Avoiding the Tax-Extension Blues
Are you breathing easier now that October 15th has come and gone? Finally got that extension filed and now you can get back to focusing on your business? What would it feel like to not sweat it when tax time comes around? How great would it be to easily provide your accountant with all the info they request, without feeling panicked or a sense of dread? How much time would you get back if you had a system that prevented chaos?
Good news! There is a way to build a simple system and stay on track. Over the next few weeks, I’ll lay out the steps to build a strong, basic foundation of a money management system.
First order of business – get an accountant if you don’t already have one. If you have one, great. If not, keep in mind that tax laws change all the time, and your accountant will be a priceless resource in navigating those laws. It’s also wise to have a professional to reach out to about some of the trickier or vague areas of business accounting.
Now we can dive into the “steps” –
Step 1: Separate your business and personal funds into different bank accounts. Even if you are a sole practitioner, open a separate checking account and credit card to be used only for business. If you don’t want to open a new credit card, and have more than one personal card, you can dedicate one to the business. If you don’t have an extra credit card, use the debit card that comes with the new checking account. But at some point, you will need a separate business credit card to cover expenses if there isn’t enough cash in the bank.
Now that you have separate accounts, use them! Do it! Business income and expenses are the only transactions that should appear on those monthly statements. If there’s still some cross-over while you are establishing this new habit, never fear. There are ways to straighten that out. But for now, start treating the accounts independently.
Next time, When Dunkin’ Donuts isn’t a business expense…