Staying Organized for Tax Time

Staying Organized for Tax Time | Lemon and the Sea: How I keep my small business organized and ready for tax time with practical tips. What I learned from my first year of business taxes and how I kept everything together for my accountant.

First, an important note: I'm not an accountant, nor do I want to be. I'm going to be sharing some accounting and organization tips that worked for me, but please get in touch with someone who can help your personal your accounting for your business.

Important Things First

When you start a business, there is a lot to do. But setting everything up correctly the first time will help later for tax purposes and make it easier to grow in the future. These are the things my accountant helped me set up when I first began my business:

  • Registered EIN: This is free through the Federal government and is basically a tax ID number that allows people to pay you and the government to track this. You will put this on your W-9 in place of your social security number.
  • Business entity: Lemon and the Sea is an LLC filing as an S-Corp. While I can't totally explain what that means, it was what my accountant and the lawyer he works with recommended for the type of business I have. This is all set up so that my business is registered federally and locally.
  • Business bank account: This one is super important, especially as an LLC. If the money earned in my business went into my personal account, I lose the protection that goes along with being an LLC. Besides, having a separate account allows you to more easily track business income and expenses without getting mixed up with your electric bill and Netflix plan.
  • Accounting software: This can be anything as long as you're organized. When I started my business, I did everything through Microsoft Excel and PayPal and it worked just fine. I'm now trying out Wave, which is free and (hopefully) means that I can do a little less manual entry.

Staying Organized

I'm naturally an organized person, so I didn't struggle too much with this for my business, but as business grows, it does get harder. I sit down at the beginning of each month (when I'm preparing my income reports) and go over my bank statements, billing, and receipts so that I'm caught up.

  • Keep all your receipts: This is really important for a business. You need to have a receipt for everything you purchase for your business (even if you pay for it on a personal credit card). Without receipts, you can't take deductions or use the expenses on your taxes. I keep all my receipts in my wallet until my credit card statement comes and then staple them to the statement after checking to make sure everything is correct. This way, I have everything organized by date and in one place.
  • Track billing and payments: Every time you send an invoice, you need a record of that so that you can match up the payment received. In the end your billed amount should equal the paid amount.
  • Categorizing expenses: This is something I'm still getting a handle on, but each purchase needs to be categorized. Some common categories include: office supplies, meals & entertainment, advertising, equipment, supplies & materials, travel, and other. You should know which expenses fit which category because the are listed differently on your taxes.
  • Reconcile each month: Each month, when you get your statement, you need to check it carefully to make sure that you have all the correct amounts for expenses and payments.
  • Reports: At the end of each year, you will need to create a Profit & Loss report as well as a Balance Sheet. To make sure these are going to be correct, I like to run them every month. That way, my job is easier come tax time.

And yes, I know that I'm a little weird here. I still do a lot on paper: I keep my bank statements and print each invoice and payment confirmation. This is probably going above and beyond as far as paperwork in the digital age, but it helps me stay organized and it's the way I worked in my previous job. The most important thing is to stay on top of your finances so that you know how your business is doing.

Get Some Help

If you're really struggling with staying organized, I recommend hiring a bookkeeper you trust. And if taxes are too complicated for you (or you just don't want to take the time to deal with them), hire a CPA to help. While you'll still need to be involved and know what's going on in your business, hiring professionals to help can really make your job easier and allow you to focus on what you do best.

And if you can't afford help right now? Check out financial blogs or search for tips on creating these reports. I recommend Melissa of Whaley Bookkeeping and Stephanie at Steadfast Bookkeeping for some great advice and really helpful blog posts.

**Again, I'm not an accountant or a lawyer, so please don't take this post as exactly what you should do. This is just what I've found that works for me.


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Lemon and the Sea is a brand and website design company located in Richmond, VA. I specialize in making the branding process personal. I work with creative women who have a heart to serve others grow their businesses so they can focus on what's most important - family.   I work closely with small businesses to help them dig into what makes them unique, share their vision, and build a business that genuinely represents who they are.