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You Are Here: Home - Newsletters - "Organized For A Living" - Article
Most 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…
GET LEGAL
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 Internal Revenue Service).
OPEN A BUSINESS BANK ACCOUNT
Open a bank account for the exclusive use of your business transactions. You'll probably need a business license to do this. This account should be SEPARATE and DISTINCT from the one you use for your daily and personal needs.
RETAIN YOUR FINANCIAL RECORDS
Keep all business bank STATEMENTS and cancelled CHECKS. You will need them for preparing your taxes, and then will need to keep them for 7 years after you have filed in case the Internal Revenue Service audits you.
DON’T MIX BUSINESS AND PLEASURE
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.
KNOW YOUR DEDUCTIONS
Understand the differences 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.
GET THE CREDIT YOU DESERVE
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.
TRACK YOUR EXPENSES
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!
KNOW WHAT YOU CAN COUNT
Don't miss some of the frequently overlooked or forgotten business expenses:
DON’T PROCRASTINATE
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 DETAILED you get, the less it will COST you at the end of the year to have your tax return prepared.
KEEP ALL TAX RECORDS
Save all documents sent to you marked "Important Tax Information". Companies or individuals with whom you do business may report to the Internal Revenue Service 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.
Jacqueline Hale is a CPA and the editor of Between Friends: Resources for Mothers. Between Friends contains household hints, time management tips, articles on organization, parenting, money management, career, self employment, self improvement and more! Visit her website at www.betweenfriends.org. Would you like to reprint this article in your publication -- or distribute it to a wider audience? Click here for reprinting instructions. Want to receive these kind of articles via e-mail each month? Sign up for a free newsletter subscription. Click here to return to "Organized For A Living" -- March 2002... Add this page to your Bookmarks!
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