Many people, including business leaders, think of "tax time" as an unpleasant obligation, like going to the dentist. But by preparing for it well before the year is done, you can avoid the stress that precedes tax season each year. Better yet, taking that deep dive into your financials can provide a wealth of insight that can help you meet or exceed your business goals.
Tax Prep: It's Not Just for Your CPA's Sake
As fall turns to winter, it's a good time to take stock of how your business performed this year. One simple way to do that is to gather the information that you're going to have to gather anyway, so your CPA can do your taxes. By keeping up-to-date books year-round, you'll make your CPA happy at tax time.
Beyond your CPA, have you ever stopped to consider the other people involved with your company who could make good use of detailed, accurate financial data? Depending on your business, that can range from your management team to your investors and shareholders.
Your managers can use the financial data to see how their department is performing. Have they hit their sales goals for the year? Have they stayed within budget? Have they sustained unexpected losses?
The sooner the management team receives that data, the sooner they can change their focus and make adjustments for next year. That, in turn, will demonstrate your company's good financial management, which will establish credibility with banks, financial institutions and investors.
Monthly Bookkeeping Tasks That Keep You on Track All Year
So how do you achieve those lofty-sounding goals? Simple: By keeping up with your books throughout the year rather than putting everything off until tax time.
Regular bookkeeping — from entering transactions to reviewing and reconciling your books on a monthly basis —not only prevents the paperwork from piling up, but also allows you to track how your company performs in real time. (Speaking of paperwork: You can reduce it, or even eliminate it, by switching to a cloud-based software system for doing your books.)
Reviewing your balance sheet, income statement and cash flow statement on a monthly basis will help you keep track of where your business is today and give you the data you need to plan for the future.
Winning the Numbers Game
You don't need to wait until the end of the year to analyze how your business' performance stacks up with your forecast and budget. By keeping up with your bookkeeping, you can compare your budget to your actuals on a regular basis. You'll also be able to track your key performance indicators by comparing data month by month.
Business is moving at an ever-faster pace. While it's important to make quick decisions, it's even more important to make informed decisions. Keeping your financial data in order doesn't just enable you to make all of your tax filings on time and avoid penalties. It also helps you deliver accurate, real-time financial information that your entire organization can use to achieve your business goals.
So don't wait until year-end to prepare your business taxes. By starting now, you'll not only alleviate stress, but also get to shape your financial future.