“Make sure you pay your taxes; otherwise you can get in a lot of trouble.” –Richard M. Nixon
Despite the fact we know it happens every year, preparation for Tax Day continues to be an onerous and tedious task for many business owners. The frantic gathering of receipts and other paperwork, wracking your memory to remember why you saved a receipt for Starbucks the previous June; the general chaos that ensues as you collect the various documents and hope everything adds up for your accountant when they start wading through them.
As a small business owner, you have so many balls in the air, staying on top of your expenses can easily fall to the wayside, leaving you to play catch-up around time tax. Simply put, this method is not only time-consuming, expensive, and inaccurate, it’s also completely unnecessary.
Using expense management software can eliminate these headaches permanently. Your data is prepared for you and expenses are labeled for you—in real-time, rather than at tax time. This software captures every expense as it happens, generates specific reports, and even categorizes data. Do you need to add a certain note for a client project? It can do that, too (before you forget what it’s about!). And, perhaps the best part, it’s incredibly simple to set up and use. Tax season is about to get a whole lot easier.
Capture your expenses as they happen
Tax season is stressful for business owners and bookkeepers alike because everyone is playing catch up. Once March rolls around, you’re staring at an inbox of receipts, purchase confirmations, and bank statements—there might even be envelopes and file folders with other documents. Everything is everywhere, and you’re working backward trying to remember what each piece of paper means. ‘What was this receipt for?’ ‘What project was this?’ It’s easy to become overwhelmed.
Expense management technology enables you to easily keep pace with all of it. For example, if you take a client out to dinner, you can snap a picture of that receipt right away. It is then saved digitally, and all of your expense documents are stored in one place. There is no setup or learning curve, and you’re not spending hours digging through paperwork. Consider the amount of time you’re freeing up; time that can be reinvested in your business or used to relax and enjoy the fruits of your labor. We’ve seen clients save an entire weekend or more simply by automating their expense management processes.
Accurately generate specific reports for accountants
Let’s face it: It’s not easy trying to tabulate data from hundreds of business transactions every year. It’s extremely time-consuming and wrought with errors. Using expense management technology has the flexibility to simply generate the reports your accountant needs from the documents you’ve been uploading all year. The ability to prepare the data beforehand so that your accountant has what they need to ensure the process goes as smoothly—and quickly – as possible is one of the biggest benefits.
For example, you can run a yearly report that shows every expense by category, providing your accountant a breakdown of expenses and perhaps even a pivot table. You decide how many expense categories you have and how they are segmented, so the accountant has all of the relevant information in a simple format and will likely only need to tie up some loose ends. The most difficult part is over, and the expense management software made it nearly painless. It’s also reassuring that this technology is extremely accurate—98% for Itemize clients.
Categorize expenses and add client notes
It’s extremely important to categorize your expenses correctly as a small business owner; you want to make sure you are taking advantage of every tax deduction possible. But that’s not always easy to do. While it’s simple enough to classify a receipt from Staples as “office supplies,” it can get a lot more complicated pretty quickly.
For instance, you host a reception at a restaurant for clients over the summer and label the receipt as a “marketing” cost for tax deduction purposes. The problem is that it’s now mid-March, and the receipt is nowhere to be found. Despite people’s best efforts to be organized, keeping track of every single piece of paper you need to save for tax time can result in being overwhelmed by paper or losing track of the documents you need.
That changes with expense management technology: there is no need to keep paper receipts since data is stored in the cloud. And, one of its best functions – especially for taxes – is the ability to add notes and annotations for every expense. That can go a long way here. There’s no mystery around what client it was for, who you had dinner with, or what project was discussed. There’s no deciphering of scribbled notes on documents. You need everything to be as clear as possible when it comes to taxes, so why make it more complicated than it has to be?
If you’ve never used expense management technology, now is a great time to start. You’ll get your expenses organized, taxes prepared, and the financial side of your business in good hygiene for the long term. You might even wonder why you haven’t used this tool all along —and not just for tax season. Why wait? Learn more about the various ways Itemize can help you automate your expense management and AP processes, or sign-up for a free trial today.