When starting up a business, it can be confusing and, at times difficult, to figure out what can be logged as a business expense. But ask yourself a very simple question: am I buying and or using this for my business? For example, if your business is a daycare for children and you need craft supplies (crayons, glue, beads, etc), that can be logged as an expense. If your mobile phone doubles as your business phone, that can also be logged as an expense based off a percentage that is used for business. If you needed new mats for your yoga studio, that is also an expense you can log. Therefore, it’s always best to keep those pesky, waxy receipts and keep track of what you buy and use for your business.
The following chart can be a useful tool for ‘logging’ those expenditures and your business mileage on top of keeping those receipts. By using the chart, you can record the money you’re spending for your business and look at it all in a single go, rather than sifting through all the receipts one at a time. It also is a great help to your accountant!
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Make: | Model: | Year: | Starting Mileage: | Ending Mileage: |
Date | Miles | Start/End Point | Reason for Expense | Amount |
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Total Miles: |
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Conversely, we all know that it’s very easy to lose receipts and what’s worse, the ink on them fades over time. It is recommended that receipts get scanned into electronic format so there is always a backup copy. Further, save that digital copy to an external hard drive as well because there’s no such thing as ever being too cautious, especially if you’re a business owner.
Lastly, it’s always good to keep well documented notes of what the expenses were used for. Writing it on the receipt as well as in the log helps with the very detailed oriented IRS. Proving you spent a chunk of change on a new desk for the office rather than a television for your home goes a long way in terms of being audited.
When in doubt if you should keep a receipt and log it, just remember the basic, who, what, when, where and why. Who made the purchase, what was bought, when was the purchase made, and where did the purchase take place. Answer these basic questions and you will have a nice and neatly organized log of your expenses.
You can never be too careful or too detail oriented when it comes to logging your expenses and having multiple records. The attention to detail and tediousness of the logging always pays off in the long run!
If you are a techno-savvy individual, there are a multitude of apps and software you and use to track your business expenses. Stay tuned for an article next week about those options!
