Tax period is just around the corner; therefore, every business must ensure that the records are well-organised. No matter whether you are running a small business or working as a freelancer, accurate and up-to-date recording of books can help save time, money, and minimal effort in filing your company’s taxes. In lieu of this, here is a brief guide as to why it is recommended to keep your bookkeeping well systematised, especially during the time of taxes.
Understanding the Role of Bookkeeping
Bookkeeping and accounting are considered to be the core of every business. It involves tracking and monitoring every financial transaction of an organisation, including revenues, expenditures, and assets. If these transactions are recorded and grouped in an orderly manner, it provides a clear picture of the firm’s financial health.
Another key responsibility of bookkeeping is to accurately record, and prepare financial statements for filing tax returns. Tax authorities require accurate disclosure of income and expenditure. Inadequate handling of accounts leads to several problems, such as challenges while compiling the right data for preparing and processing tax returns. In short, if the books of accounts are messy, it becomes difficult to avoid mistakes such as missing necessary deductions, or revenues, incorrect posting, etc. All these could lead to penalties.
Bookkeeping also plays a crucial role in financial planning and decision-making for the business. Accounting also helps owners plan their expenditures, budgets, and forecasts. Having organised financial records aids in analysing spending and identifying cost savings regarding investments and future growth.
In other words, we can qualitatively explain bookkeeping as the foundation of all financial activities. It offers the required data and information to meet tax, fiscal, and business planning and decision making requirements. If the record of financial transactions is not maintained accurately, then organisations end up suffering unnecessary pressure, financial setbacks, and missed opportunities.
The Link between Bookkeeping and Tax Preparation
Taxes are an important element in accounting, and therefore, the preparation of taxes entails the preparation of good financial accounts. This is where the correlation between bookkeeping and tax preparation plays a very important role. Accounting enables the preparation of all the required data to prepare and fulfill tax compliance as well.
In addition, well-organised books make it easier for one to keep all the documents that may be required when filing taxes with the relevant government agency. Lacking properly organised receipts or invoices may lead to difficulty in locating documents, and ending up overlooking certain finances that can give you worthy deductions or credits.
Bookkeeping also assists in minimising the chances of being audited by pointing out adverse conditions, that are likely to cause an audit. By maintaining proper documents, it becomes easy to review and balance your financial transactions to meet the necessary tax regulations. This will assist in mitigating all possibilities of inconsistencies or mistakes that could cause suspicion among the auditors.
In addition, when the bookkeeping system is well organised, filing taxes becomes easy. Given all the records in the document, you determine your taxable income, make the claim that you need, and fill out all the forms correctly and quickly.
All in all, observing the systematic organisation of records makes it easy to move from bookkeeping to taxation. It makes the work easier, reduces mistakes, and significantly cuts down the possibility of audits, all of which will ensure your time, money, and energy are conserved especially during the tax season.
Advantages of Organised Bookkeeping
Professional bookkeeping has several benefits for enterprises during tax period. One of the essential advantages is seamlessly tracking income and expenses. Thus, maintaining detailed records for your business, as well as updating it regularly, will allow you to easily determine the amount of taxable income and report it properly when filing taxes. This can assist in preventing avoidable mistakes that might lead to fines and penalties, or negligence mistakes that lead to audits.
One other benefit of getting organised bookkeeping is relating to the chance to make a maximum of the deductions. Clear and well-organised records make it possible to correctly claim any available deductions, for instance, business expenses or home office deductions. It may lower the amount of your taxable income, and this, in turn, can mean lesser taxes to be paid.
Also, the proper arrangement of documentation leads to better decision-making processes in finance. This gives one the ability to study the trends in the use of funds and thus establish how and where the money could be saved, as well as the kind of investments or future opportunities to expect.
In conclusion, if the accounts are organised, during the best time of the year, which is the tax season, it reduces clients’ concerns by
– Cutting down on stress levels,
– Establishing the best practices that avoid high risks in tax regimes and laws,
– Avoids penalties.
If the records are kept in order, then the taxes will be filed more efficiently, and less time will be wasted in search of necessary documents and accounting information, thus allowing the entrepreneur more time for other business or other areas of life.
Tips to Keep Your Bookkeeping Organised
Maintaining an orderly book is significant when it comes to the preparation of taxes at some specified time of the year. Here are some tips to help you maintain organised records:
1. Create a dedicated space
Choose a place where all the accounting work is going to be carried out exclusively. This can be an office desk, a corner of the office, a folder on your computer, or a physical file. Possessing an organised working area is essential, as it’s always easier to work and search for something in an orderly environment, especially when it comes to formal activities or documents that require proper filings like financial records and documents.
