Recently I’ve noticed a number of accountants offer their services to do a one-off service to sort out the shoe boxes of paper records their clients bring to them. It seems that a lot of small business owners still put all their receipts and invoices into a box or maybe a folder or envelope and don’t bother to look at them again.
If you are one of these business owners, this ‘out of sight out of mind’ attitude might make life easier for you during the year. However it can become a costly end of year exercise when you hand that shoebox or crammed full folder to your accountant when it comes to EOY accounts time.
Your accountant may be only too happy to deal with this (and charge you for it), but there is a much more important reason for organising these papers during the year. If you don’t keep track of your invoices and payments throughout the year, you can’t measure performance of your business. And if you don’t know about any problems until the end of the year, it might to too late to fix them, at least with our incurring interest or other penalties.
In 2012 an Australian survey found that almost 40% of small businesses kept their tax receipts in a shoebox. This approach was viewed as counterproductive because 83% of small business owners found “tax reporting stressful, with the biggest concerns including keeping track of receipts and invoices (43%), worrying that they will make a mistake (41%) and ensuring they are claiming the appropriate business expenses (40%)”.
At the time Australian tax expert Adrian Raftery (Mr Taxman) was shocked at the survey results and suggested that anyone who was serious about their business should be a bit smarter and would be a lot better off if they took advantage of systems and technology available.