- 10 Ways to Ramp Up Your Social Media PresencePosted 2 years ago
- 4 Business Lessons Learned from the Late,
Great Steve JobsPosted 2 years ago
- How to Stand Out in a Flooded MarketPosted 2 years ago
- Business Networking: Following up with a Thank You NotePosted 2 years ago
- Update Your Inner Circle for Consistent GrowthPosted 2 years ago
How and Why You Track Business Expenses
An online business is like any business in that you must maintain accurate records of your income and outgo. You’ll have to show the IRS the amount of money you made and spent throughout the year as well as whether or not your business was profitable. In this way, your taxes can be calculated correctly.
Definition of a Business Expense
Your business expenses are made up of anything you spend to run your business that you wouldn’t have had to spend if you weren’t running your business.
Business expenses can include a variety of expenditures:
- Office equipment such as furnishings, computers, printers, servers, phone systems, fax, and copier; the major items that let you run your business.
- Outsourcing – writers, graphic designers, web developers, virtual secretaries; anyone you pay to help you with your business.
- Learning resources – professional memberships, dues and subscriptions, coaching and mentorship, any expenses related to improving you as a professional or your business.
- Legal and accounting – your attorney, your accounting firm or accountant, court costs, insurance fees.
- Office space if you lease, or an appropriate portion of your rent or mortgage and utilities if you use part of your home as an office.
- Business trips – travel and related expenses for seminars, meetings, or anything directly concerning your business.
- Fees for Internet-based services including PayPal and online banking fees, hosting fees, domain registration, and so forth.
You also may be able to claim mileage in cases where you drive to a business-related place, meals if you go out with customers, gratuities for clients, and whatever else you can think of that is justifiably related to operating your business.
Keeping Good Records: Record keeping, particularly in the case of small businesses, isn’t necessarily a complex process. If you do not have many expenses, a simple spreadsheet suffices. The spreadsheet can be established to run like a check register, and you use it the same way, entering transactions and their information. Then place the original receipt in a folder that contains the year designation. When tax time comes, it will be simple to figure out what your expenditures were and what categories to put them in.
To improve on that and still have something easy to work with, use commercial accounting software like QuickBooks or PeachTree. Generally speaking, an accountant will put your record-keeping system together, so all you have to do is put in each expense and decide what category to put it in. When the year closes, just send your accountant your file by email so that the information can be used to do your taxes. How cool is that?
It matters a lot more that you keep records of your expenses than exactly HOW you keep them. No matter which system you select, make sure you utilize it consistently. It will be a lot simpler to handle your taxes at year’s end if you just take a couple of moments weekly to record your income and expenses instead of waiting until January.