Don’t Lose Track Of Your Business’ Finances
While it’s vitally important to keep your personal financial house in order, it becomes crucial when keeping track of a business–if you have owned one. At home, you may have a spouse; however, in a business, you may have a chief financial officer or a voting board of directors to contend with.
You’ll certainly have state agencies to deal with, and most important of all, the Internal Revenue Service may pay you an unwelcome visit one day.
What You’ll Need As Minimum
- An accountant engages in a high-level process while at a business’ progress and making sure adequate documentation is maintained.
- A lawyer has an accounting background and may benefit your operation in many other ways as well.
- A bookkeeper keeps the daily routine flow of revenues and expenses in an organized manner.
- A treasurer usually keeps tab of what financial arrangements are being made.
- And finally, documented records of every transaction.
When your company grows large enough, or if you warrant one now, a chief financial officer (CFO) helps your company’s finances take on a new order, so to speak. Being responsible to the company’s board of directors for all things financial, the CFO also establishes policies, procedures, and strategies.
It All Starts With A Record Book
Income, expenses and profit line. One can’t get it more simple than these three items. An accountant or a good bookkeeper usually checks these functions, but an accountant actually only advises you of when your tax papers are due, what forms should be filled out and checks for their completion.
As far as retailers go, the IRS doesn’t usually ask for expense receipts less than $75. However, the five types of receipts that you’ll need to monitor carefully are: meals and entertainment, out-of-town business travel, vehicle-related expenses, gift items and home office receipts, if applicable.
Keep in mind that expenses used partly for personal use and partly for business needs are considered as mixed use. As such, cell phone expenses qualify to be deducted for business use and so do gas mileage which is 100 percent deductible.
Keeping It All Separate
While co-mingling of personal monies and business funds may be convenient at times, it may set the stage for a later IRS audit. Remembering that LLCs, partnerships and corporations are mandated by law to have separate bank accounts for business may save you from hours of work.
For starters, designate a business checking account and a savings account to help organize your funds in preparation for tax time. A credit card set aside for business purposes and credit building is likewise advisable.
Finding The Right Financial Institution
Be it a large, national banking entity or a local credit union, shopping around for the best features and fee structures is good business sense. Regardless of your legal structure, you’ll need to open a business bank account with a business name that’s typically registered with your state.
Determining Your Tax Structure And Obligations
Varying tax obligations require careful monitoring. For example, the self-employed, sole proprietorships, LLCs, and partnerships must all claim business revenues on a personal tax return. In contrast, being separate tax entities, corporations come under a different tax scrutiny.
Because of these variations in legal entities and their tax structures, it’s best to check with an accountant or tax attorney when starting up a business.
Besides the above mentioned important steps in keeping track of a business’ finances, there are much more. However, these are foundational to any business enterprise. Implementing them, and then building on them, help make good, sound, business practice and successful business growth.