[by Kimberly Blom-Roemer]
One of the biggest dreads in my business is accounting. I hate it. I can’t even describe how much I hate it. First on my list of items to outsource IS my accounting.
But until then. I have to do it myself.
Most Important Accounting Task. Have a separate business bank account. This is of critical importance, even when just starting out. First, the IRS strongly frowns on co-mingling your personal and business finances (which degrades your credibility as a “serious business” in an audit). But second, it makes your accounting SO MUCH easier!
Software. I use QuickBooks. This allows for direct download of all my transactions from my bank directly into the software. Score! No more data entry. It is reasonably easy to use. It also has the ability to grow with the business, unlike Quicken, IMHO.
The latest version of Quickbooks for Mac even has a feature that lets you attach scanned receipts to specific transactions within the software. NO MORE PAPER RECEIPTS. And yes, the IRS accepts scanned receipts!
Software Set Up. My Chart of Accounts within Quickbooks (categories such as Office Supplies, Advertising, etc.) closely match the categories on the Schedule C in the tax form. This is key to keeping everything clean and simple, and the way the IRS wants to see it. It also makes doing your taxes easier.
Biggest Advice. Have a receipt for everything, period, even the tiniest expense. If you don’t have a receipt DON’T log it as a business expense. OK, that may mean you’re “eating it” but, that is better than paying interest and penalties to the IRS if you’re audited.
Why do I say this… I was audited, for two years, at the same time. I took at $17K tax bill to $368 because I had receipts for absolutely everything, except one item. And, because I have evidence I had indeed taken the trip with the missing receipt, and I was so meticulous otherwise, I was given the benefit of the doubt. The only reason I had a bill at all is because I switch two numbers on a 1099 – whoops.
How to Minimize the Pain. Do a little bit at a time. Monday mornings, among my other tasks, is accounting for the previous week. That sure is a whole lot better than trying to do a year’s worth in January… which inevitably slides to March… and panic and working weekends.
Kimberly Blom-Roemer is a Gulf Coast based Architectural and Aerial Photographer who wants to make sure you know that the above information is for reference only, and should not be construed as professional accounting advice. See, I can sound like I am a lawyer too!
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