As the owner of a home based business, it is important to make sure you keep excellent books. If you go off track when it comes to your spending, you could not only risk getting an audit or some kind of penalty – you could also risk overspending, which can put your business in a precarious scenario. If your home is involved, keeping better financial records is even more important, because the last thing you want is to lose your home. This is why you want to have all of your bases covered. At the end of the day, starting a business from home can be convenient and it can cut down overhead costs, but you have to be very fiscally diligent. Here are some bookkeeping basics for home based businesses.
- Have unique accounts for taxes, savings, general spending and personal expenses. When you run a home based business, it can be easy to confuse all of your spending. Before you know it, you are mixing business expenses with personal expenses. Well, to keep better track of all this, you want to have a special account for each type of spending. Not only will this make your bookkeeping process a lot more simplified – it will also make tax time a lot easier too.
- Know the different between accounts payables and accounts receivables. Many business owners – especially home bases business owners – have trouble understanding and delineating between accounts payables and accounts receivables. The former has to do with bills that are due – these are merchant accounts that you must make good on and credit card bills. The latter has to do with money that you are owed. Keeping track of these two basic fundamentals of business financial management will go a long way in organizing your bookkeeping process.
- Have a solid system for payroll. Payroll will be a giant slice of the fiscal pie when it comes to running a business – even a home based business. You may have assistants and you may have people working in other countries as satellite employees. This is why it is important to have an efficient payroll process. Ideally, you want to have your own account for this process and you want it to be automated – or else it can start to become a burden you don’t want to deal with.
- Find a great accountant. Another incredibly important basic when it comes to managing the books for your home based business is to hire a reputable accounting firm, like Accounting Freedom, Ltd. Having an accounting firm will help you out in a number of ways – it will make paying and filing taxes a breeze and they will be able to crunch the numbers for your business, which can help you know if your business is on the right track.
- Always keep receipts. When you travel, dine out and even when you pay the mortgage, you want to have paper evidence of everything. If you don’t keep these records, it will be hard to prove certain write offs and it will be harder to keep track of credit card purchases. In the end, you will be surprised by how much easier it is to manage your books when you simply save receipts.