Tax time and organizing receipts for the entrepreneur

It doesn’t matter how organized you are, doing your taxes means two things;

1. Taking stock of the year gone by in a purely factual way. How did it all add up, how did all the work, the effort, the dreams and the disappointments – how did they all add up and what do they reveal on paper? When you look back and reflect over another year gone by it is with feelings. Tax time forces you, as a business owner, contractor and artist to reflect on the past year as the sum of its worth. There is a terrific opportunity here – it might not have been the year you were hoping for but the perspective you can get when doing your taxes will give you insight into how to make next year the best ever.

2. Dealing with a lot of receipts of all types, shapes and memories.. and adding them up. There is so much paper to deal with when sitting down to “doing” your taxes.

Here’s the thing about receipts: You have to keep them, you have to categorize them and you have to add them up at the end of the year.  I think most people just stuff them in a really large envelope and at the end of the year pass them off to their accountant to have someone else sort them. But if you don’t do that, and I don’t, and I think it is an important part of taking stock of where you spend your money, how you spend it and where you could be spending it more effectively as a business then you will need a system of keeping your receipts so that when it comes to you adding them up, it’s not such a dreadful and boring ordeal. Here’s a solution that looks good on a shelf, is easy to maintain and was very quick to add up at the end of the year.

Solutions for Organizing Receipts – The Binder & Box

Get a binder and a nice box – maybe match it to the colour of the binder and the box should be no bigger than the binder – or deeper. Choose a large binder, 2 inches or bigger. In the binder you will put clear sleeves which are individually labelled by category (Research and Development, Travel etc). The idea is to put your receipts in the box at the end of the day/week. When the box is quite full of receipts then that is when you transfer the receipts into their categorized clear sleeves.

The reason I found this method to work personally was because the box means that there’s one place and one place alone where receipts are put when they first leave your pockets, bags and car. It is also portable so when you go to categorize your receipts in the binder you can take the box and binder and do it while you watch TV or chat on the phone. Some people keep their receipts in categories in the filing cabinet but I find means inevitably that the receipts never get put in. Categorizing your receipts is something you can do in your least productive times.

And the reason I have a binder to put receipts in a categorized fashion is that at the end of the year when you sit down to do your taxes it is the worst part of the whole process and you also forget what a receipt was all about anyway or it’s faded. It really does pay to do the categorizing during the year.

Hope this helps. Drop me a line if you have any specific questions.