tracking expenses

I could talk for a whole afternoon about the pros and cons to opening a separate bank account for your business expenses, using your little blue card for all your business purchases, registering a business name and applying for business credit cards, etc. [Maybe I'll post about that stuff sometime.] But I'm going to use this post to highlight one, very important but basic habit that every stylist must practice: tracking your expenses.

Your S&D business is a source of income for you and your family and you want to be sure to protect it. You are required to claim your income come tax time. Unfortunately, with claiming your new income also comes the possibility of paying additional taxes. Luckily, one of the lovely little perks of running a home business is the tax deductions that come along with it. Depending on the specific tax requirements for your region, you will be able to 'claim' certain business expenses against your income, reducing the amount of tax owed.

Blah, blah blah. That all sounds so boring, I know. Let's get to the bottom line.

The goal of your business should be to earn money! Or, at the very least break even. If you're finding that you spend more than you earn, please spend some time to seriously consider your business activities and talk to your sponsor about ways that you can either earn more or spend less.

Expense tracking is a great way to make sure you're getting the most out of your business and not letting it spiral out of control. You may choose to track your expenses daily, weekly, monthly, or just when you remember to do it. The key to expense tracking is to keep your receipts!

Keep your receipts when you take a potential hostess for coffee [Starbucks for two? Expense it.], when you buy a table cloth for an upcoming vendor event, when you buy new samples, when you pay for parking at that office building downtown... Keep all of your receipts! I can't stress this enough.

Then, when it works for you, write down the amounts of all your receipts/expenses in one convenient location.

My tax pro took my expense records from 2013 and added everything up within each category (i.e. $412 in Office Supplies, $870 in Sample Items, $78 in Food & Beverage). Once she had the category totals she worked her tax magic and figured out my deduction totals! Fortunately she is awesome and is always willing to divulge tips to help maximize my return. She shared these tips:
  • Record your vehicle's mileage on January 1st and again on December 31st. In between, track the mileage you travel for business purposes and keep all of your gas receipts. Your tax pro can compare your business mileage to your total mileage and calculate the $$ spent on business travel.
    • Also keep your maintenance bills - a portion of these can also be written off against business travel.
  • Do you have a room in your home dedicated for business-only activity (like an office)? Measure out the square footage of this room, the total square footage of your house, and be sure to bring all your property tax & utilities statements with you to your tax pro. They'll be able to write off a portion of your home expenses for business use.

**Please note: I am not a tax professional and I cannot guarantee that these tax rules will apply in your region. To be safe, consult your tax pro for real financial advice.**

How do you track it all?

S&D provides us with this cute and handy expense tracker you can find in SDU. It asks you to add up all your expenses under various categories then record on the sheet after the end of the month. This system could be great for you - but if you're anything like me, you'll forget to add up your monthly expenses and end up scrambling at tax time to find all the crumpled up receipts on your desk and add them under the right month. SO, to help me track expenses as they happen, I've begun working with a new (free) accounting software called Freshbooks.

Freshbooks is a web-based software that allows you to record and track expenses as they happen. You can sign on to your account on your desktop computer or use the app from your iPhone/Android while on-the-go. It's super user-friendly and will even allow you to customize the logo and colours within your dashboard.

You can add and edit new expense categories too, so I've included a few that are specific to my S&D business:

Interested to try Freshbooks? Your free sign-up will get you 30 days access to the limitless version, then you can continue with the free version for as long as you'd like. Here's the link to learn more or start your trial today.

I hope this post gave you a little insight on why it's so important to keep track of your business spending. It can really make all the difference at tax time!

Do you have any other tips or secrets? What method do you use to keep your receipts, record your purchases and track expenses?
tracking expenses

No comments:

Post a Comment

I love to hear your comments! I try to get back to everyone same-day so I encourage you to leave a note in the comment box below. If you want to reach me more directly, feel free to connect with me via Facebook, Twitter, or my other social networks.

Related Posts Plugin for WordPress, Blogger...