By Ray Barlow of Sage
Email was invented in the early 1970’s by computer engineer Raymond Tomlinson while he was developing applications for the ARPANET, the early network that today’s Internet was built on. He created email to be a simple communications tool, not a tool small business owners would rely on to manage their finances. But that’s just what email has become, and it’s terrible. Many people have just grown accustomed to sending and receiving budget spreadsheets, receipts, invoices, bank statements, tax forms and other confidential financial records to colleagues and their accountants by email (assuming they’re not still hand-delivering USB thumb drives or hard copies in shoe boxes). As a result, their email systems have become bloated, difficult-to-search archives with increased levels of financial and legal risk. If this describes your accounting process, the best thing you can do to prepare for the upcoming tax season is to automate your accounting process. Managing your business finances will be much easier and less time-consuming, and enable you to take five key steps to paying less in taxes every year.
(Photo courtesy of Ray Barlow)
There are a number of desktop and online (i.e., “cloud”) accounting software products, as well as desktop-cloud hybrid solutions that offer the best of both worlds: familiar user interfaces and the convenience and security benefits that cloud computing provides.
When it comes to handing and sharing confidential financial records, the wariness that comes when considering moving that data from your computer’s hard drive to a cloud service provider is a common one. Security worries and a reluctance to move away from a familiar desktop user experience combine to trump the cost- and time-saving benefits cloud-based apps can provide.
But don’t be led astray by the misconception that keeping sensitive financial records on your computer is safer than moving it to the cloud. When you want to share information with your accountant or bookkeeper, you have to send files via email or hand deliver either hard copies or digital copies on a portable storage hard drive. The risks of lost information due to a hardware crash, or a lost or stolen USB drive are high. Moving that information to the cloud with a secure connection gives you the same level of control over who has access to it while also enabling easy collaboration with authorized employees and clients.
That is why the hybrid model is becoming more popular. You save time and money by eliminating the need to purchase, install and maintain desktop software, and create secure 24/7 access to files for you and your accountant whether you’re working in the office, remotely or while traveling.
Many small business owners already work with an outside accountant. In fact, in a Sage Accountants Usage Study from 2013, 59 percent of U.S. small businesses said they work with an accountant. I recommend working with an accountant to any small business owner who asks me.
Additionally, automating your accounting process will help your accountant help you save money during tax season (and year-round, for that matter) in five key ways:
1. Avoid Costly Mistakes
Taxes are not always easy and straightforward, and rules and regulations continue to change on a regular basis. Aligning with an accountant can help ensure that your business remains compliant and is a critical step in maximizing your tax savings.
2. Use Online Banking
This can be invaluable during tax time because many banks let you download all of your transactions into a spreadsheet that you can then go through and mark the transactions that relate to tax time. Make a habit of doing it every month, and you’ll have a list of tax deductible items ready to go in 2017.
3. File Online
It makes good sense to file your taxes online as it’s faster and is less prone to errors. There may be forms that are required to be filed electronically, so it’s a smart idea to coordinate with your accountant, as they will understand all tax requirements for small businesses.
4. File On Time
Or else face hefty penalties that could have easily been avoided.
5. Avoid An Audit
If you make a mistake such as underestimating profit or claim business expenses but have failed to keep receipts to support your claim, you run the risk of being audited. Poorly-kept records and missing invoices and receipts will make the process even more stressful and time-consuming. However, if you have great records because you leverage an accountant and an automated process to track everything and link to your bank statements, the accountant can help you avoid raising audit-triggering red flags. There’s no guarantee you won’t be audited, but an accountant can turn the frustrating and daunting audit experience into a much easier process. Participants of Sage’s accountant usage studies also agree – 92 percent of respondents said working with an outside accountant during an audit was very helpful.
Don’t fear the cloud, embrace it. The combination of automating your accounting process with a cloud-based or cloud-desktop hybrid accounting solution will ensure that you keep good records. Not only will you save money during tax season, but you will also give your small business a competitive edge because you’re able to spend more of your time focusing on growing your company.
Ray Barlow is Vice President of Sage Accountant Solutions and is responsible for leading the accountant and bookkeeping business for Sage North America. His teams innovate and deliver the technology, education and services accounting professionals need to support small and mid-size businesses. At Sage our goal is to help accountants and bookkeepers get closer to their clients and ensure they remain their most trusted, valuable advisor.
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.