Home Business Record Keeping - Income and Expense
So you've set up the basics - separate checking account, month end bank statement and duplicate checks (see "Home Business Record Keeping - The Simple Way" article for more details) - now how do keep your records? Let's start with expenses.
Use either a file folder or a large envelope. Write "Daily Expenses" on it. Every time you order something through the internet; print out your receipt and stick it in "Daily Expenses". If you go to your local office supply store, as soon as you get home, put your receipt in the folder.
Also set up either an excel spreadsheet or buy the old fashion spreadsheets at your office supply store. They may be old but they work just as well. You'll be recording your expenses daily and totaling your columns at the end of the month.
At the top left corner of your spreadsheet, write the month and year. Down the left side, you'll record the date of the expense and whom you paid. Use separate columns. For example: 05/15/2006 Media Marketing, Inc.
Across the top of the page, you'll list your expense categories starting with column 4 if you are using an Excel spreadsheet. Since you are running a home based business and you are a sole proprietor, we are assuming you do not have any payroll. How you pay yourself will be covered in another article.
Write the following categories in your top columns. It's helpful to list them from left to right with left being the most used category. Let's say you begin with Advertising. Then add the following categories (not necessarily in this order): Office Expense, Utilities, Phone, Vehicle Expense, Contributions, Meals/Entertainment, Travel, Taxes, Licenses and Permits, Bank Fees, Credit Card Fees, Legal/Accounting. Skip a few columns and at the far right list your next to last column as Income. List you last column as Total.
Now at the end of the day pull out your receipts and log in your expenses.
What about the good stuff? Your profit! If you are using a credit card service, PayPal or another online processor, you should be able to log online to check you daily balance. If they don't post transactions until the following day, just post it the next morning on your spreadsheet. If you receive checks in the mail, record the total amount of deposit. So at the end of day or the next morning write the date, "Income" and the total of monies received. And as always, keep copies of your records. Make copies of your deposit slips and print out your online processor statements monthly.
And that's the basic information you need to set up your expense and income report. If you are very familiar with software such as Microsoft Money or QuickBooks, go ahead and use them. Unfortunately, many entrepreneurs buy the software and post expense (or what they think are expenses) into categories that may not be correct. When your Accountant has to straighten out these entries it takes his or her office time and that means more cost to you.
That's why a simple system, such as above, will save you time and money in the long run.
