Home Based Business Accounting

Accounting Tips for Work-From-Home Business Owners

Whether you are working on a tax filing or you are putting together an ongoing bookkeeping system, it is important that you consult with an accounting professional for help with your business financials. Staying ahead of the reports and tracking will set your company up for success.

Many business owners have great ideas for their company, but they don’t have the business or financial training to put together a solid system. So, hiring a qualified accounting team can be a valuable way for you to overcome the hurdles of good financial management.

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If you own a business and you work out of your home, there are even more considerations that need to be looked at. Here are a few things to think about when you are working on accounting and bookkeeping for your small, home-based business:

Stay Consistent with Ongoing Tracking

Bookkeeping often falls to the backburner because there are many other “front office” responsibilities that are demanding your time. Do you often find that you are falling behind on regular bookkeeping tasks? It might not seem like a high priority to update your financial reports or categorize recent spending. But, these things are critical if you want to optimize your tax return at the end of each year.

Instead of letting your bookkeeping efforts fall to the backburner, you might consider the advantages of hiring a bookkeeping service to help. Outsourcing the busy work will free up your time to focus on other responsibilities. Additionally, you will be able to cut back on your work hours so that you can focus on your family instead of working away all the hours of your life.

Separate Business and Personal

Most people know that they need to have a separate bank account for their business, but they don’t put in the effort to setup another account. As a work-from-home business owner, you should never let your business and personal finances mix! It is important that you keep a clean separation so that you can easily distinguish business transactions from personal spending.

The best solution is to set up a separate bank account as well as a checking account, credit card, PayPal account, and any other financial accounts that might be needed for your company. Then, you can cut yourself a paycheck or a make a monthly withdrawal that is transferred to your personal bank account when it is time to get paid.

Another important separation is to have a dedicated workspace. Even if you are moving from the desk to the couch with your laptop, you still need to make sure that you have an area that is a dedicated office. If you choose to use a portion of your rent or mortgage as a tax deduction, then you need to ensure that you have a dedicated space for business purposes.

KISSO: Keep it Simple Starting Out

If you are just getting your business off the ground, make it a point to keep everything simple and easy to understand. Some people jump in and complicate things with the formation of a corporation or other decisions that make it harder to keep up with the financial details of your company.

As your business is getting off the ground, you might consider keeping it as a sole proprietorship until you hit a certain level of growth. Your accountant can provide personalized advice to help you identify the best time to transfer from a sole proprietorship to a corporation or other legal entity.

By keeping it simple in the beginning, you will be able to avoid the headache of certain tax paperwork, multiple filings, and other legal requirements for small business owners.

Invest in High-Quality Software

In the beginning, it might be easy to track your business expenses on a spreadsheet. But, you will need a better financial system as your company grows.

Plan ahead for this growth by choosing a high-quality accounting and bookkeeping software. Even if it seems like overkill right now, you will be glad that you thought ahead when your business expands. It can be a hassle to transition from a spreadsheet system to an accounting program, so you can reduce your future stress by getting it done right in the first place.

One drawback to a spreadsheet system or another form of manual accounting is that you might easily miss transactions or lose important paperwork. Tracking everything is imperative, and you need to make sure that you can back up any tax claims in case you are ever audited in the future. Using a high-quality system will ensure that you are keeping up with the details, helping to protect yourself if any questions arise from the IRS.

Plan for the Future

Small business owners often get narrow-minded in their thinking. It is easy to be caught up in the current situations that you are working on, and forget how your decisions today will impact the success of your company in the future.

Each time you make a big business decision or you are working with your accountant, make sure that you have your future business goals in mind. Think about the things that you would like to do with your company in the future, and make sure that your decisions coincide with the goals that you are working to achieve.

An experienced accounting team can be a valuable asset to help you reach your goals. Since your accountant has worked with many other small business owners in similar situations, their experience can guide you through the process and help you avoid common roadblocks.

You need to be considering your long-term business plan for 5, 10, and 20 years in the future. At the same time, also look at the details to determine how your company will fare in the next 1, 3, and 6 months. If there are seasonal fluctuations in your industry, then you need to make sure that you are managing your cash flow so that you have the resources that will be needed during the slower season.

Anticipate Major Expenses

How often do you feel that you are just getting ahead of the cash flow problems when another major expense pops up? If you aren’t expecting these big expenses, you might be running into issues that could have been prevented.

What types of expenses are we talking about? It depends on your industry. But, examples of big expenses that might catch you off guard include tax payments, buying computers, payroll, major events, machinery upgrades, travel costs, and more.

Look ahead to see if you can identify any specific expenses that are on the horizon over the next few months. Then, talk to your accounting team to be sure that you are managing your cash flow in a way to support these expenses as needed. These major expenses are often unavoidable, but you can avoid the stress by preparing with appropriate budgeting and a back-up reserve of cash.

Track Your Deposits

Your business account might have a variety of deposits coming in, such as income, loans, or even a cash infusion from your personal savings account. Make sure that you track these expenses to avoid paying taxes on money that isn’t income.

At the end of the year, it is common to include all deposited funds in the income totals. If some of the transactions weren’t actual income deposits, then you can exclude those numbers from the tax calculations. But, the only way to know this information is to stay consistent with your tracking throughout the year. If you mistakenly count a non-income transaction as income, then you will be paying taxes on money that has already been taxed in the past.

Stay Ahead of Tax Deadlines

Everyone knows that their taxes need to be filed by April 15th each year, but many people have a hard time keeping up with other tax deadlines that are due throughout the year. Most small business owners need to send quarterly tax payments, and there might be other deposits for employee withholdings and more.

It can be a challenge to keep up with everything that you need to know. That’s why the simplest solution is to hire an experienced accounting team to handle these details for you. These outsourcing services will ensure that you never miss a deadline, helping you to avoid headaches, penalties, and fees.

Talk to the Experts at Easier Accounting

Are you ready for more information about how you can improve the financial outlook for your small business? It is essential to have an experienced accounting team available to help you.

Here at Easier Accounting, we specialize in small business financial services. We have many years of experience in this industry, and we would love to apply that experience to help your company. Instead of only offering basic tax filing once a year, we provide a fully-supportive accounting team that is available to you all year long.

Learn about how these services will help you prepare for future growth in your company! We will gladly customize our accounting services to meet your needs. You are welcome to contact us anytime to learn more about how our services can help your business: (888) 620-0770

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