| |
AMost of us dread the record keeping part of our
business. But believe it or not, it doesn’t have to
be that bad and it doesn't require an accountant, or
even an in depth knowledge of accounting to put a
simple and effective system of record keeping into
place. All you need are some basics and a little help
at the end of the year . . .
1. Obtain a business license. They're usually issued
through your city, town, municipality or county.
They're relatively inexpensive and they authenticate
your business (authentication is very important to the
IRS).
2. Open a bank account for the exclusive use of your
business transactions. You'll probably need a
business license to do this (see 1. above). This
account should be separate and distinct from the one
you use for your daily and personal needs.
3. Keep all business bank statements and cancelled
checks.
4. Run *all* of your business transactions through your
business bank account. Deposit all income from sales
you generate into your business bank account and pay
for business expenses using checks from your business
bank account. If you still work a job, deposit your
paycheck into your personal account, and make sure
that you pay for all personal expenses out of your
personal account too.
5. Understand the difference between business
expenses and personal expenses. Business expenses are
the costs incurred to operate your business. They
must be ordinary and necessary. Ordinary expenses are
those that are common and accepted in your field.
Necessary expenses are those that are helpful and
appropriate for your business.
6. Dedicate a credit card to your business purchases.
If you must use credit for business expenses, earmark
one credit card for business use only. Be sure to
make payments on this card using checks from your
business bank account.
7. Keep every receipt, every invoice and every piece
of paper you receive as a result of purchasing goods
or services for your business. If a
vendor/supplier/company you do business with does not
provide you with a receipt, request one. This is
especially important for cash transactions!
8. Don't miss some of the frequently overlooked or
forgotten business expenses:
Advertising giveaways and promotion
Audio and video tapes related to business skills
Bank Service Charges
Business association dues
Business gifts
Business related magazines and books
Casual labor and tips
Coffee and beverage service
Credit Bureau fees
Education to improve your business skills
Office supplies
Online computer services related to business
9. File your receipts immediately! If you want to be
sophisticated, deposit receipts into separate file
folders distinguished by vendor names, or types of
expense. Or, you can always throw your receipts into
a file marked "tax folder." Either way works;
however, the more sophisticated you get, the less it
will cost you at the end of the year to have your tax
return prepared.
10. Save all documents sent to you marked "Important
Tax Information". Companies or individuals with whom
you do business may report to the IRS on your behalf.
If they do this they will send you copies of what's
been provided. Your tax preparer *must* be given this
information.
About the Author:
Jacqueline McLaughlin Hale is a CPA and author of
"Your Home Based or Internet Business--Protect it and
Yourself from the IRS". To obtain your free copy
please send a blank email to netbiz@autobots.net.
And if you're working too hard and would like to add
some balance back into your life, please visit her
website, Between Friends, at http://www.betweenfriends.org
|
