During tax season, many business owners provide me their tax data in various ways: boxes of receipts, clumps of expenses stapled together with adding machine tape totaling each type of expense, or a listing of income and expenses in a spreadsheet format. When the information is fed to me by these means, I often wonder what expenses may have fallen through the cracks. I often have to ask after some deductions that appear to be missing such as bank charges and credit card interest.
But when a client sends over a computerized accounting file that has been kept up to date and includes cash and credit card purchases, I’m fairly confident that every eligible deduction will be included on the tax return.
I encourage all serious business owners to keep their books on computerized accounting software. Aside from completeness of data, there are other good reasons to track your business’s financial transactions using accounting software:
Bank reconciliation made simple. You don’t miss deductions when you reconcile your bank account on computerized software. The account won’t balance if you don’t post the bank charges or the missing receipt for that debit card transaction at the office supply store.
Easy input. If you don’t like keyboarding in your transactions, most banks will allow for a direct download of your bank account data. With a few keystrokes, you can enter an entire month’s worth of transactions. Tracking credit cards used in the business can be simple and you will remember to post the finance charges. Reconciling the credit card balance in the same way you reconcile the bank balance to the statement will ensure that all transactions are accounted for.
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