Getting out of the Boxed Personality

What’s a Shoebox Person? Well, to explain….

Many years ago, I worked for a CPA. He had many small businesses and they would trot into the office in January, February, March (and sometimes April!) to get their business taxes prepared by us.

We called them the “Shoebox People” because they came with the information for their business tax returns in shoeboxes. We (the staff) had to sort out the receipts in the shoeboxes to try to figure out the expenses of the business for the year writing business.

Sometimes they would come with an income printout, but mostly they just had their bank statements (un-reconciled, of course). Because they were unorganized, they had to pay more for a tax return than someone who walked into the office with a printout of the balance sheet and income statement at the end of the year.

These Shoebox People also lost money because they missed many small expenses because they didn’t have receipts. They didn’t keep track of business mileage expenses, so they couldn’t claim those on their tax returns. And if they were home business owners, they didn’t have the records of expenses to get an office space deduction.

As you might suspect, these were the businesses that weren’t doing well financially. There was a definite correlation, as we (the staff) saw it, between the financial position of the business and the state of their business record. This was, of course, purely anecdotal, but I would bet it plays out in other accounting offices too.

Want to avoid being a Shoebox Person?

  1. Get an online accounting system and keep it up to date. Put all the accounts in the note above in that system. Use their links to your accounts and get the automatic updates, so you don’t have to do manual input.
  2. Set up a way to capture every single transaction (financial event) when it happens. I send every online receipt to my bookkeeper via email, telling him which category to put it in. Then I can forget it. Another easy way is to keep all those records online, using Evernote. You can send an email to your Evernote account.

Put a logbook in your car and keep track of business mileage. Make a note every time you drive anywhere for business, including the date, miles driven, and business purposes.

  1. Every month, review your expenses and reconcile your business bank account. It’s not that difficult. Trust me. With an online system, it’s almost done for you. Make sure that all expenses are correctly categorized. If an expense was for a business meeting at a restaurant or other location where you paid with your business debit or credit card, note the business purpose and who you were with on the receipt (there’s usually a place for notes). If you see something strange, follow up on it. Only you can do this, and it will only take a few minutes.
  2. Before the end of the year, do a quick review of the year, noting anything strange, any expenses out of line with expected. Add all those business mileage expenses from your log book. Prepare a list of home office expenses. And you’re done!

After the first of the year, when you have all of your end-of-year bookkeeping done, you can walk to the tax preparer’s office with a memory stick. Or, better yet, you can email the files directly.

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