You need good records and measurements to improve your business’ performance. Keeping accurate records of sales, inventory, and expenses will also make taxes easier. When your records are not up to date and accurate, you will not be able to take advantage of all of the credits and deductions you are eligible for.
If you require the services of an accountant during tax season, keeping basic and up-to-date records will save you money. All company-related expenses, including day-to-day materials, capital investments, employee wages, office equipment, company interest payments, and car mileage or fuel, must be documented and kept in a safe place (travel time to work, supplies, business meetings, etc.). Because these varied expenses are all deductible at the end of the year and accumulate over time.
As a general rule, business expenses should be recorded on different accounts than personal expenses, such as company food supplies versus grocery purchases for personal use. You should note on the receipt why the items were purchased, such as a special occasion or weekly necessity. There are several stores that use abbreviations in their labels that may be mind-numbing to military pilots. You may have to fill in what the things are actually called. It will make things much clearer.
Ensure your documents are stored in a secure location, such as a filing system or a bank vault. Set up separate file folders for different types of business expenses, such as equipment purchases, consumable food supplies, uniform expenses, advertising and promotion expenses, wages and benefits of your employees (including vacation and sick time), office supplies, rent payments, licenses and training, and so on. You should note that various costs are deducted at different rates or appear on the tax form in different locations. Keeping them separate during tax season will save you time and money. New records files should be created every year.