Small and simple businesses don’t require too much record keeping.
How tiny is tiny?
This article is for you if:
- you have a simple side business
- you are the only person in your business
- you sell only your own services (like a consultant)
- you re-sell products from a single supplier, or direct selling such as Mary Kay or Weekenders
What is the simplest way to keep receipts and totals in a tiny business?
A spreadsheet! Use paper or create it in spreadsheet software. One sheet for income, one for expenses. One column for each category you figured out with your accountant.
Staple your new forms to the outside of two big 9″x12″ envelopes, one for income, one for expenses. For each expense, write the amount in the correct column and put the receipt in the envelope. For each sale (income), do the same. This is Maesz’ favorite Envelope Method. It works! Tiny businesses may go a full year in one envelope. Bigger small businesses can probably do one envelope per month, just keeping them all in a big box. Simple!
At the end of the year, you just total each column. Make a copy of your spreadsheets for your accountant. That’s it!
What level of detail makes sense for micro businesses?
Basically, income and expenses. You want to measure the basic profitability.
A second important consideration is tracking all the legitimate deductible expenses. Any necessary and reasonable expense related to your business can be deducted against the income you generate. If you have more expenses than income, the loss can be used to offset your other income, like salary.
Did you buy computer equipment or gadgets to use for business? Put that on your expenses list. Did you travel, drive to a customer’s location? Track it! Did you pay hosting fees for your website? List that, too.
Be sure to consult with a professional about your specific situation.
What if my business is too big for the envelope system?
The next step is to keep your records on computer. That will be the subject of the next article!
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Gee, thanks for the mention.