I'm looking for tried and true suggestions for organizing home business expenses. My husband has 2 businesses (on line sales and a writing business), and I have 2 (nutritional education and a little singing). We need to keep some information separate, but we share other expenses. For example, we share a printer so ink and other office supplies are shared. We don't have such a huge expense there that it really matter who used how much printer paper, so it doesn't seem that we need to keep that stuff separate for the accountant. We have 2 business phone lines, and my cell which I use for business. We have internet fees. We write off a portion of our mortgage, utilities, home insurance, maintenance costs and so on, but not the whole thing obviously. We have all of those usual tax advantages of owning our own businesses.
I have a monthly paycheck (via direct deposit) and a few additional checks from individuals as well as singing gigs. I also have mileage/tolls, some entertainment expenses (occasional client lunches or food provided for training sessions). I have occasional air and hotel travel, not too much to keep track of. My husband has a lot of deposits from Pay Pal, some monthly processing fees, purchases he makes of photographs to use in ads or in designing greeting cards, etc. He gets paid by the project so he does not have a regular paycheck, but he does have quarterly checks from licensing fees. He's got a ton of little charges related to processing every purchase of his stuff by others plus web hosting and so on, some professionals he pays for graphics or on line help, copyright/intellectual property fees, and so on.
Someone gave us a Neat Works scanner, which has the ability to copy invoices, forms, correspondence, receipts, etc. and then categorize expenses. Of course it cuts down on the clutter and filing because, once you scan something, you can just recycle or shred the paper. But what about the accounting feature? I'm not clear what to do with a receipt that is partially deductible though. If I buy a bulk order of nutritional products, for example, and I am using some for personal consumption but providing some to other people, how do I separate those invoice items plus tax & shipping. Since I get a partial refund of sales tax on things I purchase for my family, how do I record that info when it comes with my paycheck? I don't want to make separate orders because the shipping is higher for smaller purchases. How do we mesh this, if we do at all, with all the expenses my husband pays on line?
We also have Excel so I could do spread sheets of everything from expenses to mileage, so that would let me enter in my destination's date, mileage and tolls. I could also record a lunch I had on that same date, and I could scan the receipt in the Neat Works. But how does that overlap if I record the info in both Excel and have the "evidence" in Neat Works? Do I just use the Excel file for the accounting and use the Neat Works more for filing, not totaling up the amounts?
Do you use anything else in your home based business the makes it easy, accurate and stress-free for you?
Thanks for the responses so far. It looks like everyone is in agreement about Quick Books. But does anyone use a Neat Works just for the filing part if not for the accounting part?
FYI We have kept separate checking accounts all along but now that the businesses have diversified and expanded, the idea of 5 different ones seems a little cumbersome. We do keep things separate enough for the IRS - even if one time we buy ink and copy paper from one business and the next time from the other, it all works out. We do work with a small business accountant who thinks we are doing fine legally, especially because a few of the businesses can be under one "umbrella" corporation. But I do want to make it less of a chore to keep track.
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V.C.
answers from
San Diego
on
We use Quick Books Pro. It's easy to set up & you can set up more than one company & avoid mixing up your info. The are tutorials you can watch to help you set up, you can also hire someone to come in & set up your accounts in Quick Books & train you how to use it. There are also blogs & Q & A help from the website. A couple of years ago after upgrading, I took an on-line refresher class & I was amazed at how many little things I learned, even tho I'd been using it for almost 20 years.
When you set up your accounts in QBs, you can be as detailed as you want to be, to help you keep track.
If your schedule is unpredictable from day to day, my best advice is to make yourself take "office hours" each week & stay on top of all your paperwork. Make sure to enter your info into QBs while the details are still fresh in your mind. You'll maintain accuracy & will reduce your stress level considerably at tax time. And if you are NOT a tax accountant, find a good one who specializes in small business. If you keep up with your paperwork, you can run reports, review your info, print them & take to your tax preparer.
You should always have separate business & personal banking/credit card accounts. If you purchase something for the business with personal funds or vice versa, copy the receipt or invoice & reimburse which ever account. Good Luck
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T.F.
answers from
Dallas
on
We are in the raw materials industry and I love Quickbooks. I use Quickbooks Pro 2013.
