Generally, small business expenses are “ordinary and necessary” expenses that are tax deductible. If you own a small business, it means that your business expenses can reduce both the regular income tax and the self-employment tax. Keeping track of all your business expenses leads you a long way to reduce your tax liabilities. Today, the most advanced and effective way of tracking your business expenses is through any accounting software packages that are so easy to use and that have gotten relatively inexpensive. Below are important tips to successfully track your small business expenses with software.
- Identify the business expenses. Encode your business expenses using an Excel spreadsheet. Find out how much you can spend to purchase an accounting software package.
- Use full-featured accounting software. Full-featured accounting software like QuickBooks, Peachtree and Microsoft Office Accounting can help you monitor the health of your business. But these accounting programs are tough to get used to. You’ll easily be discouraged with all the commands and the features. Since, you’re just starting you might as well learn using personal finance software like Intuit’s Quicken or Microsoft Money. These latter programs are very easy to access and can monitor not just your business expenses but also all of your finances. Whatever software it is, be sure that it’s compatible with your computer system and that it suits your business needs.
- Set-up expense categories. Spend some time to make sure you’ve set-up properly the expense categories to smoothen your tax preparation process. With the accounting software, you can add, delete, and modify all your personal finance categories. This can make you remember the categories easily to help you generate credible reports. Some software programs link the categories to particular items on your tax form. This will certainly lessen the amount of time and energy you spend preparing for your taxes.
- Ask budget recommendations. Meet with your accountant for budget recommendations to decide what accounting software is best for your business. Be sure that there are enough and appropriate budget for each of your business operation. You can also research with other small businesses to find out the best program software they use in tracking their finances.
- Shop the best market price. Before you finally decide to buy the accounting software, make sure the price is competitive and you ask for a test run. After you acquired the software, monitor its daily performance so that if there are errors you can immediately report to the vendor.
The software programs mentioned generate profit and loss reports called income statements. These reports make you analyze the financial progress of your small business, whether you’re business is gaining more than spending or the other way around. In addition, these reports greatly speed up the preparation of your tax returns.
With these five tips on hand, you’ll do a better job tracking not just your business expenses but all your finances as well to make your business as healthy and productive as possible.