The end of the year is quickly approaching and that means you are well into the 2018 tax year and should have completed your bookkeeping at least through the mid-year point. Or are you one of the many agents that scrambles each Spring or files for an extension because you didn’t take the time to work on your bookkeeping each month like you say you are going to do each year?
To maximize your deductions and minimize your stress, you MUST be proactive about your bookkeeping. If you are not keeping up with your bookkeeping on a regular basis, you need to make that a priority. Here are five reasons not to put off your bookkeeping until the end of the year.
- The sooner you go through your expenses each month, the more likely you are to remember everything and accurately account for each expense. A year from now, you are unlikely to remember that you took a client to lunch on the 23rd of March or sent a client flowers for the first anniversary of their home purchase but you are more likely to remember that when just a few weeks or days have passed. Make it a habit to sit down monthly as soon as your account statements are available and go through each item. Categorize every item to the appropriate expense category or mark it as personal so you don’t overlook anything. This will also allow you to catch any errors that might show up on your account.
- Reviewing every expense each month will allow you to identify any areas that may be going over your budget so that you can address the issue before the end of the year. If you have a budget of $500 a year for Facebook advertising and you have surpassed that amount at the end of May, you will need to determine is that because you have made more money than you anticipated and therefore can spend more on that item or have you overspent and need to adjust other budget items to compensate for the Facebook advertising.
- If you wait to review all of your expenses and income at the end of the year, you may not realize if your expenses and income are drastically different than what you anticipated. The reason this can be a problem is if you are not making as much money as you expected and are paying quarterly estimated taxes, you could be overpaying. Likewise, if you are making more money than you expected and haven’t adjusted your quarterly estimated tax payments, you could owe significant money come April 15th.
- Trying to work through your bookkeeping for an entire year at one time is a daunting task making you more likely to need to file an extension. Categorize your expenses each month so you are ahead of the game and be one of the first people to turn your expenses over to your accountant this year.
- Rushing through your taxes to meet a deadline makes your more likely to make a mistake. Mistakes on your taxes can cost you thousands of dollars in penalties and interest. Don’t put yourself in this position by reviewing your expenses monthly to eliminate the tax time crunch.
If this is completely overwhelming to you, make this the year you get yourself on track. If after years of playing this game, you know you aren’t ever going to make the time to be proactive with your bookkeeping then take the next step and let Kim Hughes and Company help you with this. This doesn’t have to be a huge investment or new line item in your budget. Most bookkeeping accounts can be managed on a monthly basis for a little more than your monthly coffee budget or a couple dinners out. Are you willing to make that investment in your business?
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