You probably chose to start a small business so you can make money while pursuing your passion. But you're now wearing several hats in your organization, including taking charge of preparing tax, accounting, and expense tracking. If you can correctly record depreciation, debt, revenue, and expenses, your accounts will be complete and perfect when it’s tax season.
But what if you didn’t factor in accrued accounts and accounting overhead or some other problem crops up?
It's best to know how to manage your expenses beforehand. Then you can save time and money when calculating taxes and avoid lost receipts. Here are three common secrets to computing accounting for your business:
Classify and Record Business Expenses
Most small businesses mix personal and company expenses in their reports. This habit might make you have an inaccurate financial picture of your venture. Besides, categorizing mixed expenses will consume time during tax season and take away hours from running your business.
Separate Business and Personal Expenses
To remove this tax-time headache, consider running your personal and business finances from different accounts. You could open a business checking account and pay your self a salary so you won’t mix your company’s funds with your daily expenditure.
Understand Allowable Expenses
You’d also need to know which expenditure is an allowable expense. Allowable expenses are tax-deductible costs incurred in your business. Some of them are:
· Office supplies
· Business mileage costs
· Some legal and financial expenses
· Payment for work clothing
· Rent expenses
· Donating to charity
· A percentage of utility costs
· Council tax
· Trade professionals and academic journals subscriptions
· Marketing expenses
· Staff costs
Ensure you know what qualifies as a business cost so you can claim some expenses when completing your tax return. It's also vital to classify your company’s expenses separately.
Digital Records and Receipts Aid Accounting
The Problem with Physical Documents and Receipts
Imagine that it is tax season, and you bring out all your paper receipts from your files and drawers. You record your expenses and feel satisfied. But when you cross check your documents with actual expenditure from your account, they don’t tally. You might have spent €1,000 within a particular period, but you can only account for €700 because the receipts for the €300 costs are missing.
Physical, financial documents get lost easily. However, there's a remedy for missing receipts.
Keep Digital Records
If you tend to have lost receipts,consider digital record keeping. You can keep your financial documents and store your receipts on your device. Unlike paper files, receipts that you save on your computer don’t fade over time. Scan or take a picture of your financial records and save them digitally. Also consider creating a backup for future storage online.
However, if you've misplaced a required receipt and exhausted all measures to acquire it, fill and submit a missing receipt form.
Ensure Compliance for Your Business
What Is Business Compliance?
Business compliance is how your company or business adheres to corporate laws and regulations, including financial rules. HM Revenue and Customs (HMRC) in the UK for example requires sole traders to keep their expense records, including receipts, payroll records, invoices, and bank statements, for six years. Depending on your company’s location, the HMRC or IRS checks your financial documents to make sure that you're paying the right amount of tax.
You can document your finances on paper, digitally, through a money expense tracker, or use the best accounting software available. However, failure to keep records for the stipulated time means that your business isn't compliant and can attract a penalty.
How to Keep Records for Strict Compliance
Besides storing your financial documents digitally, ensure that they’re readable, complete, and accurate. You may want to categorize and file them for easy access in the future. Don’t stop at backing up your records in your device; you can create a backed-up archive online.
Several online software solutions use the latest cloud technology with bank-level security.Your backup is secure if you pick the right cloud-based accounting solution. Also, consider grouping and classifying your records for your strict compliance.
Accounting and expense management is unpleasant, but it's necessary for tax purposes, costs,and business expansion. Work-from-home ventures tend to mix business and personal expenditure. Sometimes, there’s no proper computer accounting system, leading to lost receipts and the inability to account for physical documents. At other times, records aren’t kept long enough for compliance.
ZayPay provides online payment solutions. It allows you to make international micropayments through your mobile phone. With ZayPay, you can add mobile payments to your business website or app. You can also record business costs, classify and group financial documents, track expenses, and create a secure backup of your monetary files. It provides technology-based solutions that stop your accounting from being a nightmare.
You save time and cost when handling your expenses with ZayPay. It helps you stop wasting time sorting through endless accounting documents, so you can finally focus on what you should be doing - growing your business.