[1 of 3] Top 15 Essential Bookkeeping Tips for Tax Time

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For many business owners and bookkeepers, tax season is a nightmare. Even if you’ve done “most” of your bookkeeping for last year, there might still be some tasks you put off.

In these next three posts, I’m going to give you 15 tips that you can implement today that will make next tax time less of a headache.

Here are the first five:

  • Commit to keeping your bookkeeping up-to-date as frequently as needed.
    Most businesses need their bookkeeping done at least weekly. I’ve found that those who try to stretch it out to once a month are generally missing out on important insights. Doing your bookkeeping more frequently also helps ensure that things are being done correctly as you go.
  • Reconcile your bank and credit card accounts every month.
    One of the first things I check when I’m talking to a potential new client is whether or not their bank accounts and credit cards have been reconciled every month. If they haven’t, it’s a huge red flag and an indication that it will take way more time and effort to onboard them. It’s such a fundamental bookkeeping task that usually if it isn’t done, it indicates that nothing else is done correctly either. I usually end up declining to work with them.Without reconciling a bank account, you have no idea what the true available balance of it is. Your QuickBooks should be the main source of truth because it shows checks that have been written but not yet cashed. If you look at your online banking and the balance says $10,000 but you don’t remember that you’ve already written $11,000 in checks that haven’t yet been cashed, you’re in big trouble.On the flip side, maybe you think you paid an important bill because you recorded it in your QuickBooks, but you don’t see it on your bank statement.Without reconciling your bank account, you wouldn’t realize that this is the case. Reconciling your bank accounts should be one of the first things you do each month.
  • Set goals for your business and build a budget.It’s hard to get where you’re going if you don’t know where that is. If you don’t do this sometime in Q4, tax time is a great time to set some goals for your business for the next twelve months or even just the rest of the year. These goals could be a certain amount of revenue or a certain number of customers or clients served or anything else that makes sense for your business. The important thing is to have some goal or goals.Once you have a goal, figure out what you need to do to get there. This is where building a budget comes into play. And once you’ve put together your budget, add it to QuickBooks. You can find how to do this in Module 9 of my QuickBooks training course.
  • Commit to reviewing “Budget vs. Actuals” every month.Outside of the P&L and Balance Sheet, the report that I look at the most in QuickBooks is the Budget vs. Actuals report. This lets you keep an eye on your performance and make sure you’re on track to hit your goals.It also will help you identify if you are over-spending or under-spending in certain expense categories or if transactions are recorded to the wrong category.If your revenue is consistently falling short of (or exceeding) your budget, reviewing it each month gives you the option to make slight adjustments to better inform your decision making in current and future months. The same can be said for expenses.
  • Revamp your filing system and/or go paperless.
    Step back and take a gut check: how confident are you in your filing system?Be honest.If you needed to find a specific invoice from a certain vendor from March 2017, how long would it take you?I can tell you that for me and my clients, it would take seconds. That isn’t an exaggeration.If that last line made you pause and re-read it a couple of times, this tip is for you.Going paperless for your filing is one of the best decisions you can make. It will free up office space and make your documents easier to find. Come up with a uniform folder structure and file-naming structure.For example, my clients have a folder called “Accounting” and within that is another folder called “Invoices.” Depending on the volume of vendor invoices or the number of different vendors, there might be additional folders in the “Invoices” folder for each vendor. Or all the invoices might just go in that main Invoices folder, but they are named so they can be found quickly. The naming convention I prefer is “VendorName YYYYMMDD InvoiceNumber.” Example: “AcmePrint 20190331 1561.pdf”Using this convention, your vendors will be in that folder in alphabetical order, and then for each vendor, their invoices will be listed chronologically. YYYYMMDD is the best way to write a date in a file name for this reason. Trust me: once you start using that, you’ll never go back.You can come up with similar organizing and file-naming standards for bank statements, customer documents, tax information, etc.

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