Classifying and tracking business expenses is important for Dallas small business owners. Properly tracking your expenses keeps your business running smoothly, while categorizing expenses helps with organization, planning and filing taxes.
First, label your expenses by type, such as rent, utilities, insurance and compensation paid to employees.
You might not know exactly how to label certain types of expenses. This is understandable, particularly if you recently opened your business or have never filed business taxes before.
Separate bank accounts for different types of expenses
It helps to set up separate bank accounts for different types of expenses. For example, you could have one bank account to pay your rent from and one bank account to pay utilities.
Next, learn which expenses are tax-deductible. Some common tax-deductible expenses include utility payments, insurance payments, rent for your business space and using your home or vehicle for business purposes.
Tax-deductible expenses allow you to subtract these costs from your overall taxable income, reducing the amount you pay in taxes.
Invest in business expense software
Take advantage of the many free software or applications used for tracking business expenses. Most are generally easy to use and work quite well compared to trying to manually track them yourself.
These applications can perform many tasks, including tracking expenses, creating expense reports and even calculating estimated taxes.
Benefits of regularly reviewing your expenses
Since you put time and effort into tracking expenses, analyze them regularly. Tracking your expenses allows you to view how your business is doing and see where you may be spending too much or not enough.
Appropriately categorizing and tracking your business expenses also usually means you are better prepared during tax season and will not waste valuable time trying to find data at the last minute.
Finally, you never know when you could find yourself the subject of a business audit or investigation. This type of situation is often much less stressful and overwhelming if you can easily pull the necessary information and know that it is accurate.
