You have a talent for creating the products or providing the services you sell. But what if the “running” part of “running a business” doesn’t come naturally? If you’re behind on your billing, drowning in receipts or unclear what money’s coming in, these tips can help you get organized — which can in turn help you keep more of the money you earn.
TLDR
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The right invoicing and accounting software can do a lot of the heavy lifting when it comes to invoicing, managing expenses and getting paid.
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A business bank account can keep your business and personal expenses separate, making it easy to manage your expenses and keep track of how your business is doing financially.
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To deduct business expenses on your tax return, you need to have an itemized receipt to back up your claim. Taking photos of your receipts and storing them digitally can help keep you organized — no more digging around at the last minute!
The saying, “For every minute spent organizing, an hour is earned,” may have been written by a small business owner who has been through tax season. The better organized you are throughout the year, the easier it is to not only file your taxes but also maximize your deductions and keep more of your hard-earned money.
Five ways to organize your business taxes and finances
1. Set up your invoicing and accounting software
The right software solution can do a lot of the heavy lifting for you and help you get paid on time. With some platforms, like Xero, you can set up an invoice template and send it directly to your clients — some platforms even email clients with reminders to pay you (so you don’t have to do the chasing).
A strong platform designed for small businesses can give you a clear view of your invoices, accounts, contacts and balances in one place, sync your bank account with your software, upload your receipts for easy storage and even keep track of your bills (and remind you to pay them).
Once your invoicing is set up, here are a few tricks to help getting paid faster:
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Set up direct deposit payments to your business bank account
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If your clients pay by cheque, use mobile cheque deposit, saving you a trip to the bank
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Offer a credit card payment option if that’s your customers’ preference — your accounting software may have this functionality built-in
2. Set up a business bank account
A separate bank account helps you to keep accurate records of your business-related transactions. The biggest advantage here is that this makes tax preparation simpler, as having separate accounts can help you identify deductible business expenses like office supplies, travel and business-related meals.
As your business ramps up, having a separate bank account can also help you track business-specific metrics such as revenue and profitability.
3. Get a receipt for everything
From gas fill-ups to parking to a client lunch, it’s important to get a receipt every time you have a business-related expense. Keep in mind, even if you don’t end up driving for work on the trip where you pay for gas, at the end of the year, you’ll add up all your gas receipts and divide the total by the percentage of kilometres you drove for business.
Remember, a credit card statement will not cut it as a receipt. You need to show what the expense was for — not just the total cost.
4. Store your receipts digitally
No one wants to be chasing missing receipts at tax time. So, when you get a receipt for a business expense, snap a photo of it and store it digitally — whether within an accounting app, a separate album on your phone or your computer.
As many receipts come electronically (i.e., for subscriptions, ride-share apps, and office supplies ordered online), storing everything digitally in one place can seriously simplify your expenses.
5. Save your household bills if you work from home
If you have a home-based business, your household expenses could make up one of the most significant segments of tax deductions — especially if you have a low-overhead business such as writing, graphic design or consulting.
For instance, if your annual rent is $30,000 and you use 20% of your home as your office, that’s $6,000 that you can claim as a tax deduction. If you own your home, and your tax bill is $5,000, you can claim $1,000 if you use the same space.
Accounting software can help you integrate your household bills with your other expenses.
Being organized as a business owner can reduce the time spent running admin tasks, freeing you up to focus on what you do best. And, of course, earning money for doing it.
Make the most of your opportunities, own tax season and keep more of your hard-earned cash with these tips:
> Don’t Panic: 5 Tax Filing Tips for Freelancers, Solopreneurs and Self-employed
> Top Tax Deductions for Freelancers, Side-husters, and Self-employed: Are You Missing Out?
> Earning Side-Business Income? 4 Steps to Get Your Taxes & Finances Done Right
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