This article is by Carolyn Henderson, the managing half of Steve Henderson Fine Art. She is a Regular contributing writer for FineArtViews and her freelance writing appears in regional newspapers, online magazines, and her humor blog, Middle-Aged Plague.
Okay, let me get the pun out of the way, and then we’ll get on with the rest of the article:
This is such a taxing time of year.
I admit it: I’m in denial about Christmas being over, the tree is looking like something from a Tim Burton movie, there’s no more excuse to eat cheesecake for breakfast, and it’s cold and grey and foggy and wet.
The last coping strategy I would seriously consider for getting over the post-holiday blues is bringing the 2011 financial books to final closure, but whether you do your business taxes quarterly or annually, at some point the year ends, and you tie everything together into a tidy, well organized bow.
Because I detest this aspect of the business so much, I am continually finessing, perfecting, and streamlining the financial records so that I never find myself, like a college student the night before finals, sweating over a stack of crumpled, disorganized receipts, all of which have to be brought into some semblance of organization and order before either A) the next quarter or B) April 15.
To this end, here are a few things I’ve learned, as the financial manager of a sole proprietorship business:
Save all of your receipts. While at the end of all things I stuff papers into one large envelope and file it with all of that year’s records, during the year I file the receipts by month in folders in the filing cabinet. A bookkeeper friend recommends keeping a manila envelope in the car into which receipts are stuffed, but I just use my purse. Once a month I dump papers out of the bag and into the filing cabinet.
Set up separate spreadsheets or tables for your income and expenses, and each month enter the figures into categories you have set up: for expenses, I list out Supplies (paint, canvas, frames), Office (paper, toner, utilities, shipping expenses), Books, Membership and Exhibition Fees, Advertising, Travel, Taxes, and Miscellaneous. These are not the specific categories that the IRS uses, but my accountant pulls the numbers from the figures on my spreadsheet, and these particular categories work better for our own records. And to be honest with you, I don’t keep strictly up on entering the data spot on by the end of the month, but it’s where I can get it when I do.
Use a separate charge card for your business, and use it only for business expenses. This way you have a monthly record, in one place, of purchases you have made. File the charge statements in the appropriate month’s folder along with the loose receipts.
According to my accountant, if I have a charge account trail, I don’t necessarily need every receipt – purchases from the office store or the art supply center speak for themselves, but a ream of paper from a box store, or a vase from an antique shop and used in a still life, or fabric from a craft store to be draped on a model for a figurative painting – benefit from the added explanatory paper trail from the individual receipt.
Along the same lines, set up a separate checking account for your business, and keep any attendant debit cards dedicated to business expenses.
Maintain, in a notebook or record book, business mileage driven, if you don’t have a separate vehicle specifically designated for business purposes alone. I buy cheap calendar schedule books at the dollar store and put one in each car. Eventually, I dedicate a day or series of afternoons to transferring the records to an Excel spreadsheet. At the end of the year, bundle the calendar or schedule book with the rest of your year’s records.
Find an accountant you like and trust, ask this person questions, and follow their recommendations. Of course, if you do the final tax paperwork yourself and are comfortable with this, then you are indeed an amazing person, and I want to be your friend, but I prefer setting up my records, printing them off in a tidy pile, and bundling it off to the accountant. I have some business friends who don’t do this much – they dump the pile of receipts in front of the man and say, “Call me when you need me to sign something,” but I prefer to save the added expense of his hourly time.
Nothing makes this job fun, but with a little bit of organization, some time spent learning the basics of spreadsheets, and a few hours each month to transfer information to those spreadsheets, January doesn’t have to be EXTRA cold, miserable, dreary, and grey.
Happy New Year, everyone! May it be a year of joy, excitement, discovery, and grace.