Depreciation, automobile, retirement, and pension plans are some of the most common tax-deductible business expenses. While you may qualify to deduct these expenses, accurate recordkeeping is vital to get the most benefits out of this tax regulation.
Most business owners don’t know how to track business expenses. Does this sound familiar? If you answered yes, you may be leaving money on the table when you file your corporate tax returns.
Don’t know where to start? We’ve got you covered. Here are the top tips on how to track your business expenses like a boss.
Open a Business Account
If you’re just getting started, you may think depositing income from your business into your checking account is the best option to lower initial costs. However, this practice can put you in a tough spot when filing your tax returns since you’re mixing business and personal assets. Opening a business account will help you track your expenses and maintain a record of all transactions.
Use the Right Accounting Software
Do you use accounting software to track your business expenses? If you answered no, you should get an accounting platform to maintain your business financials. Compare tools such as Wave vs QuickBooks to find the right software for your business.
The best software will meet the needs of your business. Depending on the nature of your business, you may use features such as payroll, bill payments, among others. Make sure to consider these features when searching for the right accounting platform.
Scan All Your Receipts
Most business owners fail to keep evidence of their business expenses. Not keeping your receipts will turn into a nightmare when any tax agency chooses to audit your business.
Keep in mind the agency will request a copy of your receipts to verify your business expenses. While it may be difficult to keep all your original receipts, you may consider scanning them and maintaining a digital copy. Try to keep these digital copies in a secure place such as an encrypted hard drive or a cloud service.
Keep Accurate Records
Accurate recordkeeping is vital to track your expenses and protect your business from tax audits. While using accounting software is a step in the right direction, you should record every transaction as it occurs.
Maintaining updated records will allow you to keep track of how much you’re spending and in what. You should use this information for more than filing your taxes.
Analyze your income and expenses to figure out any tweaks to improve your operations. An example is how you may lower a certain expense to invest in marketing to boost your brand awareness. These changes can put your product in front of the right customer, therefore, generating more sales.
So You Learned How to Track Business Expenses Like a Boss, Now What?
Learning how to track business expenses is a must for newbie and seasoned business owners. Understanding how much money is coming in and out of your business can allow you to develop the best strategy to grow your business.
While you may be able to set up your recordkeeping system, you may consider consulting an accounting expert. A bookkeeper or accountant can offer insight into the best options that fit your business needs.
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