As an entrepreneur, it is important to track your income and expenses. There is a lot more to just record keeping and monitoring your daily transactions. Keeping track of all your expenses and income will make it easy to identify your profit and revenue. You will also be able to see what is coming in and what is going out. You do not want any surprises because you didn’t monitor these items closely. Let’s discuss Tracking Income and Expenses for the Self-Employed with a Good System..
Make sure your personal accounts and business accounts are separate!! This is not only to prevent confusion but also for tax purposes. Also, look into building business credit so you are not using personal credit cards for business necessities.
Next, determine what type of accounting system you want to use to monitor your expenses and income. Online accounting software can help make the process of tracking your expenses and income smooth and efficient. Quickbooks is a great accounting software to utilize for a more streamlined accounting process. You can also keep your information housed in a cloud.
As a business owner, you need to decide what type of accounting method is best for your business. The size of your business and the type of industry can play a factor. There are two methods you can choose from. The most simple method is the cash-basis method. Basically, with this method, you record income once the money is received and when you make a payment, label that as an expense.
The accrual basis is a little more complicated. In accrual accounting, you record income and expenses when you incur them, regardless of when you receive money or pay. If you have a small business with not a ton of clients this may not be the best method for you.
Lastly, save your receipts and make sure you keep copies of them too. Quickbooks allows you to do this easily. Also, make sure you know which expenses are tax-deductible such as travel and car expenses and telephone and internet expenses.
Now that we discussed Tracking Income and Expenses for the Self-Employed with a Good System are you feeling more confident?
Looking for more bookkeeping information or tips? Check out our post on 5 Steps for Avoiding Overdue Accounts