Accounting Tips For You

Now that you have your own home based business and whether or not you have already received any income, it is absolutely essential that you keep a record of all your expenses. If there’s one thing more annoying than record keeping, it’s paying unnecessary taxes because you didn’t keep a proper record of your expenses.

What are expenses? Any money that you spend with the intention of earning income for your home based business may be considered to be an expense for your business. So go back to the date upon which you either set up your home based business or started your business and find all the receipts that show that you spent money for your business. If you cannot find receipts for some of the money you have spent then make a note of what the expense was for, to whom it was paid and the amount. You will find it easier to have a separate piece of paper for each expense.

From now on, ALWAYS get a receipt when you are spending money on your home based business, even if it is only for a cup of coffee. If you use a credit card and cannot find the credit card receipt, keep a copy of the credit card statement and highlight the entry.

I suggest that you obtain some file folders and label one for each month. Keep your receipts for each month in the correct file folder. Alternately, you may wish to keep a record of your expenses by category. This may simplify completion of your Income Tax Return for your Home Based Business at the Taxation Year End.

A suggestion of the categories required are as follows:

If you are purchasing product for resale: Invoices for all purchases of products, including shipping costs. This will enable you to establish Cost of Goods Sold. We will cover these calculations in a later issue.

Period End Inventory. (You will need to count the stock that you have in hand at Year End). This means your Taxa Read more

Profit - Keeping track or record keeping and analyzing the data, is really the only way we can tell the financial health of our company. Things have changed considerably since my Grandfather was a painter. Back then some basic accounting was all that was needed. Now there are so many different expenses that it is a little more involved than sitting down with a scratch pad. Today we have numerous expense accounts, different kinds of income, and taxes etc. As with most things financial the more detailed that you can make your accounting the better.

Selling Price - Our profit and loss statement is the starting point for the selling price of our jobs. Too many painters are more concerned with the going rate, rather than what THEY need to survive and to profit. Without a doubt painters are more concerned with price than their customers are. Many times we get awarded contracts where we are the highest bidder. It makes me laugh thinking about the guy who lost the job as the low bidder, thinking that he really must sharpen his pencil next time.

Owner’s Compensation - What does the owner get? Is it whatever is left over? Most of the time it is.

Michael Gerber author of the E-Myth, says most people in business for them selves think they own a business but they really own a job. If that is so then we would be better off working in a job for someone else. If we were in a job and got paid for the work that we do we would be well off. Instead we do this and do that, sales, estimating, running crews, etc and then when we make next to nothing we expose ourselves to all kinds of liabilities. Compensate yourself first.

Job costs - This financial pulse must be taken on a daily schedule. This is the place where we can lose the most. Let this part get out of hand and it will burn you.

We are in this to make money. Taking the financial pulse of Read more