Running a small business can be stressful, especially when it comes to areas that are not your main focus or area of expertise, such as finances, taxes, and accounting. Bookkeeping and accounting has the potential to eat up a lot of a small business owner’s time and energy, often without many positive results.
Much of this stress involves hiring a professional accountant to ensure you are in full compliance with the often complex and even conflicting government regulations. Hiring an accountant will save you money, but also time, nerves, and positive relations with your employees and customers.
What your accountant needs from you:
Even though you may outsource your accounting, you still need to treat this side of your business with all the care and focus you use on the other daily aspects of your company. Keep your receipts organized, your sales and cash flow records up-do-date, and back up all your important information.
Nothing is worse than scrambling for the paperwork that your accountant needs; and shoddy record-keeping can cost you. If your accountant cannot submit the proper paperwork at tax time, you could be audited and fined.
The skills, education, patience, and common sense of an accountant are never tested as much as during tax time. Personal taxes, in all their complexity, look simple next to the behemoth that is built up of federal, state and other regulations, provisions, requirements, and rules when it comes to business taxes—small business taxes included.
Five documents your accountant needs to do your business taxes:
1. A profit and loss statement: Your accountant will use this document to calculate Schedule C.
2. A statement showing the calculation of costs of goods sold: Also known as Cost of Goods or COGS, this value includes the products, labor and production facilities used to produce and sell your products.
3. A statement of assets: Your accountant needs to know all about your business assets—vehicles, owned or leased property, equipment, trademarks, patents, etc. Your assets have a strong impact on your taxes, so be sure to keep very accurate records of what you own as well as the depreciation/appreciation on the tangible items.
4. A balance sheet: Think of a corporate balance sheet like a household budget (only much more detailed!) The balance sheet shows income, assets, equity, expenditures and liability. Maintaining your balance sheet over the course of the year will greatly help you and your accountant with efficiency and accuracy at tax time.
5. A record of your donations: Many donations are tax deductible, which works in your favor at tax time.
Keeping your accountant happy
An accountant is an extremely important investment—but the records you maintain during the year will determine how he or she can best work for you. The accountant of your choice will have vast amounts of knowledge and advice to share with you, enabling you to keep your accounting practices more in tune with the times as well as the necessary regulations. To make this happen, however, you first need to ensure that the five major documents listed above, as well as any others required in your particular case, are in impeccable condition.
This article was written by Phyllis Stent, who believes that business tax accountants can save you a lot of money.