Tuesday, October 28, 2014

You Know Those Little Bits of Paper You Get When You Buy Something? Yeah, They're Important

Recently I've taken on a job with a private accountant. I do the data base entry of business finances.

For those of you in business, you know that shoe box of reciepts? Yeah, I go through that.

It's been eye opening, mainly because I can't see what I'm doing if I don't open my eyes.

But I've learned a few things and I thought I would share a couple of key tips on how to save money when you hire an accountant.

Believe it or not, going through that shoebox takes time. You have to pay someone for that time. Like me. Which is just fine and dandy for me. If you want to pay me to go through every one of your receipts then I'm cool with that.

If however you want to save money and headaches there is a couple of really important things to do before you send your receipts off to the accountant. And you don't have to understand math. Ready for it?

1. Keep your business and personal receipts separate.

Sure it seems obvious but judging from what I've seen the short time I've been doing this,apparently it's not.

For instance when you go into Ceilingmart to buy a water cooler for your business, a gift for your daughter, and a magazine for yourself, you need to actually run your business expense through the till separately.

Yes, this means you pay for it and then you pay for your personal expenses.

"But, but, it's so much easier to just pay for it all at once and figure it out later. Besides the accountant can figure it out."

Well, how am I supposed to know that the water cooler is for your office? It could be for your kitchen at home. And if you think that just because you put the entire receipt in your business shoebox you can write off the entire receipt, wrong again. The person looking at it is more likely to just ignore the whole receipt and nothing gets written off. Better to be safe than sorry when it comes to the tax man.

Not only should you pay for it separately, but - are you ready for it - you should be using different credit cards and different accounts. That's right, have a separate account and a credit card just for business.

Not only will this save the accountant time, but it saves you time so that the accountant isn't running to you all the time and asking about expenses.

And do you really want your accountant to know that you wear adult diapers or what brand of condoms you use?

So yes, if your business can write off gas and oil on your car, then by all means hand that receipt over to the accountant. But you can't write off your cigarettes, your bottle of pop and your bag of chips that you got at the same time.

2. Make a note on your business receipts about what the receipt is about. For instance, lets say you hosted a business party and you went to the grocery store. It helps to know that this was actually a business expense and not just you trying to write off your family grocery bill.  Not that you of course would try to do that, but a receipt could accidentally get in the wrong place.

3. You don't have to have a fancy schmancy filing system. Get an accordion file that's divided up into months. Circle the date on the receipt - those receipts can be a pain for your accountant  to find the date on - make any notes you need to, and then drop the receipt into the appropriate month. You can also do this with manilla envelopes. Instead of saving them all up to do at once which can be a real pain and lets face it, you probably won't, at least not with a smile on your face, just do it everyday as part of your business routine. Easy, peasey. When it's time for it to go to the accountant, you don't have to do anything special with your expenses, just send that already organized accordion file along with your other paperwork.

See, now how easy is that? And you've saved hours and hours of work that you would have to pay for.

But if you want to pay me for it. I'll happily take it.


Reema D'souza said...

Great tips!

Unknown said...

good tips. i was my accountants worst nightmare. always leaving notes on everything and expecting him to remember the way i liked doing things. i feel really bad now... lol