It’s just a couple of bucks … That’s what busy small business owners say to themselves all the time when they stop to pick up envelopes or paper for their office. But it’s that mindset – and the lack of accounting that can be a big cost to their business in the end. While the expenses might not add up to be more than $50 or $100 a month, that can be $600 to $1,200 a year! And the cost …
The cost is more than the dollars paid out – the cost is right to the bottom line of many small businesses and that means they pay MORE TAXES on it at the end of the year.
And who wants to pay more taxes? That’s money that a small business owner can take home to the family or put back into growing the business.
The speed bumps on the road to tracking expenses
Why don’t expenses get tracked by small business owners? There are several reasons:
- Lack of understanding. That’s right, the IRS doesn’t require that businesses provide receipt documentation for expenses under $75. So when a business owner stops for stamps and pays for them with the cash in their pocket, they don’t get a receipt. But those $20 and $45 expenses can add up quickly and if receipts are not tracked and documented, the expense can be lost.
- Lack of organization. I’ll cut entrepreneurs some slack here because I know what the demands of small business ownership can be like. But only a very little. Because, if the bottom line can get a significant boost with a little discipline and organization, wouldn’t that make a difference? At the very least, throw receipts into a designated box, folder or drawer.
- Treating the business like a personal account. Many, many small businesses are one-person shops. Sole proprietors who include the business in with their personal income tax return. So just like “mi casa es su casa,” money is co-mingled. Besides this being a big no-no if you want the IRS to consider your small business an actual business, there is a proper way to record expenses as ‘owner out of pocket’ expenses that keeps the accounting straight. Business owners who have not been schooled in business accounting may be making a grave mistake doing their own.
Don’t treat bookkeeping like a hassle, because it’s really your best business friend
Chances are that you opened your small business to provide a product or service – not to be a bookkeeper. And, truth be told, you probably don’t like ‘doing the books’ either. But stop a moment and think about what that is costing you – especially in regard to expenses.
If you aren’t tracking ALL expenses and handling them correctly on the books, it could really cost you. Of course, as noted above, it costs you on the bottom line, but if the IRS doesn’t allow expenses or the way you are accounting for them, it could cost you even more taxes along with penalties and fines in the event of an audit.
Business gurus, from Jack Canfield to John Maxwell and Jim Rohn, have all at one time or another guided entrepreneurs and success-seekers to ‘play to your strengths.’ Many times they are relating to time management and success strategies, but in the case of business bookkeeping, it can come down to cold hard cash – for you and your small business. True savings come from documenting expenses – properly.
If business accounting isn’t on your list of interests or talents, outsource it. In addition to expertise with payroll software, Grace Walker at The Payroll Department is a certified Quickbooks professional bookkeeper. She can help you get set up and in just a few hours a month, get your expenses on track.
Don’t leave money on the counter when you pick up that next ream of paper or pick up the tab for a lunch meeting. Look to Grace and The Payroll Department to show you what a difference professional bookkeeping services can make!
-Elaine of The Payroll Department Blog Team