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Want to avoid paying more than you should come tax time? Or a frantic last minute search for missing financial records?

New business owners have a lot on their plate, and can easily lose track of an approaching tax deadline or financial data needed to submit their return.

Organisation is key when preparing for tax time. As is taking advantage of the many tools and resources out there to support new entrepreneurs.

Set yourself up for success by following these four pillars of painless tax prep.

1. Commit to clean bookkeeping from day one

Year-round, effective bookkeeping is the best way new business owners can minimize tax season stress. With the wide range of accounting software out there, there’s no reason to rely on time consuming manual methods that leave room for error.

All-in-one options like Xero, MYOB and QuickBooks automate your most important bookkeeping processes, including:

• Tracking expenses;
• Tracking sales and income;
• Creating and sending invoices, and
• Managing inventory.

With your financial records all in one place and up-to-date, you are better positioned to maximise your refund, while avoiding penalties associated with incorrect or incomplete tax returns.

2. Capture every business expense

Each year, 21% of small business owners claim less than half of their business expenses, largely because they don’t have a reliable system for documenting expenditures while on the go.

Without carefully logged receipts, entrepreneurs may forfeit valuable tax deductions, sacrificing cash they could be directing back into their business.

Cash in on claimable expenses by using a mobile app to record receipt data, track mileage and generate expense reports. As an added bonus, many of these tools can sync with your accounting software.

3. Separate business from personal

Right from day one, small business owners should clearly divide their personal and business expenses. Differentiating between the two will make it much easier to claim deductions on your tax return – and support those claims in case of an audit.

Recommended steps to separate your business and personal finances include:

• Create a separate bank account for your business, and designate a credit card solely for business purposes (this will help you track expenditures while building up your credit and borrowing power);
• Never combine business and personal expenses ;
• Consider paying yourself a set salary from your business account each month (this will help you determine how your income, as well as the business, will be taxed; but seek advice from your tax accountant first).

4. Always consult with a tax accountant

Not sure exactly what you can claim as a business expense? Wondering which accounting software to use or how to interpret local tax regulations?

Consult with an accounting professional, such as a CPA, to put your mind at ease – well before the filing deadline! In addition to managing the nuts and bolts of tax preparation, regular meetings with your tax accountant will help you continuously improve bookkeeping practices and better understand the financial workings of your small business.

Those organizational strategies you commit to now will promote positive relations with your local tax authorities – and the long-term financial health of your company.

Would you like to know more?

For Expert Guidance for Your Business – Contact us at enquiries@informba.com or call 03 9399 3769 for professional advice on business advisory, consulting, tax, and accounting. Let’s discuss your next steps today.