As a small business owner, you may often hear advice from others about how you should be keeping track of your business expenses so that you can have write-offs at tax time. However, if you have recently started a business you may be confused as to what this means exactly. Well, when it comes to keeping track of business expenses, there are two main things that you want to keep in mind: what you’re tracking, and how you’re tracking and documenting it.
Firstly, let’s go over some common business expenses that should be tracked in almost any industry:
These are 10 common expenses that will be found in almost any industry. This is in no way an exhaustive list, but starting with these expenses can give you a good foundation for keeping track of your business expenses. So now that you have an idea of what should be tracked, let us tackle the second obstacle of what methods you can use to keep track of and document your expenses.
When you are just starting out in business, you may have a relatively low amount of business transactions. Therefore keeping your receipts is the most simple and easiest way to keep track of your expenses. Keep the hard copies in a file, take pictures and save them on your computer, or use a service like Neat. Then, total them up at the end of the year when it’s tax time. If you’re a medium sized business you may want to set up an excel spreadsheet (which we will go over more at another time). However, You always want to keep your receipts even if you are writing your expenses down in a journal or spreadsheet. In the event of a tax audit, your receipts will prove what you spent and keep the IRS from taking more of your hard earned tax dollars (Find out more ways to survive a tax audit here)! Also, you can sign up for a 30-day trial of neat software, and start keeping track of your business expenses like an expert today!