How To Track Business Expenses

Source flickr.com/photos/schuey/264857413/

If this recession has taught us anything it’s that we all must become aware of how much we’re spending, both in our personal lives and in our business lives.

And this pertains to everyone, both those families who are living paycheck to paycheck as well as those well-to-do types who make millions.

The benefits of tracking business expenses are many. Do you know why some CPAs dread tax season? It’s because they fear their clients will bring in the stereotypical shoebox full of receipts and dump it on their desk. Tracking your expenses monthly makes it easier for your CPA to correctly file your taxes and apply the appropriate tax breaks.

Bad business deals are often made when the owner doesn’t have any idea what his cash flow is in a given month. If you know exactly how much you can afford to invest, then the decision is a bit easier to make when a deal comes across your desk.

Start tracking your business expenses today by purchasing a simple notebook and accordian file folder with divisions for every month. You can find mileage notebooks in office supply shops or simply use a small spiral notebook instead.

Get into the habit of jotting down your mileage at the start and end of each day. Every time you buy gas, put the receipt into your file folder under the appropriate month. Did you treat a client to lunch? Pop that receipt in the folder right away.

Imagine how much cleaner your car will be with all those receipts filed 😉

If you prefer to use a software to track business expenses, there are many titles to choose from. BUT the software will only work if you sit down and enter the information! Start off with the notebook and folder idea first or transfer the info from your notebook into the computer on a weekly basis.

Tracking expenses for a home business is critical, especially if you’re filing itemized tax returns. Use the same filing system to keep your utility bills, phone bills, and receipts for office furniture organized. Of course, it’s also a little bit trickier deciding how much of your home office and utilities to claim on your taxes so consult an accountant at tax time.

Even people who earn tremendous money can fall victim to making bad money decisions. Michael Jackson left his estate with MILLIONS  of dollars of debt and Nicholas Cage certainly knows about foreclosure proceedings after admitting to not paying attention to his cash flow. Tracking your business expenses carefully will help you avoid these common pitfalls of business ownership.