6 Steps to Get Your Finances in Order for Tax Time

How to get your finances in order for tax time with Janet LeBlanc

Psst . . . I’m going to let an actual accountant and super smart person take the reins on this one . . . meet Janet, of Paper + Spark.

Janet LeBlank Paper and SparkHi! I’m Janet and I’m an accountant, serial-entrepreneur, and mama of two living in Texas. My passion is helping creative entrepreneurs feel more confident and empowered when it comes to their money. After a winding journey of selling jewelry, stationery, and spreadsheets (oh yeah!) online for the past five years, I’ve noticed that creatives tend to avoid the financial side of their biz. I’m here to help with bookkeeping templates, tips, and tools that are both pretty and in-plain-English.

It’s the most wonderful time of the year . . . time to finally total up all those numbers and see how your business really did this year. If you’re like many creative entrepreneurs and you don’t look forward to this process, you might’ve fallen a little (or a lot) behind on your bookkeeping work over the course of 2016. No guilt trips here; instead, I’ve got six steps to help you get your finances in order. Start taking action now and avoid the stress and overwhelm before taxes are due!

1. Come up with a plan and write it out.

Be honest with yourself—figure out just how behind you are and craft a plan. How much work is it going to take to compile all the data you’ll need before taxes are due? Do you need to get started like, yesterday? Or is it not as bad as you thought?

Examine your calendar from now ’til the tax deadline (2016 taxes are due April 18th, 2017) and sketch out how much work you’ll need to do each week in order to get caught up in time. Actually putting it down in writing in your planner will increase your chances of really doing the work.

Here is a very high level view of what you may need to know for your tax return:

  • Total sales and refunds
  • Total business expenses (sorted by expense category)
  • A year-end inventory count if you deal with physical inventory
  • Expenses related to your car if you used it for business purposes
  • Expenses related to your home office if you have one
  • Info on any business assets (think like big equipment) you bought or used during the year

2. Set yourself up to succeed.

That means 1) holding yourself accountable and 2) figuring out how you’ll stay motivated. To prevent yourself from saving all this *boring* accounting work til the last minute (and creating more stress), you need to figure out the best way to hold yourself accountable.

You know yourself best—whether that means sharing your accounting “to do list” with your mastermind group or promising yourself a big reward upon completion. In order to complete any task I really don’t like doing, I’ve got to stay motivated. I personally like to treat myself with a small reward each week after I’ve made progress; this way I keep working on the goal in small, manageable chunks until the deadline. {Note from Regina: Ditto! I like to get myself vegan brownies, yoga gear, new notebooks, or other “school supplies.” Find your “thing” to reward yourself.}

3. Gather all that paperwork.

Just start by getting all your junk together! It’s time to scrounge up all those receipts you’ve been (hopefully) hoarding throughout the year. Don’t forget to organize your digital receipts and documentation as well. Go through your email and “star” any business expense receipts, take screenshots, or print to PDF and save in an easily accessible folder on your desktop.

You can also physically or digitally print your bank statements, PayPal reports, etc. if you want to have these on hand for easier data entry later. Having all your documentation sorted and organized will make life easier when it comes time to record all these transactions.

4. Do the grunt work in pieces.

First—do you have a bookkeeping system, or at least a place to record your sales and expenses? If not, I suggest you set something up and quick. You don’t necessarily have to scramble to research accounting systems or apps right now; a simple spreadsheet can suffice.

Second—it’s time to play catch up. That means entering ALL your transactions for 2016—sales, refunds, shipping, expenses . . . everything. Entering transactions is probably going to be the majority of your bookkeeping time, so try to break it up into small, manageable time chunks.

Remember that plan you made? If you start early enough, you can give yourself a timeline that is actually doable for playing catch up. I’d suggest making it a goal to enter one month’s worth of transactions every week, and go one week at a time. If you start in December, you’ll be done before the April deadline with a few weeks to spare.

5. Make sure to record all your business expenses.

Most legitimate business expenses are also deductible on your tax return, and deductions are a good thing since they reduce your net profit and lower your tax bill. One of the biggest mistakes creative business owners can make is to not take advantage of all the deductions available to them. This often happens simply because you forgot you paid an expense in the first place!

When you’re recording your transactions for the year, make sure you’re recording every expense you paid. You might need to go on a bit of a treasure hunt through your inbox to make sure you’re not missing a business expense you paid last February, for example.

Here are just a few items to get your wheels turning:

  • Shop fees (like transaction & listing fees or monthly payments for Etsy, Amazon, eBay, Shopify, etc.)
  • Payment processor fees (Stripe, Square, Etsy Direct Checkout, Paypal, etc.)
  • Advertising expenses (don’t forget the cost of giveaway items)
  • Monthly subscriptions (masterminds, resource libraries, stock photography, etc.)
  • Photography expenses like apps, props, lighting, etc.
  • Shipping expenses for postage and packaging if you sell a physical product
  • Professional help for design, SEO, copywriting, accounting, or legal work
  • Printing costs for business cards and promotional materials
  • Web costs for domain registration, plug-ins, themes, etc.
  • Education and training expenses for ebooks or courses (like all of Regina’s goodies!)
  • Cost of scheduling or email apps (Hootsuite, MailChimp, Schedugram, etc.)
  • Software expenses (Photoshop, Illustrator, etc.)

6. Create a packet of all your bookkeeping totals and supporting documentation.

Once you finally finish getting caught up, make sure you’ve got your sales and all your business expenses totaled up nice and neat. Don’t forget that you’ll need documentation (like a receipt) for every business deduction you claim on your tax return.

I’d suggest printing out your yearly sales and expense totals (like a profit and loss statement basically) and organizing your supporting documents. You are basically creating a nice little packet of all your valuable accounting totals for tax purposes. Hand this packet over to your tax preparer or accountant, wrapped up in a nice little bow (just kidding), and they will be so impressed with you! Now breathe easy and go have a glass of [insert your favorite adult beverage or fancy coffee shop drink here].

Quick note from Janet: After learning that my customers’ biggest obstacle was simply taking the time to *do the work* each month, I recently debuted my first course—the 2016 Bite-Sized Bookkeeping Bootcamp. The bootcamp is designed to help creatives catch up on their 2016 business finances in the least stressful way possible. I take you from blank books to ready for tax time in small, doable steps. Consider me your personal accountant guiding you step-by-step through this stressful time of year . . . keeping you motivated, holding you accountable, and leaving you with a polished spreadsheet that includes all the numbers you’ll need to know how your business did in 2016.

Note from Regina: Check out Janet and her awesome bootcamp-style course for more money help—and please feel free to give her a shout out in the comments below.

12 Comments on “6 Steps to Get Your Finances in Order for Tax Time”

  1. Thanks for your post. It made me realize a few things about business accounting.

  2. This is brilliant and so helpful! I struggled a lot in my first year of business simply because I didn’t take the time to organize myself throughout the year. These tips would have made a lot of difference for me in terms of the crazy stress I went through 1 month for tax day…

    Thank you, Janet!

  3. Reading this article can give you ideas how to improve your business is the most important part having your business in track. Cheers!

  4. Very helpful tips for getting ones finances in order. I have being using for several years by saving my tax refund in a savings account to be used in emergencies. Having a couple of thousand dollars on hand does give one a little piece of mind.

  5. Thanks very much for this post Janet.

    As a newby blogger, I’m sure these are some of the things I’m going to have to tackle in the upcoming months (fingers crossed)! When diving into the online business world, I’ve always felt like the financial side was a constant blind spot for me. This clarifies a ton of things. Definitely shared 🙂

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