As a virtual accounting firm, we work with solopreneurs, mid-sized company owners and everything in between. We are finding is that in today’s economy that many people are making the leap from employee to entrepreneur.

If you’re an entrepreneur, you need implement ways to track your expenses. While this is not a complete list of items to track or steps to take, it paperworkdoes offer a starting point and will also help when you meet with your accounting professional.

Here are tips for keeping track of income and expenses for the entrepreneur:

  1. Set up a filing system for your business expenses. Keep the receipt of any equipment you purchased or any business expenses you claimed. The type of system you use isn’t as important as having a system in place. Whether you use file folders, an accordion file, or, like our firm, choose to go paperless, you do need a place to capture all bills and receipts. You may want to consider separate files either by vendor, by month, or for different types of expenses – computers, office supplies, mileage (note, you should keep a notebook in your vehicle to track your business miles), travel, utilities, and other expenses. The IRS requires documentation to support all expenses that you claim when you file your income taxes, so don’t overlook this. It’s important!
  2. Set up a bank account for your business. This account should be used for depositing all business income and for paying your business expenses. The IRS frowns on co-mingling of personal and business finances. It’s a sure way to get in trouble!
  3. Be sure that if you loan money to your business, it is noted as such on your Balance Sheet so it’s not counted as revenue. (Many new entrepreneurs miss this vital step!) When the business is profitable, you can take money out to repay the loan instead of having to claim it as income.
  4. Take time at least quarterly to review your financial statements. The Income and Expense statement, also known as a Profit and Loss, will show your profitability. Explore your options: where you could cut back on expenses and where you may be able to make more money. If you work with a bookkeeper or an accountant and you don’t fully understand how to read your reports, you should ask them to teach you.
  5. Don’t forget to review your Balance Sheet. It will tell you the value of your business and whether your financial foundation is strong. Make sure all your assets, including fixed assets, liabilities and capital are properly recorded.

QuickBooks is a great way to keep track of the accounting for your business. It is easy to use if you understand accounting. If you don’t, bring someone onto your team who does. Keeping track of your financial data is too important to leave to chance.

 

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