A Shoe Box Of Receipts Won't Do

Contributed by Elaine Landau

Why is it that so many people with great creative ideas fail at starting their own business? Perhaps their instincts were sharper than their bookkeeping skills. True, keeping track of your assets and liabilities isn’t as exciting as making the big sales or wining and dining potential clients, but if you don’t know what your financial status is, you might just be wining and dining yourself into the unemployment line.

Would You Work for You?
We’ve all had crummy bosses. Some of us have had great bosses. Which would you be? Even if you are your only employee, are you a good boss? Do you know the status of your inventory? Do you keep an accurate appointment calendar? Have you set realistic goals and objectives? Did you start out with enough working capital? Do you owe more than you are making? If you were sick one day, could anybody come into your office and make sense of your mess?

Being your own boss only works if you work at being your best boss.

Procrastination Promotes Problems
A daily accounting of expenses is key to keeping up with your own business. By throwing receipts and notes in a drawer, you’re inviting mistakes later on. If time is a factor, online computer education might be helpful. An advanced Quicken® tutorial may prove invaluable. The Internet offers a plethora of sources that can guide small business owners on the best ways to keep accurate records. If basic Internet training is needed, it is available. Computer online tutorials are offered that may help you become proficient in record-keeping programs. Online courses on QuickBooks® could prove invaluable.

Black is Good, Red is Not so Good
Seeing if your business is financially healthy can be determined at a glance with current financial statements. Profit and loss statements and balance sheets are important when banks or creditors are evaluating your business. But you need a few more documents to complete your financial picture. An income statement documents your business income and expenses during a given period of time. A balance sheet is an essential tool that shows your business assets, liabilities and the equity you have in your company at any given period in time.

If this all sounds far too elementary, that is a good sign. This is not meant to be a cursory business school lesson or an introduction into starting a business. It is simply a quick inventory of the kinds of statements you will need to generate as a business owner. If you are sincere about succeeding in business, yet keeping up the books sounds terrifying, there are a lot of online courses that will clear up your confusion.

Document This
It is important to keep documents and receipts for business as well as non-business expenditures. When doing your taxes, these receipts will also serve as documentation to determine taxable and non-taxable income. Write directly on the back of the receipt in order to remember what it was for. Don’t depend on your memory. It will fail you and the IRS has very little patience when it comes to undocumented deductions.

IRS and State Department of Revenue
Surprise inspections of your business books and accountability are the name of the game when government agencies become involved in your business tax returns. Be sure all expenses and deductions are backed up with sufficient documentation. Vague answers, unreadable receipts, and neglected business calendars will not serve you well during an audit.

When your finances are being reviewed, back-up documentation is vital to support any claims. Sales slips, invoices, deposit slips, cancelled checks, and paid bills should be put in a folder, clearly marked, and placed in a fireproof safe. To document your gross income from your business, you should retain credit card charge slips, bank deposit slips, cash register tapes, e-mail records and your 1099-Misc. form. You may feel that you are spending most of your time documenting your activities. But if your books ever come under scrutiny, you will be grateful that you spent the extra half hour at the end of each day to update your financial records.

When all is said and done, if you just can’t handle numbers and worrying about money gives you hives, perhaps it is time to hire a freelance bookkeeper. True, it is an expense. In the long run, it may save you from making very expensive mistakes.

QuickBooks is a registered trademark of Intuit, Inc. in the U.S. and/or other countries.

About the Author:
Elaine Landau is a freelance writer, publicist, web site editor, and television writer with more than 15 years of experience in marketing, advertising, and publicity.

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