Hi there, I am going to offer you some insight on 5 things that you can do now and every month in order to save yourself time and frustration later! All of this will also help you stay prepared in case you are ever audited by the IRS or the state, or the employment department. ALSO if your computer ever crashes (which I see happen more often than I would like) you have a paper trail for everything when you go to reenter your transactions. Some of this may sound pretty old school in this age of digital everything but you still HAVE TO HAVE A PAPER TRAIL!
1) Make copies of every check you receive or save the stub that was attached to a printed check. This will PROVE where your income is coming from and what it is for. I always try to make make copies of handwritten checks, and tear off and save the stubs when we receive payment for invoices or other payments. If the payment is related to an invoice, I attach the check copy or pay stub to the invoice.
2) Use Quickbooks or other financial software to keep track of your income and expenses related to your business. Quickbooks has many advantages over using simple spreadsheets or doing your accounting by hand. One advantage is built-in safeguards for things like double entering transactions, or missing expenses to write off. As long as you are reconciling your accounts monthly, this is the best way I know of to keep these thing from happening. Quickbooks warns you if you are entering a check number in twice and it warns you about discrepancies in your accounts when reconciling. If you need help getting started with Quickbooks, let me know and we can talk about the best plan for you.
3) Write on your receipts what the expense was for. If you have a receipt from a restaurant, write the reason you are assigning it as a business expense. Sometimes my clients write on the back, "meal with web designer to discuss plans to expand website". Or "lunch for my employees". Or if it's an office expense, make sure the items are clearly labeled or understandable (sometimes there is just a SKU number and not a description of the item). If not, write out what they were. Again, in case of an audit, this would be EXTREMELY helpful information to have. And if you do it now, you won't have to play catch-up later!
4) Use a business credit or debit card for all your business expenses. Train yourself to separate your personal and business purchases. Using a business debit card EXCLUSIVELY for business purchases can make it much easier to identify them later. If the situation calls for it, I go the office store and make two separate purchases; one with my personal debit or credit card and one with my business debit or credit card. Later when you go to reconcile your accounts it is easier to clearly see your business expenses if you don't have to weed out the personal items from the receipt or transaction. If you happen to lose that receipt, it acts as a backup method of recording a purely business expense. (Meaning you don't have to rack your brain for the amount of personal and amount of business expenses was actually in that transaction). This takes some self-discipline but it will be worth it in the end!!
5) Hire a professional, or at least do some consultation to help you establish a system that works for you and will better prepare you to prepare your taxes. Many people I have worked for actually saved money because instead of handing their accountant a mess of receipts and statements, they had all their financial information organized and their accountant didn't have to do any legwork for their tax returns. Bookkeeping, especially simple straightforward bookkeeping can be very affordable!
I hope these tips are helpful to you and can save you time and frustration in the long run. Feel free to leave comments or questions.
1) Make copies of every check you receive or save the stub that was attached to a printed check. This will PROVE where your income is coming from and what it is for. I always try to make make copies of handwritten checks, and tear off and save the stubs when we receive payment for invoices or other payments. If the payment is related to an invoice, I attach the check copy or pay stub to the invoice.
2) Use Quickbooks or other financial software to keep track of your income and expenses related to your business. Quickbooks has many advantages over using simple spreadsheets or doing your accounting by hand. One advantage is built-in safeguards for things like double entering transactions, or missing expenses to write off. As long as you are reconciling your accounts monthly, this is the best way I know of to keep these thing from happening. Quickbooks warns you if you are entering a check number in twice and it warns you about discrepancies in your accounts when reconciling. If you need help getting started with Quickbooks, let me know and we can talk about the best plan for you.
3) Write on your receipts what the expense was for. If you have a receipt from a restaurant, write the reason you are assigning it as a business expense. Sometimes my clients write on the back, "meal with web designer to discuss plans to expand website". Or "lunch for my employees". Or if it's an office expense, make sure the items are clearly labeled or understandable (sometimes there is just a SKU number and not a description of the item). If not, write out what they were. Again, in case of an audit, this would be EXTREMELY helpful information to have. And if you do it now, you won't have to play catch-up later!
4) Use a business credit or debit card for all your business expenses. Train yourself to separate your personal and business purchases. Using a business debit card EXCLUSIVELY for business purchases can make it much easier to identify them later. If the situation calls for it, I go the office store and make two separate purchases; one with my personal debit or credit card and one with my business debit or credit card. Later when you go to reconcile your accounts it is easier to clearly see your business expenses if you don't have to weed out the personal items from the receipt or transaction. If you happen to lose that receipt, it acts as a backup method of recording a purely business expense. (Meaning you don't have to rack your brain for the amount of personal and amount of business expenses was actually in that transaction). This takes some self-discipline but it will be worth it in the end!!
5) Hire a professional, or at least do some consultation to help you establish a system that works for you and will better prepare you to prepare your taxes. Many people I have worked for actually saved money because instead of handing their accountant a mess of receipts and statements, they had all their financial information organized and their accountant didn't have to do any legwork for their tax returns. Bookkeeping, especially simple straightforward bookkeeping can be very affordable!
I hope these tips are helpful to you and can save you time and frustration in the long run. Feel free to leave comments or questions.
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