Did you know that each and every business has a “time in the van,” and it’s the perfect place where you can set up your business expenses for the year? If your small business is a sole proprietorship then you’ve covered your “personal portion” of the business expenses. However, this is not the best way to handle billing and taxes. Why do you ask?
Well, because at the end of the year I want to know how you ran the business, did you add up your total personal deductions, also known as your “top up,” or did you also deduct your business expenses, which could include the house payment, car payment, insurance premiums, and any other personal expenses that you might be taking out of your business.
If you do not have a separate personal and family account then this is when you can figure out how your business was aligned for an overall profit.
Here’s how I have elected to split my business expenses. I will always make a month long exception to my business expense rules. I are set up in such a way that at the end of the month I get a figure in my accountant’s report that is the sum of my other 2 payment. At the end of the month I set up my billing to only make the individual monthly statements.
Here is how you re- configurations will run it smoothly.
If you want to add a commute to work, or if you want to drive to your kids’ school while eating some sweet heat sauce BBQ, i.e. you will drive to you business and get the money to the account. I will show you how to find that out. If you forget to show it to your accountant, just show it to your bank, because with a sales tax number in your records, your accountant can look it up for you. Here’s my example using a $3.61 per gallon Typical gasoline fee, gasoline cost, and total gas cost of $3.00 per month, or $15.71 per month for 6 months of fuel.
With these numbers at hand now, I simply add that total number in my bank statement to my business expense statement. Then at year end I will have a total number of requested reimbursements by month of $16,000. This is a conservative estimate, but you can now see what the actual amount is that you can receive going in to year end at the end of the year.
And here’s the key to using this strategy, you have to know what to ask for. That’s right, you really have to ask for 5/8 of that amount and hold on to your receipt just to avoid any questions about you billing amount, so make sure to record the time it takes to “scan” that amount into the account statement (i.e., you will be asking your accountant for a report of all information). The time it takes to scan goes up dramatically because that’s when they have to make sure to ask!
Once all this is set up, I then move to a separate FIFTH account “myself”, meaning that FIFTH record is used only to pay bills for my business. This keeps it separate from my personal shopping account.
Why is it important that you set up a separate account for the business and personal expenses?
Well, if you submit the proper copies and reports that your accountant will use to bill your personal insurance and other charges, they will record it in your business statistics, and therefore treat it like a personal expense. So it can be taxed as a capital expense, instead of straight income. Most state’s tax departments also treat it like a personal expense, so if you end up paying a lot of taxes at the end of the year and are looking to obtain a deduction, setting it up as a separate account goes a long way.
I’m going to talk about how to set up a separate account that you can access from a page on a website.
If you don’t want to invite someone into your home, by all means make your business home office a separate, secure, separate area to access your business and personal expenses. You want to make this as easy as possible for your accountant, so make sure you have all the information needed for your accountant and they can set it up if you invite them into your business. If you don’t want to invite them into your business just for tax purposes then you could set up an account with an add on for tax purposes.