The survival of a home business depends on keeping track of finances. This applies especially during tax time when businesses need to find and make the appropriate deductions.
By taking steps to track finances, small businesses appear more professional and may have better financial success.
Required Items: Bookkeeping software, Home business dedicated credit card or debit card, Filing system
Tracking Home Business Finances Separately
Separate business finances from personal finances. Many business owners who work from home merge their personal and business financial records for ease-of-use. This habit however, can lead to mistakes and costly errors. The initial step to managing home business records is to separate them. Do not charge any business expenses on a personal credit card and do not record business expenses as if they are personal expenses. Having two financial systems in place may be difficult, but is well worth the extra time.
Use a Business Credit or Debit Card
By having a credit card set aside just for business expenses, it is much easier to see a small business’ credit and also have an easy reference to use when filing taxes. Avoid having more than one business credit card at a time if possible, and most small home businesses don’t have this problem. Pay the bills when due and always avoid cash advances. It’s recommended that small business owners obtain a business-specific credit card from a preferred bank or financial institution and be sure to research cards with either rewards or restrictions appropriate for the business.
To keep accurate records, file every business receipt and financial record, even the ones that may not seem important at the time. Create a simple filing system to track the money that the business spends in addition to any income generated. The filing system may be as basic or as complex as needed, but it should always be organized and updated frequently. In order to make keeping track of home business finances a habit, put aside a specific time period either daily or every week to update files and records.
Use Bookkeeping Software
With today’s advances in technology and programs, there are many easy-to-use bookkeeping software programs that small home businesses can use to manage finances. These programs allow owners to enter financial information and can generate reports as desired. Update this software regularly to avoid losing track of or becoming overwhelmed with receipts. While some small home business owners may be able to do their own bookkeeping, it’s never a bad idea to use these programs, and they can be used to provide more detailed information and reports.
Finally, get help when needed. It may be difficult to learn financial management or how to claim certain deductions. While many programs and guides provide great information for small home businesses, hiring a public accountant is a great way to double-check or refer to for any questions. These financial experts keep up with changing tax laws and will make sure that small businesses get the best deal. When it comes to tracking home business finances, it pays to stay ahead of the game.
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Video On How to Track Home Business Finances