Monday, July 23, 2007

Tax Preparation for Small Businesses

It’s approaching April 15th and a voice in your head says, “You need to do the taxes”. You are up late one night trying to find all the receipts, trying to remember the information you will need, and looking for your stuff from the previous year. The voice is now saying “I have to do this differently next year”. Wouldn’t it be great if all of your tax related items were collected and grouped throughout the year, so all you have to do is punch in some numbers or hand over all the information to your tax preparer?

Each business is different, but there are some simple steps you can take to make the year-end process go smoothly. The key is to setup a simple system for collecting the information throughout the year. Keeping information in one place and doing data-entry over time will dramatically reduce your time spent and stress level as tax time approaches.

Designing the System
Think about your existing system. What has worked and what has not? Which aspect would you like to get a better handle on for next year? Define a system to manage receipts and income/expense transactions.

  • Collect receipts in standard sized envelopes at the front of your desk drawer. Label the envelopes “home”, “business”, and “taxes”. Empty the receipts from your wallet directly into these envelopes. “Taxes” is a catch all for random receipts (i.e. donations, medical visits). Alternatively, carry envelopes in your purse or car and merge them with the envelopes in your desk at the end of the week.

  • If you shop at the same stores for home and business, write “home” or “business” on the top of the receipt while paying at the store.

  • Flag transactions in your check register that you will need for your taxes by putting a note to the right of an entry indicating the category.

  • Add a file to your filing cabinet called “Taxes”. Use it as a catch all for miscellaneous items you receive during the year (i.e. donation receipts and thank you letters).

  • Mark tax-related transactions on your credit card or bank statements with highlighters. Create a legend to keep in your “Taxes” folder for use each year (i.e. Yellow=medical, Pink=car, Green=supplies expense). Remember to download credit card and bank statements monthly or quarterly, since some companies do not keep the records very long.

  • Use a spreadsheet and enter the information throughout the year. Create tabs that emulate the tax forms (i.e. “Schedule C Business Expenses”, “Form 8829 Business Use of Home”, “Schedule A – Donations”). Use the spreadsheet to keep track of your expenses, income, mileage, travel expenses, and other tax information unique to your business.

  • Keep tax information from prior years together in a box or a secondary filing cabinet. Thin your file drawer by removing statements you want to keep. Place them with a copy of your tax return and any supporting documents into an envelope or file folder. The large FedEx envelopes are useful for complex tax returns.
Elements of this system will be useful for most businesses. Evaluate it, implement the pieces that you like, and modify it to fit you. Re-evaluate your system at tax time. Make changes while they are fresh in your mind. Fine tune your system each year. With time, the voice will say “wow, taxes were a breeze this year”.

Tuesday, July 10, 2007

Digging Out - Organizing Your Financial Affairs

Tom Herman's article in the Wall Street Journal provides valuable information about organizing your financial affairs.

Monday, July 9, 2007

Organizing Your Bathroom - Bottles, Bottles, and More Bottles

Before we know it, something we bought yesterday has been sitting there for years. To keep products from overtaking our space, weed out things you do not use, group similar items together, find appropriate storage for them, and define a place for them.

One of the first steps in managing your bathroom is to break it down into sections. Think of a section, by the kind of tasks you do in each area.

Ask yourself...
What do I use, where, and how often?
Am I likely to use it again? Is it just adding to the clutter?
Could someone else use it that is less fortunate?

Move through the bathroom one section at a time. Start with the one that annoys you the most. Study the tips below.

1) Large bottles out on the counter (creams, hair products, soaps, etc)

  • Eliminate bottles that you bought, used briefly, but haven't touched in a long time.
  • If your counter is full of products, consider using a caddy like the one pictured to create a shelf on the counter for the taller items. It is great for pump dispensers and hair products.
  • If the large bottles are to handle, consider buying smaller quantities. The advantage is they are easier to lift, store, and you can try new products more often without wasting much.

2) Shower

  • Remove any items you aren't using.
  • There are many caddy's available for storing items in the shower. Some hang from the shower head, some suction to the walls or door.
  • If you use liquid soap and a spongy thing on a string, buy a plastic suction cup and hook and hang it on the wall or shower door.

3) Medicine

  • Throw away all expired products.
  • Remove anything you are likely to not use again.
  • Write on them what they were prescribed for.
  • Group the medications by category: creams (then by hand, foot, lip, etc), cold, allergy, prescriptions, pain relievers
  • If you do not have a medicine cabinet or drawer, use containers or plastic drawers as a way to group your medicines.
  • Keep frequently used items nearby.
4) Organizing your hair accessories (barrettes, pony tail holders, scrunchies, etc)
  • Group the items that are similar and then store them in Ziplocs, plastic drawers, or plastic trays.
  • Thin out your collection to the ones you really use. If you used to have long hair and think you may again some day, pick your favorites and get rid of the rest.
  • You may be able to donate some accessories to your hair stylist.
5) Makeup, Makeup, Makeup
  • Use trays or plastic drawers to manage your makeup.
  • Group the similar items (i.e. eye, lip, foundations)
  • Makeup has a relatively short shelf life, so check with the brand you use to see if you should replace the items you have.
  • If you like those freebies, donate the unused items.
6) Hotel Travel Size Freebies
  • Keep only the items you really like and will use.
  • There are many shelters that would be happy to use donated toiletries. Collect them in a bag and periodically donate them. This is also a good fundraiser for events.
  • Next time you are traveling, don't bring the freebies home unless you will really use them.
  • If you keep some around for guests, be realistic about the amount you need.
7) Storage
  • As you bring in new towels, remove the old ones. Keep some in the laundry room or garage for projects, but don't most of them.
  • When designing bathroom sink areas, put the sink closer to the toilet and the drawers on the other side. This allows you to store toilet paper within reach under the sink.
  • If you by in bulk, store the back stock in extra cabinet space in the bathroom, linen closet, or garage. Do not buy too much as your taste may change or the items may lose their potency.