Alisa A. Mitchell CPA PAHopefully you’re having a wonderful December with all of the holidays and parties this month. And if you’ve spent too much on gifts and decorations, never fear. Here are six ways to save on your accounting and taxes. But hurry, you only have until year-end to cash in a few of these tips.
1. Check your profits
After adjustments, are your books going to show a profit this year? If so, you may want to try to increase business spending before year-end so you won’t have to pay as much in taxes. Consider accelerating larger expenditures to reduce your profits and therefore, your 2016 taxes.
If your business is cash-basis and you pay with a credit card, pay the card off before year-end so that it will fall into this year’s deductions.
There are many tips on business deductions, so check with us to get the full benefit.
2. Eliminate payroll headaches
If your payroll system is causing you pain and suffering, consider switching. Year-end is the best time because switching costs are lower and year-to-date amounts don’t have to be entered. You’ll still want your old system to generate January’s W-2s, but if you start writing 2017 paychecks out of a new system, it will give you a clean break.
And if you’re not sure what system to move to, we have answers.
3. Make January smoother
January is typically a bookkeeper’s busiest month of the year. Many tasks can be done early, such as checking to make sure your W-9s are current and ordering W-2 forms if they are needed. To avoid last-minute headaches, check with us to see what can be done early. It may help keep your accounting costs lower.
You may also want to consider automating more of your accounting system. Adding an app to your existing system may save you time and money in 2017.
4. Give to your favorite charity
Giving to your favorite charity may reduce your personal taxes if you plan to itemize your deductions on Schedule A of Form 1040.
There are many personal deductions that can help reduce your taxes, so check with us for options to minimize your tax payment.
5. Get ready for tax time
Start collecting the documents you need for tax time so they’ll be handy when you need them. You may be able to upload them to your accountant’s portal, or simply set them aside in a special drawer or folder.
Go through your receipts to be sure you communicate all your possible deductions. If you’ve had a major event, such as a move, new child, new marriage, or new job, be sure to mention it to us.
When all of the parties are over and the relatives have left, try these tips to save time and money on your taxes and your accounting in 2017.
Small business owners have a lot on their plates, and time simply does not allow you to become an expert in all the areas required for running a business. Here are a couple of common mistakes that we see all the time. Correcting them will help you be more productive and profitable in your business.
1. Mismanaging receipts
Maintaining receipts are challenging for everyone, but the IRS requires that you have proof of business expenditures. Periodically, we come across people who feel that keeping the credit card statements are enough; unfortunately, they’re not. You’ll want to create a process to keep your receipts all in one place so they don’t get lost.
Receipts printed on thermal paper (think gas station receipts and many more) will fade within a year or two, and the bad news is the IRS could audit several years back if they come calling. Correct this by scanning them in or taking a clear picture of them using your smartphone.
Some accounting systems and/or document management applications allow you to upload the receipt and attach it to the transaction in your accounting system. This is a great solution, and if you’re interested in this, please ask us about it.
2. Ignoring the accounting reports
There are gold nuggets in your accounting reports, but some business owners don’t take the time to review them or are uncertain about how to interpret them. Your accountant can help you understand the reports and find the gold nuggets that can help you take action toward profitability.
Some of the things you can do with your reports include:
- Identifying your highest selling services or products
- Projecting cash flow so you’re not caught short at payroll time
- Getting clear on your top customers or your demographic of top customers
- Evaluating your marketing or business development spend
- Pointing out trends compared to prior years, budget, or seasonality effects
- Checking up on profit margins per product or service to make sure you are priced correctly
- Managing aging receivables or speeding up collections
- Measuring employee profitability, if relevant
- And so much more
Being proactive with your accounting will help you spot opportunities in your business that you can act on, as well as spot and correct problems long before they manifest into trouble.
3. Mixing business and pleasure
In your bank accounts and on your credit cards, mixing business and pleasure is to be avoided when possible. All businesses should have a separate bank account, and all business transactions should go through there. It takes an accountant much longer to correctly book a business deposit that was deposited into a personal account.
Taking out a separate credit card and putting all your business transactions on it will save your bookkeeper a ton of time. The credit card doesn’t even have to be a business credit card. It can just be a personal credit card that’s solely used for business. If you have employees making credit card charges, sometimes a separate card for them helps you control fraud.
The hardest area in which to separate business from pleasure is cash transactions. Be sure your accountant knows about these. The accountant can either set up a petty cash account or a reimbursement process so that you can get credit for cash expenditures that are for the business.
How did you rate on these three mistakes? Avoid these three and your accounting department as well as your business will run a lot smoother.