How to Eliminate Chaos in Your Business
This part deals with useful techniques for the financial aspect of your business. It is essential you take great care of the financial situation.
Taking this concept for granted may have you wake up one day with serious problems so bad there may be no way out.
It is our legal obligation to pay taxes. Failing to do so is a criminal offense that usually carries steep penalties. Always report all your income and file your tax returns. On the other hand, take advantage of every legal deduction you can.
Keeping good records will allow you to easily prove your claims if you have a tax audit. The more effort you put into this practice, the less you have to worry about it.
Imagine looking at a receipt after one year of purchasing something. What did you buy? What did you use it for? Is it a legitimate business expense? Write a note on the back of each of your receipts, while it’s still fresh in your mind. Consider the following examples:
Parking Public Library
Purpose: Research for business expansion.
Business Dinner Client: Mr. Kerkson
Purpose: Discussed computer systems maintance contract.
With this kind of documentation on the back of your receipts, you can quickly justify any questions asked by you or anyone else.
Handling a Tax Audit:
If your business is subjected to a tax audit, I strongly recommend your accountant handle it. It is an accountant’s expertise to work with taxes. Your accountant will know the best way to handle an audit. He knows the rules and how to play the game. He knows what information to show and what not to show. Did you know it’s an advantage to delay a process at times? Your accountant knows this! Accountants have good judgment about which parts of the audit they should not accept and which to let go.
They can make a tax audit virtually painless. Another advantage to having an accountant represent you is that a tax auditor can’t put you on the spot. If you were handling the tax audit yourself, how could you avoid answering a certain question?
Your accountant can always say he has to ask his client, but he will get the information. In order to allow your accountant to handle your tax audit, you will probably have to issue a power of attorney for him to represent you. Reveal all your business information, and go over all the paperwork with your accountant.
This will ensure a strong case. He must know all of your accounting information. If the audit reveals critical information, your accountant will be able to answer all the questions in a professional manner, which will result in credibility for you and him.
Do You Do the Books Yourself or Hire a Professional?
Do you take the time to do the books yourself, or do you hire an accountant? Are you willing to take the time to learn the ins and outs of the accounting system? Even if you did learn, would you have time to keep up with the changing tax laws?
I recommend an accountant as the best way to go here, too. If you feel you can’t afford an accountant, then you might want to consider one of the two following options:
Hire a bookkeeper to enter all of your business transactions.
You could enter all of the transactions yourself.
With either of the above options, you can then use the services of an accountant, who will go over your paperwork, make sure you took all the proper deductions, and prepare your tax file.
The advantage of option two is the fact that you will understand the numbers that run your business. Whatever method you choose for bookkeeping, you should always understand what is going on with your business finances.
Leaving everything to a professional is running your business blindly. You have to know exactly how you are doing at all times. This will allow you to make changes as necessary.
Your Tax Fund:
Depending on the way you pay your taxes, you may want to set up a tax fund for your business. You can consult an accountant, who can figure out how much money you should set aside for your tax fund.
With such a fund, you can earn interest on the money in the fund; plus, when it’s time to pay your taxes, you will not run into a cash flow problem.