Home Business Magazine Online
By Jim Conroy, CEO of The Neat Company
In some ways, bookkeeping is like fish: The longer it sits unattended on your desk, the worse it smells. That said, if you did business last year and somehow neglected to account for it, it’s never too late to get your 2023 bookkeeping in order and still hit your tax deadlines. But you are running out of time.
You’ve got less than two months to file your taxes and, as luck would have it, you were so busy and distracted by business and your personal life that you forgot to do any 2023 bookkeeping at all. But fear not! The task may be daunting, but you can get this done.
2023 Bookkeeping Is Important
There are lots of reasons you may have procrastinated. First-year business owners often find themselves overwhelmed. But even veteran solopreneurs and side hustlers may have crazy busy years or face personal challenges. If that was your 2023, make a late New Year’s resolution to not do that again. Accurate records are the essence of business success. They make informed decision-making possible, whether making new hires to buying new equipment to offering a new service.
Timing Is Important
Having a snapshot of the business is useful year-round. When it’s done as of the end of the year you can gauge how well your entire year went. You can move into the new year with new enthusiasm or renewed determination with a realistic understanding of your performance. You’ll be ready for your tax obligations and have the backup you need. It’s easier to understand the math for a Schedule C or a Schedule SE when all of the receipts, statements, and invoices are ready to go on January 1.
Dates
Paying estimated tax is a key part of being in business. That’s because taxes are expected to be paid as you earn your money. As a home business, the IRS expects you to pay at least quarterly if you’ll owe at least $1,000 in taxes. If you didn’t pay your estimated quarterly taxes in 2023 — including the fourth payment that was due on January 16, 2024 — you can expect to pay penalties. Estimated taxes are generally due on the 15th of April, June, and September, with the final payment for the year in January. But notice that your first quarterly tax payment for a new year is due the same day as your filing deadline for the previous year. With two possible tax payments due in mid-April, it pays to be able to plan.
It’s Not Too Late, But It’s Getting Later!
If you finished 2023 having done little or no 2023 bookkeeping, you need to get organized fast. It’s a high priority, and with each passing day, it becomes more critical.
Wherever your documents are, go get them and put them together. Maybe they’re all in one desk drawer, or a file cabinet. If they’re not — or if you don’t have physical receipts — you’ll need to go exploring. Your bank may be able to provide missing bank statements online or at your local branch. The same is true of credit card statements.
When you have your bank statements, compare them with your check register. Compare your credit card receipts to your receipts from the office supply store, restaurant, post office, or any other place you made a business purchase. This helps identify any discrepancies or missing transactions. Better now than April 14.
Document those transactions that are business-related. Ideally, you’ll have a dedicated bank account and credit card for your business, but not everybody does. (Note for next year: You should.) You can create a journal that lists all of your transactions, and then organize them to help with your tax deductions. Bookkeepers and accountants create what’s known as a chart of accounts that lists the types of transactions you make. For instance: computer expenses, office supply expenses, or postage expenses. For income, you may wish to identify specific customers or products you sell.
When you’ve done this, you’ll be able to see what your profit for the year was by adding up your revenues and subtracting your expenses. By breaking them out by type, you’ll be able to enter the correct numbers in the correct places on your IRS Schedule C.
Taxes and Why Else?
While tax compliance is a significant concern, there are broader benefits to proper bookkeeping. It gives you insight into the financial health of your business. Problems will be less likely to sneak up on you if you’ve been doing cash flow statements, income statements, and balance sheets. These can also serve as the basis for planning for the future. Organized financial records are also essential if you have a plan and you want to secure financing or seek professional advice.
2023 Bookkeeping: From This Day Forward
If you haven’t been doing your 2023 bookkeeping, own your delay and learn from it. Pledge to make the changes you need to avoid this circumstance again. Block out time on your calendar. Have a spouse or responsible kid do it. Incentivize yourself with a bookkeeping pizza party for one or the rest of the afternoon off if you’ve done the books. Automated tools can make this easier, too, such as a document management system (DMS). These capture your receipts, statements, and invoices, digitize them, organize them, and store them in the cloud so you can work with them anywhere. Hire a temp, or, if your books are too complex or make you uncertain, see a tax accountant. And remember to keep up with changes that might affect your tax circumstances. Google Alerts can be your friend.
Ultimately, money and time can fix this problem. Money buys professionals, time reduces your backlog. But the longer you put things off, the worse it’ll be. Especially if you discover problems and questions. So get started now.
The post Is It Too Late To Do My 2023 Bookkeeping? appeared first on Home Business Magazine.
Original source: https://homebusinessmag.com/money/accounting-and-bookkeeping/do-2023-bookkeeping/