All businesses, regardless of size, must keep track of their income and expenses. Learning how to record home office expenses is vital to building a thriving, successful business. Even people who work remotely for a company need to keep track of their expenses to get reimbursed.
There are several ways to keep track of your income and expenses. You can use a spreadsheet such as Microsoft Excel or Google Sheets, or more likely, online small business accounting software. Wave Accounting is an awesome free small business accounting software that we use and can say enough good things about.
Either way, you need to ensure that you are recording all of your income and expenses in one place so you can easily see where your money is going.
Table of Contents
Why Track Income and Expenses
There are a few reasons why you should track your income and expenses.
First, it will help you see where your money is going. This can be helpful in two ways. First, if you spend too much on non-business-related expenses, you can cut back and save money. Second, if you are not making enough money, you can look for ways to increase your income.
Second, tracking your income and expenses can help you save money on taxes. If you are self-employed, you can deduct many of your business expenses from your taxes. This includes office supplies, internet service, and even a portion of your rent or mortgage if you have a home office.
Lastly, tracking your income and expenses can help you run your business more effectively. You can see where you are making the most money and where you are spending the most money. You can use this information to make changes to your business to increase your profits.
How to Track Income and Expenses
You can track your income and expenses in a few different ways, depending on how big your business is and how much money you are making.
If you are only making a few hundred dollars a month, you can probably get away with tracking your income and expenses in a simple spreadsheet. You can list your monthly payment and costs in one column and then total them up at the end of the month.
This method is quick and easy, but it can be challenging to track your expenses if you have a lot of them. If you decide to use a spreadsheet, there are many different templates available online that you can use. Search for “income and expense tracking template,” and you will find several options.
If your business is a bit bigger or you are making more money, you may want to use online accounting software. This software will allow you to track your income and expenses in more detail. You can set up different categories for your income and expenses and track how much money you are making and spending in each category.
This method is more time-consuming, but it will give you a better idea of where your money is going. There are many different accounting software programs available, both free and paid. Some of the more popular ones include WAVE (what I use), QuickBooks, Honeybook, Freshbooks, and Dubsado.
If you have an extensive business or are making a lot of money, you may want to hire an accountant to track your income and expenses. This is the most expensive option, but it can be worth it if you have a lot of income and expenses.
If you are serious about running your business effectively, you may want to hire an accountant. This is especially true if you are self-employed or have a lot of expenses. An accountant can help you track your income and expenses, as well as help you save money on taxes.
No matter which method you choose, the important thing is that you are tracking your income and expenses. This will allow you to see where your money is going and make changes to your business if necessary. Tracking your income and expenses can seem like a lot of work, but it is worth it if you want to run your business effectively.
Income Tracking Tips
Income tracking is vital for any business but can be especially difficult for home businesses. This is because income from your home business can come from many different sources, such as sales, affiliate commissions, and advertising.
- Keep receipts for all of your income and expenses. This will make tracking your income and expenses easier and help you save money on taxes.
- Make sure you track all of your income, even if it is just a few dollars here and there. Every bit of income counts, so don’t forget to follow it.
- Be consistent with your tracking. The more consistent you are, the easier it will be to see where your money is going. If you are using online accounting software, make sure you are entering all of your income into the software regularly.
- Notate when each income stream pays you. This will help you budget your money and make sure you are constantly covering your expenses.
- Go back and look over your bank and PayPal accounts to ensure you have tracked all of your income. Sometimes we forget to track smaller income amounts, so double-checking is always good.
Expenses Tracking Tips
Anything you spend on your business is an expense, and it is crucial to track your costs. This includes both big and small purchases.
- If you use your car for business purposes, track your mileage and gas expenses. You can deduct these expenses from your taxes, so it is important to keep track of them. I like using the free version of the Everlance mobile app.
- Keep all of your receipts for business-related expenses. This will make it easier to track your expenses and will also help you save money on taxes.
- Be consistent with your tracking. The more consistent you are, the easier it will be to see where your money is going.
- Track both business and personal expenses. This will help you see where your money is going and will also help you save money on taxes.
- Make common categories for your expenses to keep them organized and easy to see and remember. For example, bloggers may have categories such as hosting, outsourced content, virtual assistants, travel, graphics, and online tools.
The Bottom Line
The sooner you start tracking your income and expenses, the better. This will help you run your business more effectively and save money on taxes. Use the tips above to track your income and expenses today.