Paper Cuts
Posted by Gail | Filed under Good ideas
The self-employed can be a disorganized bunch of monkeys. Over and over I see people who think a shoe-box is a filing system. Whether you run an auto-shop, clean houses for a living or have your own accounting shop, you don’t stand a hope in hell of taking advantage of the benefits of being self-employed if you can’t keep your paperwork straight. And if you spend hours spinning your wheels while you hunt down that note you wrote yourself on the back of… what was that?…you’re a dope.
People throw away hundreds of dollars every year by losing receipts and forgetting to record potential tax deductions. Never mind the time wasted sorting through messy desks and drawers jammed with paperwork in no particular order.
If the mess you’re looking at right now is higher than Kilimanjaro, you can find a professional organizer at organizersincanada.com. Be prepared to shell out anywhere from $45 to $175 an hour. If you’d rather DIY, here are some tips:
Know what you’re good at and what you’re not good at. If you’re baffled by The Books, hire a bookkeeper. If your time is better spent selling than keeping your business cards organized, hire a student to input the names and contact information on your collection of business cards into a filing system that you will actually be able to use.
Collect receipts for business expenses in a basket or file folder as soon as you get them. Keep a notebook in your car for recording business trips: date, purpose, kilometers driven so the Tax Man doesn’t end up disallowing vehicle deductions because you didn’t keep detailed logs.
File as you go. Since filing is tedious work, most people ignore it until they’re overwhelmed. File away all completed paperwork as soon as the work is completed. You’ll feel better when your desk and office are clear of all unnecessary papers and you’ll feel less stress because it isn’t constantly on your Things To Do List.
Throw stuff away. If you’re one of those people who feels you have to hang on to everything, you’re making more work for yourself. I’ve seen people hang on to their grocery receipts for years. Really? Because you’ll just have to know how much that roll of TP cost you last August? Get rid of expired insurance policies, unneeded receipts and outdated paperwork. Shred documents with personal information such as policy numbers, contact information, credit card numbers, or other details that could be security risks.
When you shop online, print out your receipt and file it immediately so your deduction doesn’t go unclaimed come tax time.
Keep personal and business banking separate. Okay, I’m going to say this again, but louder: KEEP PERSONAL AND BUSINESS BANKING SEPARATE! When you run your business out of a dedicated account there’s never any question about what your expenses are for. When the Tax Man sees personal stuff in your business account, he’ll question everything. The same holds true for credit cards. Keep a card dedicated to business separate from your personal spending. If you have more than one small business, use colour-coded cheques to identify your separate accounts.
Use small business software such as Simply Accounting or QuickBooks or a spreadsheet such as Excel to track your business income and expenses. The reports you generate will tell you where your business stands all year long and make tax time a breeze.
Hire a pro to do your taxes. They know how to claim the maximum deductions without setting off flags in the tax department.
Create email templates for messages you send out more than once. Whether you have to answer frequent questions, remind a client that an invoice is due, or tell a member her credit card payment didn’t go through, having a template will save you gobs of time. The more organized you are, the more efficiently you can run your business.
Return telephone calls and e-mails in batches. Leave specific messages and the time you called if the person you’re trying to reach isn’t available. Be as explicit as you can in your message and if you need a response, tell the person what you need to know. Don’t leave it up to them to guess what you’re looking for.
This last one doesn’t always work. I practically want to spit when I leave a nice detailed message asking for something specific only to get a call back like this, “Hi Gail, I’m just returning your call. Call me back when you’re off the phone.” Then I remind myself that whatshername probably just wants to hear my sweet voice in person!
April 14, 2010 at 7:46 am
Great post. I was talking with a colleague’s spouse the other day about this very thing. As his spouse has just joined the rants of the self employed, she was having a lot of trouble managing her variable income and gets too excited about the amount of pay.
So, what has happened is that she, over the first year of business, because no one has forced her to pay income tax, keep up with her bookeeping etc. hadn’t and ended up with a severe wake up call. I’m forwarding this post to him to pass on to her.
