Whether you’re an individual taxpayer, a head of household, or a business owner, keeping accurate tax records is essential. But if you’re like many people, perhaps you’ve let papers pile up, and even the thought of straightening things out fills you with anxiety.
Take a breath.
Getting back on track with your record keeping is not as daunting as it seems. Here are a few steps you can take to get started.
How to Tell if Your Tax Records Are a Mess
You probably already have some idea of the state of your financial records, but some telltale signs that you may have a mess on your hands are:
- You have anxiety about even looking at your records
- You have stacks of papers in your work area
- You can’t draw up a profit-loss statement readily
- Your invoicing system is not aligned with your accounting system
- Account reconciliation is all but impossible; your not able to match up different sets of records
If this sounds familiar, you probably need to do some organizing.
Why Accurate Tax Record Keeping Matters
As an individual or business, it’s essential to know where your money is going and to keep track of inflow and outflow. Sloppy or inaccurate record keeping can also have several unintended consequences.
- Poor record keeping costs you money. If you don’t have a way to collect on unpaid invoices, they may fall through the cracks and go unnoticed, robbing you or your business of valuable revenue.
- Poor record keeping is a waste of time. If you’re spending your day chasing receipts, contacting vendors, or searching through old emails for lost or misplaced records, you are costing yourself and your business time—time that could be spent growing your business.
- Poor record keeping puts you at risk. One risk of poor accounting is that you or your business unintentionally violate laws or regulations. Neglectful accounting has laced many taxpayers under scrutiny, when they weren’t even aware they were breaking a rule.
- Don’t let your bottom line suffer. Beefing up your accounting and record-keeping practices now can help you reduce waste, better track income and expenses, reduce stress, and stay out of trouble with the IRS.
Fixing the Mess
If your bookkeeping is a mess, the reason may be that your business was not properly set up from the start. Over time, the problems have only grown, and now they can no longer be postponed. If so, you may have to go back to the start and rebuild your accounting practices from step one. Though this sounds daunting, a thorough restructuring of your accounting methods is often the first step toward peace of mind.
Next, take a look at the accounting management software you use. Is it doing everything you need? If not, check out some market alternatives. There are many competing brands out there, so shop carefully and know the features that are important to you (user friendliness. Compatibility with your business’ accounting practices, etc.)
Another way to address the mess is to create a visual chart of accounts. This snapshot view will show you who your clients are, where your main revenue sources originate, and how best to monitor and regulate cash flow.
The Importance of Account Reconciliation
Ignoring your books won’t solve the problem. Reconciling accounts regularly helps you stay on top of what’s happening with your money, and reduces the chance that an error will escape notice. So, when you receive a payment, note it in your revenue accounts as a paid invoice; similarly, when you make a payment, note it as an expense. Building good habits now can prevent a debacle in the future. And by doing a little account maintenance daily, you’re less likely to be surprised by a big problem down the road.
Plan for Your Cash Flow and Capital Needs
One of the trickiest parts of your accounting system is planning for the future. Business growth is great, but without proper tax planning, it can be easy for a young company to overextend itself or to fall afoul of a number of potential pitfalls.
One way to assure yourself and your business of proper professional guidance is to partner with an accounting expert. At Moskowitz LLP, we’ve built our reputation helping clients like you get out from under their record-keeping messes. Our skilled accountants can help you:
- Get organized
- Reduce stress
- Save money
- Stop losing revenue through poor record-keeping
- Build better record-keeping habits for the future
- Deal with outstanding fines or penalties
- Position yourself for growth
We’ll help organize your records, deal with outstanding fines or penalties, and develop record-keeping habits that won’t cost you money or increase your stress. And when it comes to planning for the future, we can help you draw up a plan that will keep your business on the path to prosperity. Our experts can even assist you in determining the ideal business structure, negotiating with banks and obtaining a business loan.
Contact Moskowitz LLP today! We’re waiting to hear from you.