A very simple, yet functional spreadsheet should contain the following columns to account for business profit and loss:
- Date - calendar date
- Item - brief description of the item being documented
- Income - payments received
- Advertising - business cards, promotions, etc.
- Travel (miles) - travel expended for interviewing with clients, business promotions, etc.
- Commuting (miles) - travel to and from contracted work sites
- Office expenses - computers, software, etc.
- Supplies - paper, printer ink, etc.
- Taxes & Licenses - annual business license, periodic tax payments, etc
- Travel, Meals, & Entertainment - airfare, cab, eating out of town, etc.
- Loss - any unreceived money toward invoiced accounts
You may be pleasantly surprised to know that with this simplified spreadsheet layout, one might only need to spend 3-4 minutes each week keeping records up to date! Yes, having a good routine makes updating business records that much easier. For example, if you routinely submit invoices for your work on, say... a Friday afternoon, then use that opportunity as a prompt to document the weeks activities. Also, you may choose to use this time to store any of the weeks business receipts in a designated envelope.
Maintaining these records will ensure the information is readily available with little extra effort required, when preparing periodic or annual tax forms.
Common Tax Deductions
Typical small business tax deductions are nothing new or secretive, but it can be helpful to have these items highlighted for any who simply have never needed to give thought to such. Some of these topics will be similar, if not the same as the columns we discussed earlier regarding Bookkeping, so again we can see the intrinsic value of good record keeping. For example, State and Federal laws may allow for deducting business expenses related to:
- Commuting mileage
- Home office
- Office supplies
- Computer / Software
- Telephone / Internet
- Education / Training
- Travel / Meals / Entertainment
- Advertising / Promotions
In summary therefore, we find that a little routine maintenance in bookkeeping can make for a much less complicated or harried tax season. Additionally, it affords one to hold a clean conscience in legally availing yourself of any tax advantages ascribed by law.