As a business owner, it is critical that you keep all of your paperwork in good order so that you can find it when needed. This is especially true when it comes to documents that you will need for tax season. While having a chartered accountant is a good first step toward making tax season easier, there are other measures that can be taken to help businesses keep files organized.
Use a Digital Accounting Software Program
Computer programs can help you organize all of your accounts receivable, accounts payable and other financial information. This makes it easy to know how much in payroll tax you withheld from employees, how many outstanding invoices are left unpaid and how much the company makes each month or quarter. Having this information at your disposal means that you can justify taking a deduction or clearly explain to the tax authorities why you took a loss in the previous fiscal year.
Have Dedicated Personnel Oversee Important Files
A dedicated employee or small group of employees should be tasked with keeping important files organized at all times. Whether this is through a formal accounting department or a collection of employees with strong organizational skills, you can rest easier knowing that your important information is being sorted and organized in a clear and concise manner.
Don’t Be Afraid to Throw Out Outdated Paperwork
You don’t need to keep everything that your company has done on file forever. For instance, an invoice that has been paid in full can generally be thrown out after a few months or put in a digital file for storage. Paperwork related to employees who have been gone for years can generally be removed without consequence. If you have any questions as to whether you should keep a document, you can contact an attorney or talk to a tax agent.
Color Coding Can Help You Stay Organized
Creating invoices on green paper while using red paper for expense reports may make it easier to tell the difference between the two at tax time. Additional colors can be used to differentiate other documents that you may need when sending information to your accounting firm. Using a color system or a similar method of organization reduces the odds that you throw something away or misplace it before you file your taxes.
You never want to lose an important document prior to tax season. Even though you may be able to recreate it or get another copy, this could delay your ability to file, increase the odds of an audit or reduce the odds that your business gets a discount that it is legally entitled to.