April 14, 2010 at 7:57 am
” Keep a notebook in your car for recording business trips: date, purpose, kilometers driven so the Tax Man doesn’t end up disallowing vehicle deductions because you didn’t keep detailed logs.”
For this there is something that you can put in your car and plug it and it records every place you go. So at the end of the year you extract in the computer and you can see everywhere you went.
I know that you can buy that at Canadian Tire. Has soon has I can I will tell you the name.
Christine
April 14, 2010 at 8:18 am
Gail you’re so right! I hired a nice fellow to help me set up my books on Excel. I had spent a good sum of money on fancy software, but it was so complicated for me to use, I wasn’t using it. THEN I got disorganized.
Now, a pro has set me up using software I’m comfortable with and I use almost daily. Suddenly, I’m organized AND I feel a lot calmer too! Amazing how the paper piles up!
April 14, 2010 at 8:58 am
Sometimes you’re not a dope, sometimes you’re just plain ol’ lazy.
This posting is especially timely as this weekend I will be performing my annual “hunt for the receipts” — and *every* year I find a deduction I could have claimed about 2 months after this hunt (always minor, but still).
Honestly, I think watching the hoarding shows on t.v. lately have helped me to become much more organized. But I definately need to apply some organizational skills to my paperwork.
My problem is a combination of lazy, habit, and cluttered mind. I honestly think I like piles of crap everywhere… I must, because I keep creating that.
I missed a *specialist* appointment because I wrote the time and date on the back of a piece of paper at work and my office here looks like a paper bomb went off.
I am working on it — but calling me a dope — that worked! Thanks Gail… I definately needed a kick in the pants… and please feel free to call us chronically paper challenged lazy to — because there is complacency in recognizing a problem and doing nothing about it.
My pet peeve is people who send me an e-mail asking me to call. I’m right by the phone, they never even tried to dial…. and then I call them, and they’re not! arghhhhhhhhhhhhhhh
April 14, 2010 at 9:23 am
My mom is famous for the phone thing. Actual example left on my voicemail:
“Hi dear. I have that phone number you were looking for. Call me.”
Arrrgh!
April 14, 2010 at 10:00 am
@ MiddleWay – “the rants of the self-employed” Seems to me your typo was actually a Freudian slip! lol We’ve been there – rants sounds more accurate than ranks anyways
DH just started a new contracting position today – here’s hoping I can get him into the habit of tracking the mileage…if it doesn’t work, may have to look into that computer system referred to by ArgenTine. (let me know when you remember what it’s called)
April 14, 2010 at 11:07 am
As a contractor I was relatively diligent about my paperwork…it looked like organized chaos, but I KNEW where all the receipts were stashed for future entry into my spreadsheets. My file box was great, and I could just throw receipts in there at least, until I actually got to turn on my home computer and sit for an hour to enter everything.
I hope to get back to contracting soon, and think I’ll be even better with making sure the ‘float’ is a bit higher for the eventual time between contracts this time. I sunk myself last time, although I did have my taxes paid monthly and never owed. I just had too much fun with the “leftovers” and never saved it for the rainy days.
Ah well…hindsight will work to my advantage next time around!
April 14, 2010 at 11:42 am
Wow. there’s a professional association of organizers? I’m impressed!
April 14, 2010 at 12:20 pm
I have pretty much given up on leaving messages or sending emails. No one calls/writes back. I don’t mind calling over and over again til I get a live body, it sure beats trying to move on with my project without any direction.
April 14, 2010 at 12:25 pm
I am happy to be one of those anally organized people. My common law needs to read this blog…..looking at his dexk once again and shaking my head. Hard to share an office with this guy!
April 14, 2010 at 1:14 pm
Great post!!
I’m just finishing up the last of preparing and filing of my clients returns and believe me the self-employed individuals need a true lesson on staying organizied. Beyond staying organized self-employed really need to invest time learning about the various deductions that they are entitled to receive.
I’ve just started to explore the many feature of MS Outlook and the template idea for emails that are redundant in nature is a great idea.
April 14, 2010 at 1:42 pm
I am the most organized I have EVER been in my 12+ years of running my freelance business, and yet my taxes were the highest ever. Not fair I tell you!
