Operating You, Inc.: Tracking Finances

Now that you are running a business you need to set up the infrastructure that goes with it. Some of the operational requirements will be dictated by how you have structured - as a sole proprietorship or an incorporated business. Let me discuss some of the basic ones that you will need. I am making an assumption that you know the equipment and material you need to conduct your service offering. For example, if you are a consultant, you probably need a laptop with necessary applications. This list is in addition to that.

~ Accounting System
You need a system to track your business income and expenses. I strongly recommend that you separate your business income/expenses from your personal ones. This not only allows you to track the success of your business, but also enables you to accurately report taxes to IRS (and benefit from business expense deductions). Here are a few things you can do -

  • Open a business checking account to manage business cash flow. You may want to open this at the same bank where you have your personal savings/checking account. That may allow you to avoid maintenance fees and transfer money to/from your personal account instantly.

  • Obtain a credit card for your business expenses. The payment grace period offered by credit cards enables you to better manage your business cash flow by delaying payments. Getting the miles or points is an extra bonus. Just make sure to pay on time and to avoid cards with annual fees.

  • Track every income and expense. Many folks just use an Excel spreadsheet to track their business expenses. However, you should be able to use dome of the free tools available online. Two of the most popular ones are: www.mint.com and www.outright.com

  • Keep all your receipts. This will come in handy if you get audited by IRS. Here are some ways -

    i. You can either put them in a box or envelope and label them ,
    ii. Scan them and save digital copy. IRS has certain rules on this. The two most important are - the scanned copy should be legible when printed, and the digital records should be indexed and cross-referenced with the actual transaction. See IRS publication (TBD) for details on these and other requirements.
    iii. You can use tools such as NeatReceipts that comes with a scanner and software, or
    iv. Use service provider such as www.Shoeboxed.com. They will scan and store the receipts for you. They offer a free service and a premium paid service.

 

Manage Records