2. Establish a routine
It is recommended that you create daily, weekly, monthly, and at least annual plans for developing and auditing your records. This could be a weekly or monthly assignment depending on the business’s traffic and the number of transactions accomplished. This implies that one of the best practices to embrace in record keeping is to be consistent.
3. Use a system
You should establish a bookkeeping system that applies to the kind of business you run. This could be in Excel, accounting software, or just on paper. Select the method that will allow you to sort more conveniently and create categories of your choice transactions.
4. Separate business and personal expenses
It is recommended to separate business and personal expenses. This helps to make sure that all your business expenses are well recorded to avoid complexity when you are creating your taxes.
5. Keep receipts and invoices
Keep all receipts and invoices related to your income and expenses. This also comprises electronic records of the product(s) bought online. It is advisable to store them in a particular folder or you can even opt for the cloud for quick accessibility.
6. Track your expenses
First, divide the expenses into different groups and then document them consistently. This assists in the determination of Allowable expenses and optimises allowable expenses.
7. Stay organised throughout the year
It is critical not to delay the organisation of records until the time when preparing the taxes for filing. Try to update your records regularly in a year to avoid rush hour and carelessness.
Adhering to the aforementioned tips will help to keep the documentation orderly and prepare for a hassle-free tax season. Receipts and other records are useful as they ease the search for data, enable the claiming of all allowable deductions, and avoid mistakes and auditors. Therefore, it is essential to focus on creating good habits and choosing easy and convenient methods of maintaining accounting records, for this tax period and beyond.
Utilising Technology for Bookkeeping
Technology has also impacted bookkeeping, making it faster and smoother than it used to be in the past. The use of technology in doing accounting specifically for books can be useful, as it means getting a lot done within less time and with a minimised error margin.
Understanding the necessity to be organised in the modern world, different software and apps are designed to help businesses or individuals manage their affairs and financial operations.
A popular choice sometimes is the hosting of the accounting software. This enables one to gain access to his/her financial documents irrespective of where he/she is with the internet connection. It also makes it easier to make real-time updates and share information with the bookkeeper or anyone else who may be involved. Making use of cloud-based software, you have the possibility to use functions like automated feeds in banks and import your financial data automatically.
Another such gadget is an app for receipt scanning. Just like receipts, instead of having papers filled with the details, you just have to take a photo of the receipt, and the app will extract all the important details and even sort it into suitable categories for you doing away with the problems of manual recording and bulk issuance of receipts where many are likely to be lost or misplaced.
Technology also offers data security and data backup when using it for bookkeeping. Many web-based systems have already incorporated data encryption and data backup which, guarantees the security of your financial data.
All in all, the use of technology in executing bookkeeping makes the process efficient and reduces time and effort, as well as being accurate. The above-presented information should encourage one to plan a detailed check on the different options available and perhaps come up with the most appropriate system. In other words, you will be able to make vast improvements to your accounting and spend more time on any other pursuits you may have in life.
The Role of Professional Bookkeepers
Bookkeepers are career people whose duty is to ensure that business entities and other people have proper books. Their deeper insight and understanding of the different accounting rules guarantee that several financial transactions are recorded as well as classified properly. They assist business entities and anyone involved in economic activities in compliance with the relevant laws and regulations regarding taxes by providing evidence for all income and expenditure.
The potential advantages that come with hiring a professional bookkeeper are the time and energy that you will be able to conserve. Managing the accounts can cause a lot of confusion, and if you are inexperienced, this can lead to a lot of time being wasted.
Outsourced bookkeeping and accounting services to a professional means that you will not be preoccupied with it, thus attending to other segments of your business or personal needs.
By outsourcing your bookkeeping and accounting services to professionals, you can leverage the benefit of specialisation and precision in terms of accounting standards and compliance that are required in accounting practice. Auditors are aware of possible mistakes or differences and avoid situations that will lead to an audit or penalty.
Also, they will help you with further issues connected to taxes, such as the knowledge of the current rules and regulations, which guarantee that all possible deductions and credits are taken into consideration and thus help you save.
Final Thoughts
In a nutshell, it can be argued that professional bookkeepers are very useful in retaining proper bookkeeping records. They are very useful in any business organisation as personal assistants in managing financial matters.
Corient is among the foremost providers of outsourced bookkeeping and accounting services in UK. We at Corient offer a comprehensive range of services, such as bookkeeping and accounting outsourcing, outsourced payroll, tax and VAT outsourcing, tax and audit planning, and business advisories.
Contact us today to get yourself the best bookkeeping, accounting, and tax services near you!