When you’re running a business, you have a lot to manage. If there isn’t a person in your face forcing you to stay on top of a task, it can be easy to keep putting it off to tomorrow, Friday or next week … and soon you have a large pile to work through.
While this strategy works for many projects, it can lead to trouble in the financial realm. If you’re audited, you’ll need a track record for each transaction or face consequences. Your business expenses are not something you can make up or give your best-educated guess. They need to be accurate, and you need to have the evidence to back them up.
The best and least stressful way to keep your business expenses accurate is to maintain what the IRS calls a contemporaneous approach. It’s basically an organized approach for tracking your expenses as they occur. Here are eight tips to help you manage your business expenses and finances and ensure you are prepared in case of an audit.
1. Pick a strategy that works for you
You can outsource your finances by hiring a bookkeeper or a “QuickBooks expert.” The more cost-effective but time-intensive route is to track your expenses yourself, either by hand or electronically.
2. Know what to track
You’ll want to track the following items. Ensure you’ve got a strategy for each.
- Cash flow
- Donations/charitable giving
3. Store your business expenses information in one place
Law requires you to keep all tax records for at least three years. This can either be a digital copy in the cloud or a physical copy. You might also store your expenses within your subscription service app.
4. Keep your business and personal accounts separate
Having a separate bank account for your small business will help you not mix up your personal expenses with your business expenses. Having a credit card connected to the business account will also enable you to easily send business expenses through that account.
5. Use technology and apps to help streamline the process
Traditionally, professionals would keep all business receipts in a manilla envelope. Nowadays, there are many electronic, paperless options that sync to your accounts or allow you to upload photos of receipts. Pick a platform you’re comfortable with that isn’t cost-prohibitive.
- Microsoft Excel has many templates available for tracking cash flow, income, etc. It is a great option for small businesses without too many transactions.
- QuickBooks is a widely …….