What are you doing this January? If you’re a small business owner, you’re getting together your tax records to hand-deliver to your accountant. Or, you’re firing up your pencil sharpener and setting aside 8-10 days to do your taxes yourself.

If you’re the type who scrambles to find receipts, statements and other financial documents, you probably think tax season is a huge headache.

It doesn’t have to be.

You’ve probably heard that any successful business needs to create systems. Systems allow you to thrive, because they will ensure that your business keeps working even when you aren’t. You can teach your systems to others (employees, partners, downlines) and exponentially increase your revenues, while maintaining great customer service.

Same goes for recordkeeping. Take some up-front time to plan a system and put it into place. Then, all that remains is to follow the system, consistently and diligently.

Do you use an accountant to prepare your taxes?

If you do, get your money’s worth! When you deliver this year’s records, ask: “What’s the best recordkeeping system you’ve ever seen? Who’s your favorite client at tax time and why? How do they do it?”. Every accountant I’ve talked to has a client that’s come up with a superb way to track tax information. So why re-invent the wheel? Learn their system, and copy it.

A Paper System That Works

If you can’t beat ‘em, join ‘em. Rather than develop your own way to track revenues and deductions, use the IRS’s system. Create a business activity tracking sheet right from the schedule you use to file your taxes.

Start by grabbing a copy of your business entity’s tax form at www.irs.gov. For example, if you’re a sole proprietor, you would use a Schedule C in conjunction with a Form 1040.

To create your tracking sheet, set up three columns. In the first column, list every line item from your tax schedule. If you use Schedule C, you’d start by listing your revenues: “Gross Receipts”, “Returns and Allowances”, and so on. You’d continue with expenses: “Advertising”, “Car and Truck”, “Commissions and Fees”…until you reach the end of the IRS form.

Label the second column “MTD” for “Month-To-Date” and label the third column “YTD” for “Year To Date”. Make 12 copies of your new tracking sheet.

Take twelve manila folders and label them with each month of your fiscal year. Make sure to include the fiscal year on the label, too. Put one of your tracking sheets in each folder.

Now for the system. Each month, put all your receipts, statements and reports in the appropriate folder. On the last day of the month, total your business activity in the MTD column using the appropriate line items. To calculate the YTD column, simply add the current month’s MTD to the previous month’s YTD. (Your YTD is a running total for the year.) When you reach the final month of your fiscal year, the YTD column will represent your final tax figures.

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