TRACK YOUR EXPENSES
The foundation of a business is its record keeping system. Crucial, within the overall accounting system is the tracking of business related expenses. The information obtained from these records will help you monitor your business growth as well as providing necessary tax return documentation. Yes, some expenses are tax deductible and records are necessary.
Before we look at a few of the most important expenses that need tracking, let me emphasize the importance of having a banking relationship. Your account, regardless of the balance you keep, has some value to a bank; they, like you, are interested in your success and want you to grow your account balance. If you haven’t done so yet, introduce yourself to the bank manager and every time you visit the bank stop and say hello. At some point ask that person to join you for coffee/lunch and ask them to share their story. This is the beginning of a very important part of your business’s financial growth.
If you don’t have a business credit card, get one today! Every cent that you spend on behalf of your business, no matter how small the amount, should go through that card. In my opinion, the following are expenses records that are most often overlooked:
- Meals & Entertainment: business growth requires entertaining potential customers as well as existing clients. Even if it just a cup of coffee, pay for it with your credit card and list the name of the person you were with and the purpose of the visit on the back of the receipt. Sometimes it may be a requirement for you to spend cash and may not get a receipt. In such a case, write the same information on a piece of paper along with the time and date. At the end of each day put the receipts in a “shoe box”, and once a week allocate time to post them in your booking system.
- Car Expenses: always record where you go when meeting with a prospect or visiting an existing client. Keep accurate mileage from your office to your return to the office. Yes, it may be a lot of work, but this is one habit that will save you money and provide backup information in case of an audit.
- Rent and operating expenses: in many small business operations, some equipment such as cell phones and laptops are used for both personal and business use. A portion of the expense can be written off as a business expense, but time of use records are essential. Sometimes a business cell phone and computer used only for business may be an alternative answer.
I cannot emphasize the importance of having a CPA involved in your business operation; they will provide detailed information on the type of records you should keep, both now and as your business grows. This expense is not optional, but necessary for growing a successful business.
“Beware of little expenses. A Small leak will sink a great ship.” Benjamin Franklin
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