Due to the volume of what we sell I also use excel spreadsheets for a double check on accounts payable for vendors, traffic and accounts receivable. I track when money is due in to me because we charge late fees if someone does not pay on time. Fortunately we've had success and very few late pays. Our market is pretty niche and we have products that are critical so people pay on time to be able to keep the plant supplied or their manufacturing plants can be shut down!
Our expenses are all related to our one company and I process expense reports weekly. I run payroll twice a month and all payroll taxes are paid on payroll day through my Quickbooks. I run all quarterly reports 941, and submit online to the IRS. We have the medical and 401K programs set up in QB as well and it makes it much easier to track.
Although we work from home, we choose not to claim a portion of our mortgage because tax wise that can be a slippery slope for some people because it it so detailed by the IRS. We keep track of mileage and that is paid based on IRS standards in the weekly expense reports. Quickbooks is so easy to use and you have a lot of detail. I send the file to our legal and tax counsel about once a quarter for them to review and make sure everything is up to par.
We keep our books and taxes clean as a whistle because we have such large volumes of sales which run anywhere from $300,000 to $500,000 a month. Our books have to be spot on and accurate. I have vendors, warehousing and various trucking companies I use throughout the US.
I may be mistaken but I believe you can set up more than one company on QB. I also have can extensive filing system as well. Each year I clean out and start over. I keep previous years boxed and stored.
Good luck to you.
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J.B.
answers from
Boston
on
Do you use QuickBooks or something similar for your accounting? I would imagine that with the amount of business you're doing that you must (otherwise how do you manage your inventory and print invoices for your clients?) but if not, start there. Professional business accounting software will be able to read all of your bank accounts, credit cards, etc., import your transactions, categorize them and flag the ones that are tax-related (based on how you set it up). QuickBooks has a mileage tracking feature, you can just track your mileage there.
My most sincere recommendation is that you invest in proper business software and take a class to learn how to really use it if you suspect that you aren't using all of the benefits and features. My husband was self-employed for almost 10 years as an independent contractor and in 2012 he started as an IC but then was hired as a W-2 employee but still worked out of our home and had the same mileage and home office expenses. His recordkeeping is terrible so he played the "I'll worry about documentation if I ever get audited" and voila! A state audit notification arrived in the mail yesterday for 2011 & 2012. He has to go back through a mess of assignments to provide documentation of all of his expenses. It's going to be a nightmare. If he had just invested in software and used it properly, it would be a matter of printing a few reports and mailing them in.
Also, have separate checking accounts for each of your businesses. That won't solve the issue of needing to split transactions for things like shared office supplies, but it can help with things like your husband's PayPal income and on-line sales business income and expenses. That's probably the most transaction-heavy business so having one account for all of that and nothing else makes sense, plus another account for your nutrition consulting business, where again you have to deal with purchasing and selling products and probably have a bit of transaction volume.
By having separate bank accounts for each business, your accounting software can automatically categorize everything from Account A to Business A and Account B to Business B by default and then the only manual transactions you need to do would be to further split the categories for any transactions that are shared across the businesses.
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S.T.
answers from
Washington DC
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wow, i so admire your entrepreneurial gumption, and would be overwhelmed by the complexity!
i'm glad you're getting some great suggestions. i had a successful p/t home business for almost 20 years, but my antique bookkeeping involved a ledger (a book- not online) and a pretty tin in which i kept all my receipts.
don't think it would work for you.
:) khairete
S.
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G.B.
answers from
Oklahoma City
on
One of the main things we're taught when we are running a business we own or from our home is to keep all purchases separate. You just need to make sure you use your checking account for each business separately.
Such as going to Walmart. You have a bunch of paper and ink and stuff for businesses then remember you need a gallon of milk and loaf of bread....write 2 checks. One from your business account then one for the personal purchases.
This gets you in the mental habit of keeping your business as the business and home as home.
It will also make your accounting easier.
I'd probably become a LLC and call it D.'s Dramatic Dirge or D.'s Dolce Ditty's....lol. Then everything for the music part would be totally on one account. That way you can do a spreadsheet on costs and profits with no thought put into how to separate it out.
Same for hubby and all the businesses you manage. It's so much simpler, really.
When I was able to stop keeping a bin for receipts so I could get them in the books I was so relieved and didn't dread doing the budget.
