Depending on how your small business's bookkeeping system is set up, you may be extremely stressed as April 15th approaches if your books are a mess or you may not even blink an eye since your bookkeeper handled the books properly throughout the year. As the old saying goes, nothing can be certain but death and taxes. Since taxes have to be paid each year, why avoid it until the last minute? Why push it off and have a negative impact on your business? If the proper procedures and systems are put in to place then there really is no need to worry or stress as the deadline approaches. One of our many mantras at Salt Lake City Bookkeeping is that year-end bookkeeping shouldn't exist.
Be Prepared Before Year End
Nothing is better than a business owner knowing their tax position prior to year end. This is accomplished by having the bookkeeper send the books to the CPA towards the end of November for a review. Any dialed bookkeeper can accomplish this by a few clicks of a mouse given the assumption that the books are being updated on a daily, weekly, or monthly basis. After that review, there is still time to do some tax planning before the year is over if needed. Once the year closes, some of those tax planning options disappear since a majority of businesses operate on a cash basis and back dating transactions is a red flag with Uncle Sam.
Having that peace of mind with knowing what to expect helps reduce so much stress, and this is hard to put a price tag on unless you have lived it. Don't have a CPA that wants to review your books for you? Fire them and hire one that does. There are CPA firms everywhere that would love to work with proactive business owners.
Hearing business owners talk about filing an extension for their taxes almost makes me wince in pain. It's not like filing an extension is going to save the owner any money. Sure there are some circumstances that force the extension to be filed, but those are few and far in between for the normal small business. Extensions buy time, but at a cost. Why pay interest on your taxes? Most business owners work very hard to earn their money. They are usually the first ones to work and the last ones to get paid, so why pay interest on that hard earned money? It doesn't make sense to me. No one likes paying taxes, so why pay more if it can be avoided. Any business owner that files an extension needs to evaluate their bookkeeper or their own habits to find out why this is happening and stop it from happening ever again.
When the pre-year end review is done not only is peace of mind gained, but now the focus can shift from tax prep to planning ahead. Sometimes waiting on figuring out your taxes other parts of the business suffer such as budgeting and financial forecasting. The first few months of the year should be dedicated to building budgets for the upcoming year and also reviewing previous budgets to see what can be learned from major differences. This is, of course, very challenging if you have a tax deadline hanging over your head and outcome occupied with that.
Be prepared, look ahead, and don't kid yourself that an extension is going to save you any money for filing your taxes. As a small business owner your bookkeeping system should be in tune with your mindset and overall approach to the business. After handling over 100+ clients' books, we sometimes get treated as a small business consultant because of the tips mentioned above while just being the bookkeeper. Need a more experienced bookkeeper? Feel free to reach out, we love teaming up with other small businesses and watching them grow both in the short term and long term.