Taxes are fatiguing and sometimes demoralizing. While you may find breaks and bright spots, it’s never fun go through a lot of effort to give up some of your cash.
The tax crunch is finally over and now’s a great time to develop new habits that will make it less of a crunch next year. Let’s talk about those habits, but if you still haven’t filed, checkout our post about filing for an extension.
Make taxes less of a speed bump in your day-to-day operations with better tracking and automation.
1. Know what costs to track and track them consistently
Hunting for numbers and records is a large time sink at tax time. It’s not uncommon to have that moment of shock where you realize the total you need for a field on your return is buried in a file drawer’s worth of receipts and invoices. Hindsight can’t fix the problem of the moment, but it can help you track the right numbers next year.
Some numbers come right from your year-end inventory count, others you need to keep track of.
Save a lot of time during tax season and even have better day to day insight into your business if you track these numbers consistently throughout the year.
Costs you should track include:
Cost of finished good
This cost will include items you make yourself and items you purchase from others.
Cost of works in progress
This is the cost of unfinished products that haven’t been sold or a customer hasn’t agreed to purchase.
Cost of raw materials and supplies
This cost is self-explanatory, but can also include costs incurred to get the raw materials from your supplier into your inventory.
Cost of labor
This will include costs for assembly and overhead to get a finished product into your inventory.
Keep track of all these costs throughout the year, and you’ll only need to subtract the price of your inventory at year end to find your Cost of Goods Sold (COGS).
2. Automate your inventory management and accounting.
Whenever you encounter a repetitive task in your business, look at ways software could automate that task to both save you time and prevent human error.
Keeping your inventory and sales records in one ledger is easy when you sell in just one location. As you add online sales channels and expand to wholesale, pulling together all your inventory and sales records requires more time.
Because of this problem, one of Stitch’s core features is integrating all your sales channels to make comprehensive sales records automatic. Using an inventory management program, like Stitch, means that all your various sales records are in one place, plus costs and inventory totals are tallied automatically.
Having cost and inventory records in one place means far less counting during year-end inventory. You can export your inventory totals to a Google spreadsheet to use during your physical inventory count, and you can save everything to a file format your accountant can use.
Automate your accounting
Consistent accounting practices and periodic check-ins with your accountant will save you from scrambling and filing extensions at tax time. Like mentioned above, Stitch provides record export features that make it easy to send your accountant regular updates. However, Stitch also offers software add-on options that can make this even easier.
The biggest of these options is Xero, a web-based accounting application that makes it much easier for businesses to manage their books and work with their accountants. This makes an inventory management tool like Stitch even more powerful since it manages all your inventory in your storefronts, but also automatically sends all the financial information from your sales to your accounting records.
If you still use QuickBooks, Stitch offers another add-on that makes it easy to send your inventory and sales records to QuickBooks instead.
Repeat after me, “Next year will be easier.”
Taxes are never fun, but consistent practices and automation can spread out the labor involved and make tax season less of a crunch and more of business as usual.