So, you want to open your own business? Great! Already have a small business started? Kudos to you for chasing the American dream, my friend. However, if you’re not careful in how you account for your money, you could end up in some serious hot water. Luckily, there is a very effective way to make this simple and efficient.
The first step: open a business account separate from your bank account. Don’t have any business income yet? Loan your business the minimum amount you need to make this happen. Then, when you start making a profit, you can pay your self back. Anytime you make a business purchase, use the business card. This not only makes sure that you know exactly how much you’ve spent on your business, but also makes the bookkeeping much easier. We’ll get to that in a bit. (Bonus, you’ll be able to show a distinct separation in the event of an audit!) Of course, this will only work if you also make sure to use your personal card for all of your personal purchases.
Once you’ve opened your business account, the second step is to make sure that you link your account to your bookkeeping software. Yes, bookkeeping software costs money. As an entrepreneur or small business owner, time is money, and the cost of the software will more than pay for itself in the amount of time you save when it is set up correctly. Once your business bank account is linked to the software and all of the expenses are mapped (read: assigned to their correct expense account, such as meals and entertainment, marketing, office supplies, etc.), most softwares will remember the transaction and automatically record all future transactions to the correct expense accounts in the future. Voila! Your bookkeeping for your new business is now automatically taken care of and will be kept up to date as you swipe.
The only other items you will need to manually keep up with for most will consist of mileage. Most of us don’t purchase a new vehicle specifically for our new business venture, so in order to get credit on your taxes for business miles driven you must keep a mileage log. Trust me, it’s worth it! Do these two simple things and whomever does your taxes will adore you….which might just result in a lower fee.