Be Smart All Year Long: Tax Tips for Entrepreneurs
🕐 Read Time 5 Minutes
It's that time of year again — tax season is fast approaching! As a successful small business owner, we know you’re busy enough without stressing about gathering receipts, tallying up expenses, and rushing to file your taxes on time.
But fear not! With a few organizational tips and tricks in place throughout the year, you can reduce your tax prep stress and breeze through tax time next year. Read on for our best tips to save time and headaches when filing your small business taxes.
Get Organized Early and Often
We all know someone with the infamous “shoebox method” of organizing receipts and expenses. They throw every receipt, invoice, and scrap of paper into one box all year, then try sorting through that mess come tax time. Does this sound familiar at all?
As an entrepreneur, getting organized is critical for success in all areas of business — taxes included! Here are our top tips for organizing your receipts:
Implement a System: Use file folders, a binder, or envelopes to organize receipts. Better yet — go digital (more on that later).
Categorize Your Receipts: Organize your receipts based on your expense categories (e.g., supplies, travel, meals, entertainment, etc.). Notate the purpose of the receipt.
Use Dedicated Business Accounts: You must keep personal and business expenses separate. This simplifies tracking and organizing receipts (your accountant will thank you).
Regularly Update Your Records: Allocate time weekly or monthly to update your receipt log and financial records. This prevents the daunting task of sorting through a year’s worth of receipts at once.
Educate Your Team: If you have employees, ensure they understand your system for organizing receipts for expenses incurred on behalf of the business.
Come tax time next year, you'll thank yourself for staying consistently organized versus leaving it all until April 14th to sort through!
Embrace Technology
Who has time to track every business purchase and expense throughout the year manually? Luckily, technology has made it simple to automate expense tracking in a few different ways. Expense tracking apps like Expensify or Hubdoc quickly scan and upload receipts to keep everything digital and organized.
Automating as many expenses and organizational systems as possible takes effort upfront but is a total game changer when it’s time to tackle taxes. Leverage these tools to streamline your processes, reduce errors, and save time.
The less time you spend wrestling with spreadsheets, the more time you have for what truly matters — growing your business and enjoying the fruits of your labor. Do your future tax-filing self a favor and set up automated tracking early on!
Monthly Tax Savings: Your New Best Friend
One of the most straightforward yet effective tax tips for business owners and entrepreneurs is to save for taxes each month. Yes, it's about as exciting as watching paint dry, but hear us out. By setting aside a portion of your income each month, you're building a financial cushion that will soften the blow come tax time. Think of it as your tax-time piggy bank.
Getting into this habit will save significant stress when tax time comes — trust us! When April rolls around, you'll be skipping to the tax office (or, more likely, your accountant's office) with peace of mind and maybe even a little swagger.
Invest in Professional Help
While DIY is great for home projects, when it comes to taxes, sometimes it’s best to call in the experts. A good accountant can be worth their weight in gold, offering personalized tax tips for entrepreneurs and business owners.
Now we know what you’re thinking — accountants are expensive, and I can do my own taxes. Sure, you may have filed your own personal 1040 tax form without issues year after year. But once you start running a business, tax codes get infinitely more complex. Accountants can provide insights tailored to your specific situation, helping you navigate the complexities of tax laws and uncover deductions you might have missed.
Consider it an investment in your peace of mind and financial health.
Designate Weekly “CFO Days”
As a business owner, it’s all too easy to let the crucial tasks of managing finances and accounting tasks fall through the cracks amidst the hustle of sales, marketing, customer service, and the day-to-day running of your business! However, just as you allocate time for strategic planning and reviewing metrics, setting aside dedicated time for organizing your finances is equally important.
I’ve found it incredibly beneficial to establish what I call my “CFO Day.'' Here’s how it works: Choose one day a week and block off 30-60 minutes on the calendar exclusively for financial management activities. This time is devoted to reviewing your current financial status, updating your numbers, and crafting a financial strategy that aligns with your business's plans for the coming week.
But don't just think of your CFO Day as another task on your to-do list. Treat it with the same level of importance as a meeting with your most valuable client. It's a commitment to the financial health and success of your business. Adding this practice to your weekly schedule ensures that you're not just working in your business but also on your business from a financial perspective!
Let Financial Fitness Coaching Help You Stay Ahead of the Game
Tax season will inevitably roll around each year — there’s no avoiding it! Procrastination and taxes go together like oil and water (they don’t). Waiting until the last minute to organize your finances can lead to unnecessary stress and mistakes. Nobody wants that.
Instead of dreading the stress it causes, start implementing these tips all year long to cruise through tax filing. This proactive approach makes tax season more manageable and gives you a clearer picture of your financial health throughout the year.
Begin simplifying your tax process today by grabbing your complimentary copy of our “CFO Checklist.”
Follow our advice, and next April 15th will be just another relaxed spring day in the busy life of a thriving entrepreneur.