May 2016 - Amy Northard, CPA - The Accountant for Creatives®

How to organize business receipts and paperwork

Posted by | Tax Tips | No Comments

How to organize business receipts and paperwork for your small business. - Amy Northard, CPA amynorthardcpa.comAs a business owner, receipts, copies of invoices, bills, and other paperwork can pile up quickly making our desks cluttered and offices messy. When you have a plan in place to organize all those papers, you can clear out quite a bit of office clutter and know where to find documents in case you get a notice from the IRS or your state.

I’m going to share what works for me and some tools you can check out to keep the clutter to a minimum. If you have a different method or app that you love, please share in the comments!

First, let’s get the timeline for saving business records out of the way. The IRS suggests saving your receipts and records for at least four years, but keep in mind that the IRS can still come knocking on your door if you failed to report more than 25% of your business’s gross income (income before expenses are taken out) six years after you file a return.

Now, let’s talk about why you need to hang on to all this documentation. The biggest reason is in case you get a notice from the IRS or your state requesting additional documentation or notifying you that they want to audit your records. By having organized records that you can easily locate, you’ll cut down on quite a bit of the stress that those letters usually cause.

On to the fun part, the organizing! As a service-based business, I don’t have a whole lot of expenses that produce paper receipts. Since that’s the case, I just throw my receipts into an envelope labeled with the month. Now, if I ever need to find a receipt for an expense, I can go directly to the month of the expense (found by looking in my bookkeeping software) and pull the receipt.

For emailed receipts, I’ve created a Gmail folder where I save my invoices to. If I need to find a receipt, I can search the folder to locate the specific receipt. It’s always a good idea to back up these emailed receipts in case an email gets hacked or shut down for any reason.

My challenge to you: once a month, print your digital receipts to PDF and save them in another location.

Bank Statements
When I do my bookkeeping for the month, I print off all my bank, credit card, PayPal and Stripe statements and when I’m done, I stick those in the monthly envelope as well. You can also save PDF copies in the cloud (ex: Dropbox).

Copies of invoices are not commonly thought of as important tax documents to save, but keep in mind that as states search for ways to make more money, they’ll bump up efforts to collect sales tax that’s owed. To do this, they’ll look through a business’s invoices to make sure sales tax was properly invoiced.

Since all my invoices are sent through Quickbooks, I can access them virtually that way. It’s also a good idea to export invoices to PDF format and save in another location. This will save you a lot of stress if your bookkeeping software were to crash or your online account were to close.

Apps & Tools
There are so many different ways to keep your receipts and paperwork organized for your small business, but here are some top tools that I love recommending to my clients:

Shoeboxed – Shoeboxed lets you use your phone to scan in receipts or mail in paper copies using their “magic envelopes.”  They use their scanning technology to grab information from your receipts and catalogue them in their software. Shoeboxed works with most popular bookkeeping software. Bonus: they have a mileage tracker, too!  Shoeboxed offers a “free for life” account as well as options to upgrade for additional capabilities.

WaveApps – If you use Wave for your bookkeeping, be sure to check out their receipt-scanning technology. You can upload receipts from your computer directly to Wave, scan them with your phone, and forward emailed receipts directly to your Wave account. For $0, it’s hard to beat.

Evernote – If you’re an avid Evernote user, saving copies of your receipts in the software along with notes about the expenses is a great way to keep things digital and organized.

I hope this has given you some ideas for organizing your receipts and business documents. If you have a process that works for you, please share in the comments!

New Business? Do these three things first!

Posted by | General Business Tips | No Comments

New business? Do these three things first! You'll save yourself from a headache later on.There’s so much to do when starting a new business and it can get overwhelming fast. Let’s focus on three important things you should do right now before business picks up.

Already in business? No problem. These can be implemented at any time, it’s just best to get them out of the way first, if you can.

1. Open a separate business bank account

It’s super easy to make business purchases out of your personal account and toss the receipt in your purse, but I promise you’ll thank yourself at tax time if you get rid of this bad habit. If you’re a sole proprietor (the default business structure), you can go to your bank and set up another personal bank account using your social security number.

If you’re any other form of business, be sure to take your business formation documents, federal ID number, and anything else your bank may require. Call the bank or check their website for a list of information you’ll need so you don’t have to make multiple trips. Once you have this account set up, only use it for business.

Click here to see NerdWallet’s list of free business checking accounts.

2. Decide on a bookkeeping tool

There are a bunch of bookkeeping software options available, but my top three faves are Quickbooks Online, Xero, and Wave. With these cloud softwares you can automatically import and categorize your transactions which is a huge time saver when compared to manual entry in a spreadsheet. Once the transactions have imported into whatever system you choose, assign them each an income or expense category. Then you’ll need to do a reconciliation (which is like balancing your checkbook).

If the learning curve of a new bookkeeping software is too much, there’s nothing wrong with using a spreadsheet to organize your financial information. The key is to choose something you’ll do on a consistent basis so you don’t have to add everything up at the end of the year.

3. Research your sales tax obligation

As states try to round up funds, they’re turning their attention to sales tax as the solution. Many states are now requiring sales tax on select services in addition to tangible products, which in past years, had no sales tax requirement. Before you send your first invoice, get clear on whether or not your state wants you to collect sales tax on your products and services. This will save you an awkward conversation with a client later on if you need to add the sales tax and may also save you from paying out-of-pocket for the sales tax.

If you can’t find the answer to whether or not your product/service is taxable, you’ll probably save time by giving your state department of revenue a call. The best time to make this call is early in the week and early in the day. Because, let’s get real: no one answering phones is going to be super excited to get you info on a Friday afternoon!

Take care of business by finding out whether or not you should be collecting sales tax (even on services!)Tweet me!

Getting these three things crossed off your checklist will reduce your stress and set your business up with a good foundation.

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