Dollars & Sense
The importance of bookkeeping
Every smart business person makes time for bookkeeping even though it may be the last thing you want to deal with in your spare time. Doing some type of bookkeeping is a key element to running a successful trucking operation.
To effectively manage your business you must have accurate knowledge of your income and expenses. Consistent, regular bookkeeping is the only way to keep track of this important information.
Your bookkeeping system should be accurate, whether you use a professional service or do your own bookkeeping. A professional bookkeeping service will usually provide you with a checklist of items needed to prepare a Profit & Loss Statement.
Typically you would provide your bookkeeper with monthly income and expense information, for example, your settlement statement showing gross pay or a record of income received if you do your own billing and a breakdown of all expenses. This would include receipts for all cash purchases, a copy of your check register or check stubs, and your monthly credit card statements.
Keeping accurate, organized, records is vital to the success of your business. A lost receipt is a lost deduction and a lost deduction means more of your money paid out in taxes.
Developing good record keeping habits can save you thousands of dollars. Have some type of filing and record keeping system in your truck for recording expenses, filing receipts and other important business documents. Keep some type of a planner or calendar in the truck for recording expenses you cannot get receipts for, such as, truck washes, laundry, unloading, etc. Be sure to record all the details of the expense.
If you are doing your own bookkeeping, we recommend using a computer. There are many good software programs available specifically designed for trucking. In fact, we developed a bookkeeping program called Truck Books.
You simply gather all the same income and expense information a professional bookkeeper would need and enter that information into your own bookkeeping system. You will have an area for entering your income and an area for entering expenses. You want to make sure to enter your information as regularly as possible.
Once you have all your income and expense information in an organized format, you will be able to review that information to gain more insight into your business operation. Whether you are looking at a professionally or self prepared Profit & Loss Statement, you will have the information necessary to manage cash flow, control costs, calculate estimated tax payments and make informed business decisions.
Your accountant can be a valuable advisor, whether he does your bookkeeping or periodically reviews the bookkeeping work you've done yourself.
A good accountant can be an asset year round, providing business advice and guidance when it comes to equipment purchase, tax and retirement planning, income and expense projections and much more.
Tax Tips
Keeping Tax Records
There are many different opinions as to how long to keep tax records. We suggest to our clients that they keep records for no less than 5 years and if they have enough space, we encourage them to keep 7 years worth of tax information and returns. This is especially true of our self-employed clients. Contacts and financial agreements should be kept indefinitely.
Making a Tax Payment
When making a tax payment to the IRS, be sure to specify exactly how you want that payment applied. If the IRS receives a payment without specific instruction of how to apply the payment, IRS rules say they can apply the payment in a way that will serve its own best interests.
This can cost you a lot if the payment is applied in away that does not minimize your interest and penalties. It is especially important if you owe for more than one year or more than one type of tax. Always write exactly what each payment is for directly on your check and include your Social Security number.
Example: 2004/Form1040 - SS# 000-00-0000 or 2005/1stQtr/Form1040ES - SS# 000-00-0000
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping service services to the trucking industry for over a quarter century.
Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at (800) 697-5153. Visit our Web Site at www.pbstax.com.
"Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.