2014 is almost over and its time to get organized for 2015. Start the New Year off right! Get organized NOW and create a plan so that you can move forward seamlessly into the New Year.
10 Tips to keep your business finances in 2015:
Have a separate business checking account. Do not use this account for personal reasons. Only business expenses come out of the business checking account. Along the same lines, don’t put business expenses or business income on a personal account.
Have a separate business credit card. Use this card ONLY for business expenses. This card will be paid out of the business checking account.
Have a separate business PAYPAL account. You can connect one checking account to one Paypal account. So this means you can connect your BUSINESS Paypal to your BUSINESS checking account and your Personal Paypal account to your personal checking. These should never be mixed.
Have a simple filing system for receipts. Keep separate systems for business and personal. I use accordion files which I label “Business Receipts 2014” and “Personal Receipts 2014”. You could organize these receipts by category or month. It just depends on what makes more sense to you. You could also extend this filing system to check stubs. I keep my stubs organized in an accordion file. I also make copies of deposits since my bank does not provide check images. Come up with a system that works best for you....set it up now...and stick to it.
Write “notes” on your receipts so that you know what the receipts were for. This is particularly important for “meals and entertainment” expenses. You can take this one step further and put this note in the “memo” section of your accounting software.
Give yourself a “salary”. If you write yourself a disbursement from the company in the same amount every month, it will help you to budget your personal finances. You could always adjust this amount if needed. Please remember that your entire Net Income is taxed. Taking money out of the company as a disbursement does not change that. So make sure you are keeping that in mind and putting money aside for taxes.
Understand what is a business expense and what isn’t. Try to get a strong understanding on what can be a business expense and what can’t. This would be a good time to speak with a tax professional to come up with a plan. For example…Does your accountant want you to pay for your internet out of your personal account but to keep a record so that a portion can be written off at the end of the year? Or can you use that entire expense as a business expense. If you know this kind of stuff ahead of time then you can start tracking this at the beginning of the year and won’t have to play catch-up later on.
Keep logs of business use of personal items. If you use personal items (ex: car, cellphone, etc) for business use as well, keep a log of the business usage to assist in splitting the costs at the end of the year. Once again…talk to a tax professional about what type of record keeping you need to have.
Use some form of accounting system. If you rely on your trusty shoebox of receipts and stack of check stubs…there is a better way. Start 2015 by using some form of accounting system. Practically all accountants support some form of cloud based accounting like Quickbooks Online. Have someone who knows what they are doing set it up for you and teach you how to use it. Then start 2015 using this program and you won’t have to worry about data entry at the end of the year.
Speak to a tax professional. If you meet with a tax professional now then they can help you get organized for 2015. Having a plan and staying informed will keep you on track during the year and avoid any nasty tax surprises next year.
Speak to a financial planner. Many small companies and independent contractors get frustrated when having to give such a large chunk of their money to the IRS due to self-employment taxes. Speak with a financial planner now to see the best ways to shift some of your profits into tax deferred retirement plans. It takes time to set these up and you should be contributing to these accounts throughout the year. Set these up now so you don't have to scramble at the end of the year.