California’s Proposition 30, a Sales and Income Tax Increase Initiative, was passed on November 6, 2012 as an initiated constitutional amendment. It will increase personal income tax rates on very-high-income Californians for seven years and raise the state’s sales tax rate by one-quarter cent for four years.
For this reason among others, California’s, regardless of their career or salary, should start paying attention to their business’s money transactions. Many accounting services San Diego would recommend outsourcing a company’s bookkeeping operations to a professional firm specializing in such a field. However, accounts are not cheap, and many business owners may prefer to keep their own books and save the extra cost of hiring out.
However, a lack in expertise can sometimes result in improperly recorded data and wasted time and money. If a business really wants to manage its own bookkeeping, the following do-it-yourself tips may help them become more self-sufficient and accurate in keeping track of their business’s expenses and paperwork:
- Keep track of expenses: Paying attention to how much is spent, and one what, is crucial for DIY bookkeeping. One great way to keep an eye on spending is through using a business credit card, which is only used for business expenses. This itself can be a basic accounting system. Most credit card companies distribute statements that categorize expenses so one can see which expenses relate to which business activities. If a business always uses a business credit card for expenses, then it’s less likely to pay cash and lose the receipts, forfeiting tax-time write-offs.
- Set up files for record keeping. Whether paperless or not, a filing system should be created for record keeping. The more organized the filing system, the easier things will be when it comes to things such as looking up past accounts and filing taxes.
- Make a chart of accounts: Making an electronic chart of accounts is one of the fundamental steps in developing a business accounting system. Employing such a chart of accounts allows a business owner to categorize funds that are received, retained, invested, or paid. The chart should be detailed enough so client transactions can be easily tracked, but not so complicated that large amounts of time are wasted on filling small details. And don’t forget to have multiple backups of the document on a hard-drive, should it ever be lost or accidentally damaged.
- Maintain a clear audit trail: Maintaining an easy-to-follow trail of business transactions (such as invoices and checks) is crucial for passing audits on your business. The most effective way to document transactions is to create an electronic copy of all business receipts and invoices by scanning them into a computer. This information, if electronic, should be backed-up on a hard-drive to ensure the documents are available if the company is audited or if the documents are lost or damaged.
- Always remember taxes: All tax deadlines should be marked clearly on a calendar, along with preparation time, if necessary, to make sure that payments are made on time. According to bookkeeping San Diego experts, payroll taxes that go unpaid can be especially problematic. A common mistake that many businesses make is when to get through periods where funds are low they dip into employee withholdings that they should have sent to the IRS. This can easily be avoided with proper bookkeeping.
Following these tips should help business owners, and not just those in California subject to the coming higher income taxes, get on top of their books and jump through the hoops presented by auditors and the IRS. As long as time is spent and attention to detail is prioritized, any business can take part in their own bookkeeping.