Posted on January 30, 2015 @ 07:47:00 AM by Paul Meagher
For many small businesses and startups this is a critical time of the year to establish good bookkeeping habits. The end of the first month of the year is when you should make sure that your books for the first month of 2015 are up to date. Your "books" don't have to be entered into a professional accounting package although that would be nice if you can manage it. As long as you are keeping track of all your business related income and expenses for the month, filing all of your receipts by month and/or by bill type, recording the beginning mileage for your vehicle, etc... so that when tax time comes next year you are not scrambling through a disorganized mass of receipts, statements, invoices, and emails to figure out your income and expenses for 2015. You can also have multiple folders per month to organize things a bit more.
The end of each month is a natural time to take stock of what you've done business wise that month. You can record your income and expenses in a scribbler, in a text file, in a spreadsheet, in a database, in an online book keeping service, or in an accounting program. It doesn't matter at this point, the important thing is to create a record of some form that journals all the important business transactions from January 2015. If you wait until next month, your memory for what you did in January
2015 will begin fade, your pile of receipts will build up more, and the task of bookkeeping will become increasingly uninviting. I'm talking from experience here and this advice is as much to myself as it is to you.
Getting into a monthly habit of making sure your business bookkeeping is up to date, even if your transactions are recorded in a scribbler, sets the stage for making ongoing improvements to your bookkeeping systems as each month goes by this year. It is also not too late to register a business to make filing your income taxes more
logical next year.
The simplest thing you can do to get started is to create a folder (or folders) for all your statements and receipts that is titled "January 2015" (add extra labelling if you have multiple folders). Put a copy of all relevant transactions, statements, invoices, receipts and so on for January in this folder. You can arrange your system differently later on but at least this is a start. I'm no guru on accounting but there are guru's online who can give you ideas about how to setup various expense and income accounts that you might to record your transactions under. There is no single right way to do your accounting, whatever works for you and makes tracking your business expenses and income over the year possible and also makes doing your taxes in 2016 less painful. You don't have to set the bar too high for yourself because you can keep improving your bookkeeping and accounting systems each year, however, the foundation for all of it is getting into a habit of spending some time trying to get your books are up to date at the end of each month. Fail this task now and you are setting yourself up for another year of financial chaos that only gets straightened out when income tax season rolls around again next year.
So enjoy the Superbowl this weekend, but make sure that you also put aside some time to get your books for January 2015 in some type of order, even if that just means putting all your transactions in a folder, figuring out your starting mileage for 2015, and perhaps printing off some bank statements and bills if you ultimately end up printing these off for your records or when doing your income taxes for the 2015 tax year. Get on top of it now, and get into the habit of doing your bookkeeping
and accounting at the end of each month, and you will master a critical business skill that will reward you with a better sense of your ongoing financial situation throughout the year and will make doing your income taxes next year relatively pain free. You will also be in a better position to optimize the taxes you pay out each year if you know where you are financially, what expenses you have to claim so far, what sales taxes you currently owe to the government, what sales taxes you can claim, and so on. Better bookkeeping is power when it comes to figuring out how to optimize your tax situation.
In conclusion, if your resolution for 2015 was to improve your bookkeeping and accounting systems, the end of January 2015 is the critical time to set yourself up to accomplish that by doing some month end bookkeeping and accounting (the latter implies that you have some income and expense categories setup to record transactions under).