Expense Tracking Tips for Your Home Business
One of the greatest things about owning your own business is it puts you in control of your life. Instead of relying on the boss to give you a raise, you can create your own opportunities by landing new clients and cross-selling different products to your existing base of customers. This level of control is hard to beat, and it remains one of the chief benefits of business ownership. Unfortunately, not even the most savvy business owner can control everything, and one thing that is particularly hard to control is the tax bill. Self-employed individuals face a number of tax challenges their traditionally employed colleagues do not have to think about, and as a result, they are often stuck with higher tax bills at the beginning of every year.
One way for the owners of home businesses to lower their tax bills is through the strategic deduction of legitimate expenses. While business owners cannot expect the CRA to reimburse them for personal expenses, taking deductions for things like telephone service, internet access and office supplies is well within the scope of current tax law.
If you want to lower your tax bill going forward, you need a smart and strategic way to track your expenses. Waiting until the end of the year and sifting through a shoebox full of receipts simply will not do. Here are some tips to get control of your expense reporting and get a handle on your home business tax bill.
Record a description of the purchase on the receipt
When you buy something for your home business, immediately write the name of the item on the receipt, right next to the price you paid.
Digitize your receipts right away
Modern receipts are often printed on poor quality paper, and that is why your shoebox receipts degenerate into an illegible mess. Use a hand scanner to digitize and store your receipts right away – so you will have them when you need them.
Get and use a business credit card
Getting a credit card in the business name is smart, and it will help you keep your home business and personal expenses separate.
Use a spreadsheet to keep a running tally of your business purchases
Separate your purchases into various categories, i.e. office supplies, computer equipment, telephone, client gifts and so on. This categorization will make tax filing easier.
Keep a separate bank account for the business and pay your business expenses from that account
Having your home business revenue flow into a separate bank account and paying your expenses from the same account is smart business and a great way to keep your personal and business-related activities separate.
Whether you just opened your home business or have been running it for a long time, it is important to consider the impact of taxes and look for ways to reduce the financial burden. The CRA provides a number of deductions designed for the home business owner, and taking advantage of those tax savings could give you more money to invest and save. The tips listed above can help you get started, and the rest is up to you.