By Satish Patel
Hopefully by now, your 2011 taxes are a fading memory (or soon will be!). For many small to mid-sized businesses, the annual, looming tax deadline is a daunting one. As a business owner, the added tasks of compiling tax paperwork amidst a multitude of other daily responsibilities equates to added stress.
Many of our clients are CPA firms, and they have shared with us suggestions on how small businesses can work together with their CPA firm to complete taxes less expensively, earlier and more effectively. With a bit of discipline and a commitment to implementing some organizational strategies, next year’s 2012 tax season can be far less stressful. Be proactive by incorporating these CPA recommended strategies into your everyday financial practices:
1. Leverage your existing accounting system.
Whether you have an advanced system or a basic accounting system, maximize its capabilities and use them to their fullest potential. Make a commitment to enter expense data on a regular basis. This can be a challenge for business owners who have other, more pressing issues to address, but making data entry a priority is essential to staying organized and helping you keep your finger on the pulse on your company’s finances. Even the most robust systems with numerous reporting capabilities require current data to provide you with accurate financial reports. Keep miscellaneous receipts organized and be diligent about expense tracking all year long- not just before tax season. If you find you cannot remain on top of the data entry, evaluate hiring a bookkeeping service to assist with these tasks. Hiring a bookkeeping service or performing the updates yourself is far less expensive than paying your CPA to complete this. And your CPA will be happy if you leave them to focus on their area of expertise- accounting!
2. Maintain detailed records of your invoices, bank statements and financial reports.
Filing key financial documents in an orderly manner will help you locate the necessary paperwork when tax season arrives. Keep detailed records for financial documents including invoices, bank statements, loan paperwork, and financial reports such as income statements and balance sheets. Work to ensure your accounts payable and accounts receivable records stay current so that you have a clear understanding of cash flow. Keeping these records accurate and current allows your CPA to perform his or her duties more efficiently- and less expensively.
3. Analyze financial records for accuracy.
Financial statements should be reviewed regularly for accuracy, and bank statements should be reconciled systematically to ensure data integrity between your accounting system and your bank. This will eliminate any last minute discrepancies that need to be accounted for prior to tax filings. Regular analysis of financial statements will also allow you to stay on top of issues that may arise and provide you with an accurate sense of profitability so that you aren’t shocked with a tax bill in April.
4. Know your filing deadlines
Many small business owners are aware of the April 15th deadline, but there are several other key tax deadlines as well. Payroll taxes, W-2s and 1099 contractor forms all require filing and distribution prior to April 15th. Business owners need to adhere to these filing deadlines, as well, to avoid penalties. If you do not have the time or expertise to manage these additional filing deadlines, consider hiring a tax advisor or payroll service to assist you.
5. Keep an ongoing list of questions for your accountant
You know your business best and how it operates. Throughout the year, maintain an active list of questions for your CPA so that you can gain clarification on questions that may arise about your financial operations and their resulting tax implications. An even better option is to meet quarterly with your accountant to review those questions so that you can implement practices during the current calendar year which can positively impact your company’s filings.
As a small or mid-sized business owner, implementing these strategies will allow you to partner with your CPA more effectively and make your 2012 tax filing season far less stressful. We are currently offering a free analysis of your business processes and accounting system, which can help you prepare for tax season. If you would like to learn more on how Analytix Solutions can help move your business forward, please call me directly at 781.503.9002 or email me at [email protected].
Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.