Are you tired of always waiting to the last minute to get your paperwork together when it is tax filing time? You have been so busy growing your business that you have not had the time to log your financial business activity. You know that you should be doing it and every day you say to yourself, “Today, I’m going to do this!”, but the day never comes. Now it’s tax filing time and you are considering having to file an extension. You are not alone as this is the story of many busy entrepreneurs. But remember, half the battle is just bringing organization to the process.
Wouldn’t you like to keep more of the money you make? When it comes to organizing your business finances, it’s more than just filing your receipts in one location. It is so much more than easily accessing your documents when its tax filing time. Bringing organization to your business finances will put you in a position of to be able to minimize your tax liability. Listed below are 4 steps that will help you get a better handle on your business finances.
Step 1: Have a Separate Business Account
Many Solopreneurs co-mingle their personal funds with their business funds. Doing this can make it difficult for reconciliation at the end of the year. The first step to bringing organization to your business finances is starting a separate checking account for your business. For the account to be set up in the business name, you will need your articles of Incorporation if you’re a corporation or your articles of organization if you are an LLC. The bank is also going to want you to have a Tax ID number. You will need to bring this documentation with you to set up the business account. I also suggest getting a credit card in the company name as well so that you are not using your personal credit cards to cover business expenses and your statement will only show business transactions.
Step 2: Paying yourself
All revenue generated should be deposited into the business account. Never use business generated revenue to pay for personal expenses. The best way to pay yourself is to write yourself a check from the business account or set up a direct deposit from your business account into your personal account if you are paying yourself a salary on a consistent basis. Your salary will be used to pay for your personal expenses.
Step 3: Organize Your Financial Paperwork
Invest in a file cabinet and create file folders for your financial paperwork. Organize the folders based by category. You should have a category for each revenue generating segment of your business. For example, if your business is janitorial services and you do both commercial and residential have a folder for each. Create file folders for housing your expense receipts.
I recommend the following categories for your expenses:
Office Expenses Utilities
Rent/Lease Legal and Professional Services
Car/Truck Expenses Taxes and Licensing
Labor Cost Travel
Step 4: Hire a Financial Services Professional
Hiring a financial professional that provides bookkeeping, accounting and tax preparation services is a great way to keep your business finances in order. Having a professional help aides you with tax planning to help minimize your tax liability. A professional also assists you with setting your revenue goals and applying the best strategy for Capital Expenditures. Your financial service professional should provide regular financial reports, so you always know the health of your business, and where you can find financial efficiencies.
Founded in 2015, DNA Financial Services LLC has pledged to Educate, Empower and Equip the financial DNA of its’ clients now and for generations to come. The company offers several financial services including tax preparation, bookkeeping, personal and business financial coaching. These services have been designed to bridge the gap in wealth building and functional money management, while promoting financial literacy for people from every walk of life.