I guess I must be a “dope” though. I am notorious for writng things onto loose papers, napkins, backs of receipts, the corners of school notices…. Also, I have a downstairs calendar, and upstairs calendar and the google calendar and things don’t magically appear on all three when I write them down! The nerve! Many a missed appointment can be blamed on that one scheduling flaw.
But at least I know my limitations with some business aspects. I hire a pro to do my year end and taxes. When I was an employee I did it on my own, but I would be insane to attempt the small business taxes on my own, I know that about myself.
April 14, 2010 at 1:45 pm
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April 14, 2010 at 4:49 pm
I’ve managed to organize myself well in my teaching career, but I “accidentally” became self-employed part time when I self-released a CD of my music. I did not realize at the time that that made my music a business. I have always known that I loathe business and never wanted to be self-employed. So for the past two year’s I’ve had to keep some semblance of “books” and keep records and such just for the sake of a “business” that is barely more than a hobby.
I am currently committing every mistake you listed in today’s blog, but I don’t make enough at it to hire a bookkeeper and as I have no interest in pursuing this full-time, a manager isn’t an option either. Maybe I’ll choose one of these points to work on.
April 14, 2010 at 6:56 pm
Most days I’m too organized but it has really paid off down the road.
The beginning of each new year I shread all the old bills, etc, except for the last two months, just in case there is some banking error and the bills didn’t get credited. It pays to be on the safe side, we have had the bank screw things up in the past. I made them write a letter of apology and credit my account with the service fee. It doesn’t happen often but it did a second time while we were building our new house. Our address changed obviously, and so did the billing account number which they didn’t correct, but they were really good about it.
I keep all warranty receipts in a separate folder because you never know when you may need then. Shoes shouldn’t wear out in two months, but they do anyway? Refund please.
All mechanical booklets, assembly instructions and cleaning schedules are put in a clear folder sheet and attached near the equipment (Venmar, water softner, water pump etc.) Serial numbers are recorded also so when you have to talk with a service rep. you are prepared.
These little organization tools will save you time and headaches down the road.
April 15, 2010 at 2:18 am
Great tips! Paper is overwhelming!
April 15, 2010 at 7:06 pm
Many years ago I worked as a clerk in an accounting office. My nickname at work was Shoebox. A huge part of my job was taking the boxes of paper that about 95% of our self employed clients used to drop off and sorting this mess of paper into usable piles ready for the bookkeepers who would then basically create a whole years worth of books for the businesses. These boxes varied in size from a shoebox to two cubic feet square movers boxes. Nothing was sorted, nothing organized and most of it was dropped off just before the tax deadline. I once asked my boss why people didn’t just do a little of the prep work themselves. He said there was no one reason but that I should be happy they didn’t want to bother since it create employment for all of us. But boy did those clients pay for the priviledge of employing me to sort receipts by date and category.
April 15, 2010 at 7:41 pm
I strongly disagree with the advice to throw out expired insurance policies. Especially with liability insurance, there is the possibility of a claim being filed years after the incident. In such a case, the insurance policy which will be paying out is the one you held at the time of the incident, not the one you hold now.
By all means throw out old grocery receipts and bank statements, but insurance papers should be filed away like tax receipts and warrantees. Also on the topic of insurance, keep receipts for everything non-consumable. If you get broken into, it makes it really easy to prove what you lost to the insurance company if you have receipts for your TV, computer and camera.
April 16, 2010 at 12:20 am
It’s a really good idea to write the serial numbers of computer, TV, etc equipment on any manuals, warranties, receipts when you file them. These numbers are not necessarily included in the manual/warranty/receipt. We were broken into recently and a laptop stolen. We were able to give the serial number to police and they actually recovered the laptop and returned it to us. We were shocked but for once my family appreciated the value of being organized.
April 16, 2010 at 8:55 pm
Thank you so much for this Gail! I needed to hear the part about separate banking accounts for the business and personal and that was one of the reasons I am on your site looking looking for advice today
You rule!