Beating procrastination at tax time
A new study shows tax time procrastination is a huge problem for Australian small businesses. Why do we procrastinate, and how can we solve the problem?
A new study conducted by cloud-based accounting solution Xero has confirmed what many small business owners in Australia already know: procrastination is a big issue for small business owners, and the problem gets so much worse at tax time.
The study asked 500 small businesses about their EOFY time-management habits, and the results gave some useful insights into the sentiments of small business owners about tax-time tasks. One-third of those surveyed reported that the first time they had to navigate EOFY tax-time requirements was one of the most stressful experiences they've had in their business.
When asked to rank completing their small business taxation requirements against other typically annoying or frustrating experiences, 58% of respondents said they'd rather clean their entire house than do their taxes, and 69% would choose sharing a meal with their in-laws than sitting down with a year's worth of financial records.
The survey also showed that 65% of respondents would prefer to work on the weekend than tackle their taxation. In a cruel twist, many will ultimately end up doing both, with recent research showing that working nights and weekends is the norm for small business owners in the lead up to tax time.
But it wasn't all bad news, with the majority of small business owners surveyed admitting they would rather tackle their tax-time requirements than take a maths exam or sit in peak-hour traffic.
Given that tax time is an annual event and a non-negotiable aspect of running a business, how can business owners navigate tax season without falling victim to common procrastination techniques?
Why do we procrastinate?
According to the Xero study, 48% admitted to procrastinating on their business tax requirements because they didn't feel it needed to be completed immediately. Almost one in five respondents claimed to be too busy at this time of year to focus on their taxes.
But is that really why people procrastinate? Tax accountants H&R Block reported that many people mistakenly believe the procrastination comes down to a time-management problem when the real reasons run a lot deeper. Citing Tim Pychyl, author of Solving the Procrastination Puzzle, the article revealed that when faced with an undesirable task, people can feel a number of negative emotions including anxiety, resentment, boredom or frustration. Seeking to avoid these negative emotions, people tend to avoid those difficult tasks and concentrate their attention on other tasks that give an instant hit of more positive emotion.
Only 17% of respondents in the Xero study admitted that they avoid completing their business taxes simply because they hate doing it, but the above insights into the real reason people procrastinate would suggest the figure could be significantly higher.
Tips for beating procrastination at tax time
Given that procrastination is more likely to occur as people seek to avoid negative emotions, the way to beat procrastination at tax time – or any time – is to find a way to associate a positive emotion with the tasks you would otherwise seek to avoid.
The thought of staying up until the early hours of the morning hurriedly preparing your business's tax return the night before it's due would fill anyone with dread. Instead, break up the task into several discrete steps (gather all paper receipts, download or collect business bank statements, compile payslips, for example) and tackle them one at a time. Consider this EOFY checklist for small business for ideas.
Start by drawing up a list of every task you will need to complete in the process of preparing your business's tax return. Set aside a window of time at the start of each working day (if your individual tasks are small enough, 10 to 15 minutes each day should be plenty of time) and promise yourself that you'll complete that day's task before you move on to anything else. Immediately after completing the task, immediately reward yourself in some small way. Perhaps you don't make your morning coffee until after you have finished that day's task?
The satisfaction you'll feel from crossing off that day's activity, knowing you've made a concrete step towards the end goal of completing your business tax obligations (coupled with your cup of coffee or other immediate reward) should provide enough positive emotions to counteract the overwhelming negativity associated with the seemingly never-ending task of business taxes.
Planning ahead for next year
Once you've made a concrete plan to take care of your current business tax obligations, start planning now to avoid the same problems next year. Your life will be a whole lot easier if you continue to take small steps throughout the upcoming financial year to prepare yourself for tax time in advance.
Keep that same 10 to 15 minute window blocked out in your calendar and use that time every day to update your financial records in some small way. Not only will you make your life so much easier come tax time, your business will inevitably benefit from your increased awareness of your current financial position.
Imagine if, come next July, your bookkeeping is up-to-date, financial records are understandable and accessible, and finalising your EOFY tax return is as simple as compiling the information and either passing it to your accountant or completing the paperwork yourself.
Once you've discovered the positive benefits that come from tackling your current tax obligations one small task at a time, keep the momentum going and plan ahead for the upcoming tax year. Next July, you'll be glad you did.