Keeping Your Records Straight
Basic Record Keeping for the Home Manager
How to organize your home-based business bookkeeping records.
Separating Your Expenses
Many home-based business owners make the mistake of mixing the business account with personal expenses. Some people even use the same bank account. This is a mistake, as it is much easier to track business versus personal expenses if you keep the bank accounts separate, and use each account for its designated purpose only.
Keep Your Receipts
The next rule of keeping your record is to keep all of your receipts. If you don’t have a receipt, then the government will not allow you to use it as an expense. Meals are always contentious, and you must be able to justify them as a proper business expense. This means that you should keep the business card of whatever client you are meeting with, and if you are having a sales or team meeting, you must keep minutes of the meeting, document who was there, and keep all of the receipts along with the appropriate documentation.
Tracking Vehicle Expenses
Where auto expenses are concerned, if you are using the same vehicle for business and personal use, you must keep a travel log that documents each trip and the mileage used during each trip. If you are a sole proprietor, then you divide the total expenses (fuel, insurance, maintenance – again, keep your receipts!) at the end of each year by the percentage used for business to obtain you annual business auto expenses. If your company is incorporated, the easiest method is to keep a log, and to reimburse on a monthly basis according to the government mileage allowance.
Use a Proper Filing System
Keep all of your records in a proper filing system. This will make things easier if you ever need to look something up. And it will help if you are using an outside accountant to complete your taxes at year-end. Some businesses outsource their bookkeeping, and this can be one way to make certain that the records are kept properly. Make sure to get your records (receipts, bank and credit card statements, and logs and notes) to your bookkeeper on a timely basis.
Separate Income from Expenses
Also keep expenses separate from income. If your business is small enough, or has few enough transactions, you can keep one file for expenses and one for revenue. If it is bigger, keep the expenses separate by vendor or month, whatever your bookkeeper or accountant recommends.
If you follow these points, you should be able to keep good records, and be able to follow your business’s finances better, obtaining reports in good time and with a high level of accuracy. And it will save you in accounting and tax expenses.
