haven’t already gotten on top of your taxes, it’s time to do so. These last minute tax tips can help you meet that April 15th deadline without a problem with the IRS.

Estimate the Tax You’ll Owe

Ideally, you’ve been making quarterly estimated income payments and you have a clear idea of how much you’ll owe to the IRS. If, for any reason, you’re not going to get your tax paperwork done on time, you can easily file for an extension, as long as you’ve already paid however much tax you expect to owe on April 15th. It may not be a bad idea to overestimate, depending on the reason the rest of your paperwork won’t be ready — you can face penalties if you underestimated what you might owe.

Having an estimate can also make things easier if you will be on time with your tax return but just haven’t gotten around to it yet. You don’t want to be in the position that you need to make a payment and don’t have quite enough in your business checking account for any reason.

Get Organized

If you’re going to be asking your tax preparer for a rush job, you’ll have much better results if you aren’t handing over a shoebox of receipts or equally disorganized electronic files. There are tools out there that can scan and organize your receipts — Shoeboxed, for instance, just requires you to stick your receipts in an envelope and mail them off. There’s a fee for such services, of course, but if you aren’t going to get to it yourself, the fee is much lower than you might pay to your CPA for a similar service.

Check Your Resources

Trying to claim a particularly difficult tax deduction or credit? Check your professional associations or other resources for guides to doing just that. Many groups offer a regularly updated tax guide for those bumps in their industry, especially focusing on how to appropriately claim specialized deductions. For instance, if you are a building contractor, you may be claiming one of the various energy efficiency credits related to projects you’ve built over the last year. The paperwork can be complicated, but many local contractor organizations offer their own version of a guide to that particular tax credit.

Your personal resources can also make the process easier. If you work with the same tax preparer year after year, he may send you a simplified document to fill out about the changes in your business over the last year, rather than requiring you to fill out every form from scratch. You’ll still have to have all your paperwork but you can avoid having to calculate much more than what your bookkeeping software can already provide.

Image by flickr user alancleaver_2000

15 Small-Business Tax Deductions

March 22nd, 2010 :: Steven Fisher

As Tax Season is upon us we thought we would share some great tax deduction advice we came across on Entrepreneur.com:

  1. Auto expenses: You may deduct mileage, parking fees and tolls for business use of your car. Most people take the standard mileage rate deduction because the record keeping requirements are less burdensome, but actual expenses often yield a larger deduction, says Fawaz. Keep track of the mileage, odometer start and finish for each trip, destination, the starting point and business purpose. “The actual expense method often yields a higher deduction, including repairs, insurance, maintenance and depreciation for the business portion of use,” Fawaz says.
  2. Equipment, furniture and supplies: Look at your purchases and ask your tax preparer to run the calculations to see if you should expense it or depreciate it. But don’t overdo it, says Clare Wherley, a certified financial planner and certified public accountant with Lassus Wherley in New Providence, N.J. “I’ve often had to caution the entrepreneur that buying a piece of equipment just to get a tax deduction isn’t good business sense.”
  3. Professional and legal expenses, and association dues:Professional and legal expenses are deductible, but if the costs are part of startup expenses, you may need to amortize the cost over 60 months. Association dues may include a portion for political contributions or lobbying, so those can’t be deducted, Fawaz says, noting the association must disclose this amount or percentage.
  4. Expenses to start up or expand your business: The biggest mistake in deducting expenses to start up or expand your business is failing to make an election to amortize or deduct these expenses in the first year. A paper election is required to be attached to the return, stating your intention to amortize them, Fawaz says. Otherwise, the expenses become nondeductible until you sell or liquidate the business.
  5. Professional publications and software: Here again, the common error is taking the cost as an expense instead of amortizing, Fawaz says. Software licensing fees, for example, should be capitalized and amortized over 60 months unless it has a life of only one year, such as an annual maintenance agreement. Professional publications should be amortized over the subscription period if prepaid.
  6. Gifts and advertising: Client gifts are deductible up to only $25 per gift. And if you advertise, deductions taken for costs that cover multiple-year contracts must be spread over all the contract years, Wherley says.
  7. Home office: If you have a legitimate home office, don’t be afraid to deduct it. To qualify, the room must be used exclusively for business. It can’t double as a spare bedroom or toy room for your kids. You can deduct a portion of rent, utilities, insurance, taxes, maintenance, professional cleaning, depreciation and interest. State tax deductions will vary.
  8. Telephone and internet: Any dedicated services for your business are deductible. If you use your home or personal cell phone for business, you may only deduct the portion used for business purposes.
  9. Education and training: You may deduct the cost of continuing education or certification for the business you’re already in, but education that qualifies you for a new line of business is not deductible, Fawaz says.
  10. Bad debts: A bad debt is only deductible if the income has been declared. Wherley offers this example: A business owner bills a client in December 2009 and declares that income on his 2009 return. By the end of 2010, he realizes he will not be paid by that client. So in 2010, he can take a bad debt deduction for the income previously declared. If that income was not declared, he can’t take the bad debt deduction.
  11. Interest on loans: You can fully deduct interest on loans for your business. If you have a loan from a relative, make sure it conforms to IRS rules.
  12. Entertainment and travel expenses: Keep excellent records here, and keep a log of who you met, why, where, when and for what business purpose. “Only 50 percent of meals and entertainment costs is deductible, and none of the costs associated with country club memberships are deductible,” Wherley says.
  13. Taxes and Social Security: State taxes paid are a healthy deduction; just don’t allow yourself to be surprised by how high Uncle Sam’s bill may be. “I often advise setting aside 50 percent of net income to cover everything,” Wherley says. “If there is something left over, the refund is that much sweeter.”
  14. Insurance: Insurance premiums for the business for one year or less are deductible currently, while excess prepaid premiums are deductible in subsequent years, Fawaz says.
  15. Charity: Save all your receipts, and don’t forget to keep track of contributions of inventory or property.