Thinking of starting a business? You know all there is to know about your trade, maybe you’ve even considered asking your math savvy friend to consider joining you in your new venture.
Maybe you’re already in biz. Started from hobby to side hustle. Congrats! Now it’s time to make sure you are off on a good start! Use these tips to make sure you have setup a great foundation for success!
Bank Account
WHY?
Reduce potential risk to personal finances in case of an IRS audit.
BENEFITS
⚈ It will make it easier to track income and expenses.
⚈ It will lay the groundwork in building a relationship with a bank. (Helpful if you need to apply for loans or credit.)
⚈ It will make tax season easier. When you have all transactions in one account you don’t have to worry about searching your personal account for one off transactions. This will also make finding deductions easier for your accountant.
HOW
⚈ Once you have your business established the bank will usually just need a copy of your EIN. (Other needed documents will differ by bank.)
⚈ IF YOU CHOOSE NOT TO SETUP YOUR TAX ID AND EIN: It is still important to keep your business and personal expenses separate. Another option for you is to setup a second account you are only using for your business.
TIP
Look for a bank with little to no fees for your account. Every expense adds up. 🙂
Accounting System
WHY?
Organize business expenses and income.
BENEFITS
⚈ Helps track income and expenses
⚈ Gives you insight about the health of your business. This means it’s able to tell you if your business is profitable!
⚈ Ability to track what invoices and bills need to be paid.
HOW?
⚈ There are excel templates or budgeting apps that may be helpful, but nothing like an accounting software programs
TIP
If you do plan on getting an accounting software, I would go through a bookkeeper or accountant who uses it because they can usually get a small discount for the duration of the account as opposed to just a free trial.
Receipts
WHY?
This will provide proof of purchases in case of an IRS audit.
BENEFITS
⚈ Receipt management will serve as proof of expenses in the case of an audit.
⚈ If any expenses are questioned, you will have proof of the amount and taxes paid for each transaction.
HOW?
⚈ Although receipts were once kept in shoeboxes, it’s not the best idea these days. Lots of stores are printing receipts on thermal paper which means that temperature changes can delete data. So be sure to make copies of receipts.
⚈ Another option here is to store receipts in a google drive folder. (To make searching for receipts easier, try storing them in folders by month or by bank cycle so your folders match the bank statements.) (Another Tip here: Rename your receipts to make it easier to find. Information you may want to include: Date, Store Name, Amount)
TIP
There is software out there to help with this. Most commonly heard of are Hubdoc or Dext.
Need more help?
Alright! We’ve covered banks, accounting systems, and receipt management. How are you feeling now?
Did you have any trouble researching or getting through these steps? Let’s see if I can help you even more! Check out my FREE guide here: