Many small businesses face a similar problem shortly before opening their doors – how do we manage our money? Whether your business is large or small, instantly profitable or slightly struggling, there is no “one-size-fits-all” approach to managing the finances of your small business. If you manage your money properly you’ll likely discover additional expenses you can use for tax deductions. As long as you’re proactive on the front end, organizing business expenses is easy. Here’s some tips.
Separate Personal and Business Finances
If you don’t already have a personal bank account and a business bank account, sign up for a business account immediately. Not only does separating funds protect your business, but it’ll make selling your business easier if you ever decide to sell. While a business account isn’t required, it’ll make things easier around tax time. Additionally, it helps in keeping clean records – with a business account you’ll know each deduction and deposit is business related; if you use a personal account for business expenses sifting through payments to find those that are business related can be tedious.
Use Small Business Accounting Software
You can always ledger to keep track of your income and expenses, but with a variety of small business accounting software available on the market there is no need to save pennies and do the work by hand. Software, such as Sage One web-based accounting solutions, are affordable, convenient, and easy to use. If you’re new to using accounting software, don’t worry – most software providers offer tutorials, walk-throughs, and help sections on their websites. And when it comes time to do your taxes, a professional system will make the daunting task seem easier than ever before.
Create a System to Organize Your Taxes
Whether you hire an accountant or use your small business accounting software, saving receipts and keeping track of business expenses is crucial. Did you know trips to the post office and the office supply store can be used for a tax break? Any and all mileage you put on your car for business related purposes should be tracked, as this will help you when tax season rolls around. Additionally, back up all sensitive information on an external hard drive for additional protection against data loss. It may seem like a pain, but if your computer ever crashes your business won’t take a hit.
Keep an Eye on Your Budget
If creating a budget wasn’t included in your business plan, don’t go another day without creating one – creating and maintaining a healthy budget is crucial for the success of your business. Not only is having a budget a must for ensuring you stay on track with month-to-month spending, but it’ll help you keep track of where your money is going each month. That way if you ever need to cut back on business expenses you’ll know exactly how much you spend on “fluff” items, like coffee and snacks.