Happy Tax Day! If you are thinking, as many Americans are, that THIS is going to be the year you get your bookkeeping better organized, we have some easy tips for you!
Let’s start with improvements you can make quickly. We’ll get more complex as the series progresses.
Separate Checking Accounts and Credit Cards
This is just standard small business advice but a lot of ranches and horse operations don’t follow it. You should have a separate checking account and credit card for your business. Will you be perfect? No. That’s not an excuse. But when you get most of your business items separated, you’ll be able to do your books much faster because you can ignore all of those personal checks and card charges.
If your operation isn’t legally organized into an LLC or a Corporation you’ll end up just using separate personal accounts. It’s still worth it. You will look more serious about your business to customers and the IRS. And you make it faster to get your books done, whether you keep your records up to date every day, once a year, or if you hire it done.
Speaking of hiring it done, you might save hundreds of dollars or more by only having your bookkeeper enter the transactions from the business accounts. I have a client that does that and her bill is well under half of what it would be if all of their transactions had to be entered. She just scans the personal account and sends me a summary of those little things that accidently sneak into one’s personal account and I add them.
Write on Your Memo Lines
Yeah. Really. Take that extra second to make a note about deductible items in your register or stub. A word or two in a register can make entering your transactions into your bookkeeping system much, much faster. If you have to stop and dig for every receipt, it’s going to take you a lot longer! Do you really want to spend extra time on bookkeeping? Or would you rather spend time with your horses?
Does that mean a check can’t be for both business and personal items? No, sometimes that is impractical. For example, if I go to the grocery store and buy groceries, I won’t write in the memo line. But, if I pick up a jug of canola oil for my horses, I’ll write “oil $6.98” in the memo line of a check that is maybe for $142 total.
Don’t Use Cash For Business Expenses
Use a credit card, a debit card, or a good old check for all of your business payments. You need a bank statement to back up your transactions, not just a receipt. A reconciled bank statement gives you assurance that you have not missed a transaction. Sure, it is still deductible if you use cash. And if you NEVER lose a receipt and always get them immediately entered into your bookkeeping system then you’ll be fine. Nope, I don’t believe people like that exist. And if you do, you need more horses!
File Things by Vendor Name, Not by Month
This one seems wrong to a lot of people. Stuff comes in day after day why wouldn’t you organize it that way?
Filing is actually a big topic. If you are interested in more in depth information, there is actually a professional association for filing. Really. I used to think filing was just filing until a teaching job made me learn otherwise. There is a lot to it and it actually does make your life better if you learn at least a little.
The best and most basic tip I can give you about filing is this: file your vendor statements, bills and receipts alphabetically by vendor name. If you have a vendor you use often, give them their own file folder. Use a general folder for the other vendors that start with that letter. For example, if you buy feed once every month or two from Acme Feeds, they should have their folder. Then, if you take a colt to John Anderson to train and are so unhappy you never plan to pay him for anything ever again, you know his receipt can go safely in the Miscellaneous A folder.
Why is this better than a monthly folder? You already have check registers, computer registers, bank statements and credit card statements that list transactions chronologically. If you file alphabetically then you have information in an alternative order. Can’t remember when you last bought pellets from Acme Feeds? Grab the Acme folder and you know in a minute.
There you are, those are a couple of really high value tips. By that, I mean they are easy to do and have a lot of impact on your business. Hopefully, you are already doing some of these. If you are doing them all, great! Will try to discuss more advanced tips for you in future articles!
Have a question or opinion? Please, leave a comment!
