One of the dreaded tasks of owning a small business is doing your own bookkeeping and accounting. When you fall behind on your books, it can become very disheartening. You’re continually trying to dig yourself out and get caught up, only to get more behind.

Soon, it seems easier to just put the bookkeeping tasks at the bottom of the to-do list rather than to face them. If you find yourself in this situation, there is hope. Take a look at a few of these tips on what to do when you fall behind and how to stay on top of bookkeeping tasks for the future.

Prevention is the best medicine

Before we get to the to-dos of how to get caught up, it’s important to understand why you shouldn’t fall behind in the first place. There are some unwelcome consequences that can come as a result of not keeping up on your books, especially when tax season comes along.

The most dire of these consequences is losing your business all together because of poor planning. A more likely outcome from messy record keeping is an IRS audit. No small business owner wants to deal with an IRS audit.

Audits can halt your business growth because of the time and attention it takes to provide all the appropriate documentation. And if you are behind on your records, finding the receipts and information the IRS needs could prove troublesome.

As tempting as it may be to ignore your small business bookkeeping needs, it’s worth setting aside some time to get caught up before tax season comes around.

Ask yourself the hard questions

The first thing you need to do to get caught up on your books is to ask yourself some hard questions. You’ll want to ask and answer these questions honestly:

• Do you want to be caught up in time to file tax returns?
• Do you want to invest in professional bookkeeping and accounting help?
• Will the information you provide be accurate, or will you still need a CPA to clean things up?
• Do you have the time and the desire to take on this task?

Answering each of these questions will help you know the right moves to make next.

Catching up with bookkeeping starts now

Once you’ve decided you do need to get caught up, there are a few steps you’ll need to take.

1. Gather receipts. Collect all receipts and invoices related to the business. Some receipts to look for include: customer invoices, debt collections, business purchases, and vendor bills and activity.
2. Reconcile bank accounts. This is an important step because you’ll want to identify and fix any errors. It will cost you a lot more if you hire a bookkeeper or accountant to do this task.
3. Separate personal and business expenses. Without separating your personal and business expenses, you’ll risk unpleasant tax implications. Keeping personal and business expenses in the same account can result in unnecessary stress at tax time. If you’re unsure about whether a purchase is a deductible business expense, visit the IRS website.
4. Collect W-2s, W-9s, and 1099s. If you’ve paid any independent contractors during the year, you’ll need to file these forms.
5. Hire a tax professional. It’s a good idea to hire an experienced CPA or tax professional to review your books, financial information, and any tax deductions before you file your taxes. This step will help eliminate any errors and also help you maximize the deductions available.

Options for staying caught up

Once you get caught up, it’s much easier to stay caught up. The IRS requires you to keep receipts for expenses over $75 for seven years. Make it easier to keep current by going paperless.

As you are processing your paperwork, you can create digital records and keep track of important documents with some of these tools:

• ZipBooks has many features, but some that will be really helpful with bookkeeping include creating and sending professional invoices, tracking future income and current balances, and automatically tracking all billable activity.
• FileThis is a smartphone app you can use to photograph and store statements, bills, and receipts. All your documents will be in one place online.
• Evernote’s ScanSnap Scanner can help you scan and file receipts. The scanner automatically uploads and stores what you scan to Evernote.

Don’t despair!

Don’t wait to get caught up on your bookkeeping tasks. Tax season will be here before you know it and you’ll want to be organized and prepared. Block out some time and use the tips and tools in this article.

Everyone gets behind occasionally, but creating an organized system will help you avoid costly mistakes in the future. Act now to save yourself time and money. You’ll appreciate the peace of mind that comes from being ready.