5 ways to simplify bookkeeping for tax season and all year round + Bench Overview
If you’re a small business owner or entrepreneur and feel as if your finances are not in order, here are five ways to simplify your bookkeeping – plus an overview of Bench Accounting.
This article on simplifying your business is in partnership with Bench Accounting and other financial services we use and recommend, so we may get a small compensation for referrals at no cost to you.
Get a month of free online bookkeeping services from Bench plus 20% off if you decide to use their services beyond a month — but read the article and overview first to make an informed decision.
If you are an entrepreneur, freelancer or small business owner and feel as if your finances are not in order, or more complicated than they should be, then you are not alone.
Bookkeeping is often a neglected area and most entrepreneurs struggle to keep up with their finances and accounts throughout the year.
This, of course, adds even more stress once tax season comes around. Lack of bookkeeping makes it hard to prepare for and file your taxes correctly.
It also makes it difficult to uncover the tax deductions you deserve so you can significantly reduce taxes owed or possibly get a refund back.
Plus, if you are scrambling at the last minute to pull your financials together for tax filing, you may even risk missing the deadline and owing a penalty. But it does not have to be this way.
We've partnered with Bench Accounting, an online bookkeeping service we have personally used and deeply admire, to pull together these tips on how to simplify your bookkeeping all year round, but especially during tax time.
First, keep your business finances organized
Even as a freelancer or solopreneur your business financials should be separated from your personal financials in different accounts, if possible.
And no matter how big or small your business is, it is best to use a dedicated software such as Freshbooks that links to your financial account and can automatically track and tag your income and expenses.
We personally use Freshbooks because of its simple interface. It is also ranked as the #1 accounting software for solopreneurs, freelancers and service-based business owners.
You can automate invoicing, organize expenses, track time and accept payments online with just a few clicks.
Freshbooks almost always offers a substantial discount on their all-in-one cloud accounting suite making it one of the more affordable options out there.
The Bench team also integrates seamlessly with Freshbooks making it easy for them to pull and analyze your financials and get you prepped for tax filing and beyond. This is a sure way to keep all of your business financials on autopilot.
Second, file all of your business receipts
To ensure you get all the deductions you deserve and can prove your spending if ever audited, it's best to hold on to all of your business expense receipts.
We personally use Evernote to organize and save all of our receipts during the year. For any paper receipts we simply scan a picture of it with the Evernote app and file it digitally.
What we love about Bench is that you can also upload all of your receipts and store them in the Bench app, with no storage limits.
This makes it easy for them to link receipts to specific transactions, ensuring the accuracy of your financials and ability to identify deductions.
Third, set money aside for potential taxes
A lot of business owners don't know that the IRS in the US as well as other governments require you to estimate and make payments on your tax liability throughout the year.
A good rule of thumb to manage this requirement is to set aside 30% of your projected earnings and automatically transfer this amount into your business savings account on either monthly, quarterly or annually.
This may seem like a pain at first, but it's very simple to set up and ensures you won't accidentally spend these funds. That way you have the money available when it's time to prepay the government.
Fourth, stay up-to-date on tax reforms
You want to be fully aware of how any changes to the tax laws impact you as it may influence how you manage you finances throughout the year.
The most reliable way is to visit your governments tax website, such as irs.gov in the US, and read through any announcements and changes.
You should also speak with your CPA or read the blogs and updates of any do-it-yourself tax filing service you may use.
If filing your taxes on your own, we recommend H&R Block for their straightforward and affordable online tax filing service as well as audit protection plan.
Finally, work with a dedicated bookkeeping
Believe it or not, tax season, and managing your finances throughout the year, can be a simple and seamless experience if you bring in a professional.
Bench works by combining intuitive software with a human-operated service. Unlike other bookkeeping options, you won't have to input information yourself or deal with your books independently. Your Bench assigned bookkeeper will do that for you each month.
One of Bench’s best features is the year end financial package that they create for tax filing. It includes everything you or your accountant will need to file your taxes.
They even include a detailed backup in case of an audit, and notes for expenses that need specific tax treatment.
With Bench, you also get the peace of mind that your books are completed on time and accurately.
That means less time spent bookkeeping, and more time to focus on building your business and making more money.
If you’re struggling with bookkeeping, or even if you need multiple years of historical bookkeeping completed, Bench can help you get caught up to file on time and stay on top of things in this year and beyond.
Start by trying Bench out for a month for free. If you like the service you'll also get 20% off if you decide to continue working with them.
Bench is obviously not for you if you aren't able or willing to make a small investment in getting the professional help you need.
If you enjoy doing your own financial bookkeeping (and we have friends who genuinely do, so get it) then Bench may not add value to you either.
Bench is best for any business who doesn’t have the time, energy or wherewithal to do their bookeeping in-house.
This article with tips on simplifying your business was written by our parent company, Concept Shop. In partnership with Bench and other services, we may receive a small commission for our referral, at no cost to you.