Quick, answer this question – have you fallen behind on your accounting tasks? If you are a business owner who has added the title “accountant” to their many roles (as 64% of business owners have), there’s a good chance the answer is “yes.” This is not a criticism, but a sad fact of life for many business leaders who need to prioritize urgent business needs over ensuring their accounting information is up to date. What can first be a short-term delay can easily stretch into months, and the longer getting your bookkeeping organized is on the back burner, the more intimidating it becomes, which only prompts us to push it down deeper on our “to do” list.
The consequences of inaccurate records can go beyond simple inconvenience. Among the biggest risks to businesses are a lack of working capital and ineffective business planning. Without up to date knowledge of your financials, you don’t have the information you need to understand your business health and make sound decisions. And, while the IRS only audits about 2.5% of small businesses, that’s roughly six times the average for individual taxpayers, and no one wants to be caught unprepared.
First of all, know that you are not alone, and there are strategies you can use to get caught up. The key is to get started today, not tomorrow.
Here’s how to get started on that backlog:
1. Get your receipts together. Make sure you have all applicable records of expenditures and income including vendor bills, customer invoices, purchase orders, and any related activity. If you’re still relying on paper receipts, consider investing in scanning software to digitize your paper trail.
2. Make sure you have all tax-related forms. Examples are W-2s, W-9s and 1099s for any independent contractors you have engaged.
3. Reconcile your bank accounts with your records. Ensure any income and expenditures are accurately reflected in a dedicated business account.
Depending on how far you are behind, each of these tasks may take some time. Rather than waiting for a free day (which will never come), schedule daily time to work on your accounting tasks. Then, once you are caught up, continue to schedule dedicated hours to stay on top of your accounting.
Finally, understand you have alternatives to a DIY approach to accounting. As a business owner, your time is extremely valuable and scarce. Even so, one of the hardest things to do is to acknowledge you can’t do it all. We’ve helped many businesses organize their accounting, including bringing their records up to date. And when you work with us, we’ll gather information throughout the year to put together a complete tax package with all your up to date information for your CPA at tax time. That alone has proved invaluable for our clients! Let’s schedule some time to explore how we can help you.