Happy Monday, business owners! It is the last Monday of February and if you haven’t started thinking about taxes, you probably will in the next few weeks as April 16th approaches.
This blog post is especially for you new business owners who have yet to file a tax return for your business yet. One of the questions I get asked by non-business minded people is ‘Why does bookkeeping matter and how do I do bookkeeping?’ This question confused me for a while because OF COURSE bookkeeping is important. I should have known that not everyone obsesses over it like I do.
Bookkeeping is simply keeping of financial records for your business.
When you’re tracking your expenses here are three things that you want to be doing.
- Use a software program. Whether it’s QuickBooks Online, Excel or Freshbooks, as long as you understand it and can keep up with it then you are doing well!
- Reconcile your books every month against the bank statement. This gets kinda tricky in Excel because there isn’t a ‘reconcile’ button or feature, but you can do this easily in QuickBooks or Freshbooks.
- Code every transaction. If you buy an ad, that goes under advertising expense. Business rent goes under rent, etc. You want to be sure that all transactions are coded correctly because of the picture below!!
The picture above here is of the 1040 Schedule C. If you are a sole proprietor or an LLC, then this is the form that will be filled out for your taxes. Being able to hand your tax professional the total amounts for all of the categories above will save you time and money during tax season to not have them charge you to categorize and fix any mistakes.
This is why bookkeeping is important. Not only to find out where you’re spending too much, but to have your taxes filled out easily and correctly.
In tomorrow blog post, I will be sharing some deductions that you may not realize are deductions!
How is your tax preparation going so far? Let me know in the comments and send me an email at Lydia@dacbalance.com if you have any questions! I’d love to help.
Also, does this still seem overwhelming? Are you still afraid you’re going to do something wrong? Let a professional help you. You can probably find a good bookkeeper in your area. I am taking a few more clients before April 15th for 2017 records. You can apply on the DAC Clients tab.
Looking forward to hearing from you!