If you're the type who scrambles to find receipts, statements and other financial documents, you probably think tax season is a huge headache.



It doesn't have to be.

You've probably heard that any successful business needs to create systems. Systems allow you to thrive, because they will ensure that your business keeps working even when you aren't. You can teach your systems to others (employees, partners, downlines) and exponentially increase your revenues, while maintaining great customer service.

Same goes for recordkeeping. Take some up-front time to plan a system and put it into place. Then, all that remains is to follow the system, consistently and diligently.

Do you use an accountant to prepare your taxes?

If you do, get your money's worth! When you deliver this year's records, ask: ?What's the best recordkeeping system you've ever seen? Who's your favorite client at tax time and why? How do they do it??. Every accountant I've talked to has a client that's come up with a superb way to track tax information. So why re-invent the wheel? Learn their system, and copy it.

A Paper System That Works

If you can't beat ?em, join ?em. Rather than develop your own way to track revenues and deductions, use the IRS's system. Create a business activity tracking sheet right from the schedule you use to file your taxes.

Start by grabbing a copy of your business entity's tax form at www.irs.gov. For example, if you're a sole proprietor, you would use a Schedule C in conjunction with a Form 1040.

To create your tracking sheet, set up three columns. In the first column, list every line item from your tax schedule. If you use Schedule C, you'd start by listing your revenues: ?Gross Receipts?, ?Returns and Allowances?, and so on. You'd continue with expenses: ?Advertising?, ?Car and Truck?, ?Commissions and Fees??until you reach the end of the IRS form.

Label the second column ?MTD? for ?Month-To-Date? and label the third column ?YTD? for ?Year To Date?. Make 12 copies of your new tracking sheet.

Take twelve manila folders and label them with each month of your fiscal year. Make sure to include the fiscal year on the label, too. Put one of your tracking sheets in each folder.

Now for the system. Each month, put all your receipts, statements and reports in the appropriate folder. On the last day of the month, total your business activity in the MTD column using the appropriate line items. To calculate the YTD column, simply add the current month's MTD to the previous month's YTD. (Your YTD is a running total for the year.) When you reach the final month of your fiscal year, the YTD column will represent your final tax figures.

Prefer software?

Just because you use a software program such as Quicken, Peachtree or Quickbooks doesn't mean your financial information is readily accessible at tax time. You still need to make sure your paper records back up your digital entries.

Take twelve manila folders and label them for each month of your fiscal year. Again, don't forget to add the year.

Put all your receipts, statements and other supporting documents in corresponding monthly folders. On the last day of each month, run income statement and balance sheet reports from your software for the month you're closing out. Put these reports in the manila folders, too.

When the year is over, run final reports from your accounting software covering the entire fiscal year. Bundle your manila folders together and put your year-end reports on top.

Deliver to your accountant; he or she has everything they need to put together your tax return.

Another variation on this system: Create folders for each line item on your tax return. Again using Schedule C as an example, you would create a folder for ?Advertising?, another for ?Car and Truck Expenses?, and so on. Put supporting documents in the appropriate folders. Your accountant will likely work off your software reports and use your supporting documents to double-check your figures or seek additional deduction opportunities.

Final tips for success

A great system isn't worth beans unless you actually use it. Schedule your monthly recordkeeping tasks in your PIM or daily planner. Make it a habit to regularly file business documents and/or make entries in your accounting software. A good rule of thumb is to schedule at least one hour a week for recordkeeping.

If you think your time is better spent elsewhere, hire someone to do your recordkeeping for you.

Either way, when next tax season rolls around, you won't have to pull out the extra-strength headache tablets. You'll just pull out your files instead!

Copyright 2006 Leo J Quinn Jr Enterprises, LLC