As Albert Einstein states: “The hardest thing in the world to understand is income tax.'' Company owners who are not educated in taxes find themselves having to keep up with two unrelated work areas. The first being paperwork and the second, bureaucracy. Declaring taxes can be a less stressful and less expensive endeavour for companies. In this article, we go through 5 tips that lighten the load during tax season.
Save Time And Money Spent on Tax Filing
Time and money are spent on filing taxes in accordance to tax office rules, keeping up with local and international tax laws, paying employees to gather all relevant paperwork as well as hiring an accountant to go through it.
Paperwork is energy and time-consuming; a task filled with human-error and delays. Yet, it is vastly important. You need to have all your paperwork organised and accounted for in an expense report to ensure that you are completing the administration for your company efficiently and can declare your income correctly. Revenue and costs need to be calculated accordingly and for most without an automated process, locating the documents associated with costs is cumbersome as is calculating the annual figures.
In addition, bureaucratic organisations update rules and processes on an annual basis and expect to get correct declarations from individuals and companies. This can get confusing. When not declared correctly, the tax office sends out heavy fines or worse, prosecutes those who are guilty of negligent tax declaration. Most people put their trust into an accountant, yet finding an experienced accountant can be hard - you need to spend money on a good one. And because you are spending money, you are better off making sure that the money being spent for the accountant's time is on research and correct declarations rather than paperwork.
5 Tips for Better Tax Declaration Workflow
Instead of losing time and money on freelancer administration, why not make the process more efficient and cheaper? Our 5 tips will help you towards a better workflow where gathering tax documents can turn into two simple steps of downloading expense reports and filing them at a lower cost.
1. Do your research
As a business owner, it is good practice to understand tax rules and breaks - you should know what and why you pay the government what you do as well as your entitlements. In some countries, such as the Netherlands and the UK, the tax department provides a thorough information guide on filing your income as an employee and as self-employed. It is online, easy to go through and well explained. If you have questions on VAT payments or paying freelancers internationally, you can always go to your local chamber of commerce and ask for information.
Gathering all the knowledge can take up to a week of dedicated reading and meeting attendance - if not more; and chances are by the end of it, you will still not be confident that you can declare your taxes properly and will need to hire an accountant. Even so, sussing out the tax rules and knowing the basics are important for running your own company and educating your team.
2. Educate your team
When working with freelancers, there are new administration needs and privacy rules to follow. Areas for you and your team to focus on are file management and security (such as contracts and private data), GDPR rules, the KYC process, and the importance of good expense report generation. This way, the team knows what is involved in freelancer administration and can do it correctly. Having your administration in tact will increase your chances of declaring tax benefits and expenses - lowering your final income figures and tax bill.
3. Automate with a Freelance Management System (FMS)
With cloud-based platforms and coding, paperwork automation is easy. It provides storage for contracts, invoices and private data; uses software to sign contracts and generates expense reports after payment transfers have gone through.
Instead of spending time on locating and calculating expenses manually, you can use a Freelance Management System (FMS) such as Flime to automate the workflow leaving you and your team to spend time on other work. Having paperwork organized, numbers calculated and privacy secured will reduce the added stress a team feels when working with freelancer administration.
4. Hire a good accountant
Accountants need to comply with the many tax rules that are constantly changing. They also need to know what tax breaks are available to you. With expense reports generated, a good accountant is left to do the more complicated work which ensures correct tax declaration with benefits (if any) included.
It can sometimes be necessary to do some networking to find the right accountant to add to your team. You want to be confident that your accountant knows how to comply with all the rules including VAT payments when dealing with freelancers internationally. They also need to file declarations correctly and on time. Ask the tax office if they can recommend a good accountant - one that specialises in companies and freelancers.
5. File on time
Filing late is the most common reason for entrepreneurs to pay penalties and interest to the tax office. Usually, this is caused by ignorance of tax laws or just being too busy and forgetting. These penalties can be incredibly punishing to entrepreneurs. If you do not file on time, you can get a large fine. Different countries have different deadlines for filing taxes as well as annual payments. If you know that you are going to be late, your accountant can always apply for an extension.
Implement a New Automated Workflow with Freelancer Administration
With technology in place, the mechanical parts of recording and calculating data or gathering contracts and invoices can be automated by integrating Flime's cloud-based FMS tool. This leaves employees to continue with other work and ensures that your accountant has more time to concentrate on the tax declaration forms.
Automation reduces stress and pressure by making the process of paperwork as fast and as efficient as possible. So why not leave the extra work and stress behind? Contact us at Flime for a demo and take the next step into making your freelancer administration and declaration of company costs into a flawless workflow.