It’s alarming for me to see how many clients are not maintaining their checkbooks and records properly or are not even keeping separate books at all for each of the companies they own and operate. Maintaining your books is not something I advocate solely as a tax-savings strategy; it can also prevent you from losing your sanity and getting dragged into a potential lawsuit.
Thus, it’s critical that business owners do some bookkeeping and get their accounting ‘dialed in’. Here 5 significant reasons to take your accounting seriously.
- Tax Planning. First and foremost, there is no way you can make intelligent tax planning decisions without knowing the condition of your business. How much net-income, or loss, and whether or not you need to be looking for extra tax breaks. Get your books up to date to at least some degree so you can make a lucid decision.
- Corporate veil. If you want asset protection, your books have to be in order…and I’m not just talking about your corporate records. I’m talking about your accounting records. If you are commingling and your accounting a mess, a plaintiff can more easily pierce your corporate veil.
- Audit protection. Having a separate checkbook and good accounting records will improve your chances in an IRS audit. The IRS will oftentimes disallow a number of expenses when personal and business expenses are commingled in a single checkbook.
- Less stress and more sanity. One might think doing your accounting and keeping your books up to date is cumbersome, unnecessary, and possibly even a waste of time. In fact, I have seen time and again that this procedure saves time and money in the long run. When your books are disorganized, you’ll feel a constant stress to get it taken care of and this ultimately can cause you to feel undone.
- Improved decision-making. Having good accounting records leads to quality decision-making. How can you expect to be a successful business owner without accurate records? You owe it to yourself and your business to keep good books.
If you want to throw caution to the wind regarding corporate veil protection, commingle revenue, and have an audit nightmare, that’s fine. But also keep in mind the dollars and sense. Good bookkeeping is also about tax deductions—capturing write-offs you would otherwise miss and having the power of better information to make informed decisions quickly and effectively.
A better bookkeeping strategy is not an elusive goal. Trust me when I say you can do it! I recently had a client bounce into my office in an uncharacteristically good mood, excited to drop off their tax information for us to prepare their taxes. They could see I was visibly surprised at their positive attitude and I quickly asked what the reason was. (Believe it or not, most people don’t approach their tax planning with such enthusiasm.)
My client explained how they had struggled with bookkeeping for years, but this particular year they were able to implement an affordable system and were amazed at the benefits. I remembered my client from years past with the truck bed full of boxes, and saw the same change and excitement in this client’s eyes. Good bookkeeping can change your life.
If you have more questions about a Health Savings Account, please call and speak with August in our office to schedule a call with one of our CPAs at 435-856-5866 or visit us at www.ke-cpas.com.
Mark J. Kohler is a CPA, Attorney, Radio Show host and author of the new book “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions” and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.