Who hasn’t heard about businesses that keep all their receipts in a shoe box? Some people don’t even track their receipts at all! As several CPA’s have told me, “If only the receipts were in a shoe box, I’d be happy and maybe I could figure out how to help the client.”
Tracking is not difficult. When you first begin your business, you can set up basic bookkeeping in Microsoft Excel, QuickBooks or Quicken. Which package you use doesn’t matter, just as long as you use one.
I prefer Excel because I can customize the spreadsheets to suit my personal requirements. It is helpful to establish a numbering system for expenses. Identify each deductible area like 100 Payroll, 110 Payroll Taxes, 200 Rent, 300 phone, etc. When you write your checks, refer to the number. This will help your accountant prepare your taxes and help you identify areas that are out of balance compared to other small businesses.
About five years ago I noticed that I was spending about $100 a month on copies. After the second month, I decided to buy a copier. I saved money, even though the copier cost more than $100 because I was then saving the time it had once taken to drive to a copier, make the copies and drive back.