Nobody likes tax time. This is particularly true for the small business owner who has to deal with business taxes in addition to personal taxes. However, there are things that you can do throughout the year to reduce the stress that is felt at tax time. One of those things is to use a business credit card for all purchases that are made throughout the year. This keeps expenses easily organized and reduces the time that you'll spend trying to sort your business expenses from your personal expenses.
Every good business uses some type of expense trackign mechanism. If you're a small business owner who doesn't yet have a way to sufficiently track expenses, it's imperative that you get one. A business credit card makes it easier for you to make purchases and track expenses and to keep those expense items organized. It also lends credibility to your business even if you're just a one-man operation. Consider going to lunch with a client and using cash to pay the bill. You look a lot more professional if you take out a credit card (with your company name on it) to cover the cost.
Assuming that you understand the importance of business credit cards and already have one, you should learn to start using it wisely. Wise use of your card means using it for every single purchase that you make for the business and only for those purchases made for the business. In other words, you don't ever pay cash for business expenses and you don't ever put personal purchases on your business credit card. This is a very easy way to keep all of your purchase information in one place. It also keeps your personal expenses separate so that you don't have to think about them when it comes time to tax time.
The main reason that people hate tax time is because it's so time-consuming and frustrating. If all of your business expenses are made on your business card, you're not going to have this problem. You can get a copy of your annual statement and easily see what money was spent. This can be compared with information from your bank account to see how your expenses compare with your income. Having this information on just a few documents makes doing your taxes a fairly straightforward process. It's just a matter of plugging in the numbers and seeing what happens.
It is possible to actually use your credit car to pay your taxes if it turns out that you owe money to the government this year. The benefit of this is that it's done easily and it keeps yet another business expense organized on the card. The drawback is that there may be a fee associated with using your card to pay your taxes. Weigh the fee against the benefits and decide whether you want to use your card or your bank account to pay what you owe.
