End of tax year = a new beginning?

Now that we have experienced the mad dash towards the last possible date to submit a tax return form, why not think ahead this time and actually start collecting the data necessary to do this somewhat before the deadline starts to loom over our heads?

There are a number of things you can do to not only make your accountant’s life less of a living hell, and at the same time alleviating the stress you experience if you have to search for information that pertains to something as long as 1.5 years ago? Well, there are practical solutions to the ongoing records like expenses and income that you really should follow to simplify things. Of course, none of the three tips below may not apply to you, but I’m sure you’ll be able to transfer some of them into your own practice.

#1: Receipts

That’s a big one, and if you have ever tried to make sense of restaurant bills, taxi vouchers, credit card slips and miscellaneous receipts, you’ll know how hard it is to remember what exactly these refer to. It’s hard enough to determine if they are eligible to be entered into your tax records in the first place!

Make it a point to note what each receipt is for: this can be done as simply as writing on the back (please use clear writing as it’s likely not going to be you who has to decipher the hints), or scan the receipt with your phone and give the image file a proper description. Many, if not most, accounting software packages provide options to upload files to create complete records, and often a handy app to do just that is supplied with the package. My advice: make use of those options. It may seem like a tiny bit of hassle at the time, but you know full well how much time you’ll save later on, right?

If you stick to paper receipts, make it a rule to always put them in the same place when you receive them (a special pocket in your agenda, maybe?) and file them once you get back to your office. And by filing I do NOT mean “dump it in a box for someone else to sort it out later”. That ‘someone else’ is likely going to be you … and we are back to square one of this section.

#2: Invoices

Yes, I know that most invoices these days are paid by electronic means and that leads to an electronic trail that allows you to follow up on things with your bank statements, in paper format or online.

However, how useful are those for looking things up? You may want to verify what kind of search options your banking software has. If you are unlucky, you can only filter by date range, but not actually search the records by keyword, which makes checking things time-consuming, especially when you are going back a couple of months, or years.

Also, judging from years of dealing with accounting mishaps, believe me that more often than not the references on those payments are rather rudimentary and not always helpful to track anything down: oftentimes, the text is created by the person or company who pays the invoices in the first place, and they don’t necessarily follow the request you made about what kind of information they should put in the commentary field. Ask yourself: how often have you had to spend time assigning a payment to a particular invoice because no reference was made to the invoice number? What if charges have been deducted for international payments, or exchange rates have made the amount difficult to track?

Tricky, of course. And again: time-consuming.

While these things still need to be done, I firmly believe it is easier to reconcile these things nearer to the date than it is to do so years later. Not only will you be more aware of the work you have invoiced to someone, but you are more likely to remember details of the administrative process which – let’s face it – is not the foremost issue on our minds.

#3: Missing information

This is the queen of annoyances: missing reference materials. Was this a paper invoice, something I got by email or potentially even downloaded? Where did I save it? DID I save it at all? All those questions might come up for every single bit of paperwork you need to support your tax claims. And that is without an inspector popping in and asking pesky questions about that 6p discrepancy between record A and record B.

My advice here is to make sure in regular intervals (and I mean weekly or bi-weekly, not once a year, two days before the deadline for taxes!) that all the necessary paperwork is available and ready to be accessed at short notice. If you record something in your expenses, list what kind of evidence you have and where to find it. If you pay a bill, don’t rely on your bank extracts to show the info (because more often than not it doesn’t) but make sure to keep track of the paperwork at the same time.

Of course, there are a lot more things to consider from an accounting point of view (e.g. making sure that you don’t miss out on expenses you could claim but don’t, or amounts that look like legitimate claims but that the taxman, for some arcane reason, frowns upon.

Stick to what YOU can do, and leave the intricate stuff to your accountant or bookkeeper. And most importantly: do it. Regularly.