How to Keep Track of Your Home Business Finances

Make a habit of sorting through your finances periodically

Keeping accurate track of your home business finances is essential to the survival of your home business. During tax time, you'll be able to find and make appropriate deductions easily, and if the Internal Revenue Service questions your records you can address its questions more promptly and confidently. You also appear more professional to banks when applying for a business loan if they can see that you manage your home business finances carefully.

Things You'll Need

• Bookkeeping Software
• Business Credit Card
• Filing System

Instructions

1. Separate business and personal finances. Business owners who operate from home sometimes merge their personal and business finances. The first step to managing your home business finances is to separate the two. Do not charge business expenses on your personal credit cards, and do not treat your business expenses as if they are your personal expenses.

2. Get a business credit card. With a business credit card you will see your business's financial picture more clearly, build your business's credit and have an easy reference to consult while filing your taxes. Make sure to have only one or two business credit cards, pay your bills on time and avoid cash advances. It is a good idea to get your business credit card from your preferred financial institution and to look for a business card with rewards or restrictions that work for you.

3. File all business receipts and financial records. Create a filing system to keep track of all the money your business spends as well as all the income it generates. Your filing system can be as simple or as complex as you are comfortable with, but it must be organized and updated frequently.

4. Use a bookkeeping software. There are many bookkeeping software packages that home business owners can use to keep track of their finances. These bookkeeping software allow you to enter your financial information and generate reports as often as you'd like. Update your bookkeeping software before you lose track of or get overwhelmed with receipts. For some businesses it may mean that weekly updates are sufficient, while others may want to enter their information daily.

Tips & Warnings

• To make keeping track of your home business finances less stressful, set aside a specific period of time daily or weekly to update your bookkeeping software.

References

• Bank of America Business 24/7: Divide and Conquer; Chris Freeburn
• "Entrepreneur Magazine"; How to Improve Your Financial IQ; Peri Pakroo; August 25, 2010