Keeping your finances straight for tax time
Tax time is nightmare time, especially for business-but it doesn't have to be. The plain fact is that tax time is a nightmare because people aren't prepared for it, ever. Well, some people are, obviously, but I'm racking my brains to think of the last time I was, and racking them even harder to think of any of my friends or acquaintances who don't acquire that haggard, haunted, defeated look when tax times rolls around. So, let's consider a few ways in which you can keep your finances straight for tax time. That's the key to enjoying tax time: keeping your finances straight.
- The key to keeping your finances straight is organization. By organization I mean really organized-the military is a good metaphor for keeping your finances straight for tax time. You want to be rigid, disciplined, unrelenting-you want to do the same things month after month, and not let any month slip buy without going through the steps you've built up to keep your finances straight for tax time. Now, this is going to take some work and sacrifice, and cost you a few extra hours, and it's never, ever going to be enjoyable. But that's nothing compared to the misery and hours put in to tax time if you're not prepared when it comes slobbering up all hungry. Let's focus on this idea for just a little bit longer.
- Let's take another simple metaphor, that of physical fitness. Let's say that you create a physical fitness program that really works great for you, physically, schedule-wise, and so forth. It's very simple, and consists of: 50 pushups and 50 sit-ups every Monday, Wednesday, and Friday morning, and twenty minutes of running every Tuesday and Thursday morning. It's simple on paper at least; but pushups are hard, even for people who do a lot of push-ups. Running is hard, even for people who run quite often. There's not a runner out there who doesn't feel a little bleak now and then as he faces his morning run. This momentary bleakness; these few minutes of pain; these are nothing, nothing, nothing compared with the general misery of walking around out of shape and tired. And anyone that works out regularly will tell you that a certain joy comes in the process of working out itself once you get used to it. The same exact principle applies to keeping your finances straight for tax time.
- So, what are the push-ups and sit-ups, what are the twenty minute runs for finances?The most basic workout for keeping your finances straight for tax time is the monthly income statement. This means that every month you create a careful chart of what you spent, where you spent it, what you invested, where you invested it, what you earned, what you did with those earnings, etc. etc. etc. You want to know your business's financial trends and facts as well as a surgeon know human anatomy. You want to be an expert. To attain this degree of excellence, you'll have to be as disciplined as the runner. You may want to hire an outside accountant to help you; you may already have accountants on your team. Even so, you've got to be as savvy and up-to-date as they are, if not more so; if you show your accountant that you're completely on the ball, chances are that your accountant is going to work that much harder to impress you. A monthly income statement has plenty of benefits besides being prepared for tax time, such as allowing you to see market trends that you can capitalize on etc., but I can't stress enough its importance for an easy, smooth, hassle-free, IRS-free tax time experience. It'll be like walking around lean and mean and fit; you'll not only feel a surge of accomplishment when you perform the monthly income statement, you'll walk around all that month with your blood pressure exactly where it should be.