preparing for tax time all year long

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preparing for tax time all year long

Having a certified personal accountant working with you to prepare for your taxes throughout the year will help you in so many ways. Do you wait until the beginning of the year to get your documents in order to file your taxes? Did you realize that doing so could end up costing you money when you do file your taxes. This blog will show you some of the things that you could be missing if you aren't paying attention to your taxes until it is time to file. Maybe after reading, you will make changes to the way you go about preparing for tax time.


Four Issues That Can Overdraw a Small-Business Bank Account

There are few problems as terrifying for a small business owner as zeroing out their bank account. Many businesses operate solely on cash; without it, they aren't able to purchase their products or continue paying their staff. Because of this, business owners need to pay attention to the issues that are most likely to potentially overdraw their account.

1. Checks That Weren't Properly Recorded

When a business owner writes a check, they can easily forget to mark it down in their ledger. Handwritten checks have to be immediately recorded—otherwise it's very easy to forget about them entirely until they're deposited. Likewise, receipts should always be collected regarding debit-card transactions for recording purposes. Though an accounting service may be able to pull transactions from bank statements, they won't be able to pull them until the transaction has cleared.

2. Receivables That Weren't Collected

Though invoices may have been stored, they may not have actually been collected. When a business owner relies upon receivables that haven't been collected, they can easily find themselves operating at a deficit. Companies need to reduce their receivables as much as possible through the use of better collections. Receivables that simply cannot be collected upon can sometimes be sold, but if they are kept within the business, it is important to adjust the balances accordingly.

3. Confusing Cash Systems with Accrual Systems

Cash and accrual are two different methods of managing an accounting system. Cash generally represents the amount of money that is actually in the bank, whereas an accrual system will speculate based on potential checks and deposits. Either cash or accrual can be appropriate for a business, but it's important that the reports always be consistent. In general, cash-based accounting is simpler but accrual-based accounting is more accurate.

4. Automatic Debits That Aren't Automatically Tracked

Many companies have automatic payments that are entered in every month. Advanced accounting systems will be able to insert these transactions automatically. Other accounting systems may not. If automatic debits aren't automatically entered in, they can be very easy to forget. Utility bills, payroll, and loan accounts are all types of expenses that are usually automatically paid.

Small-business owners already have enough to keep track of without having to manage the minutiae of their finances. Small-business owners may want to invest in bookkeeping and small-business accounting services to avoid these problems. This allows the business owner to have a complete record of their finances without having to devote all their time to the process of recording.