Small business owners: advice on income/expense record keeping

[rnorwo1]

Hi,
I work in the mental health field, and I am opening my own practice. I was in private practice for a while before, but I rented from a larger practice and I only did it one day a week, so record keeping was extremely simple to do by hand. The last few years I've been teaching (W2) and working part time as a contractor (1099), and I just stick my few receipts and mileage log in a folder.

This time, DH and I bought a building (we opened a separate LLC for that), and we are going to incur a ton of expenses in renovating, maintaining, and purchasing supplies on an ongoing basis, and we will have other professionals renting space from us; so, that LLC will have a great deal of activity. Then, my separate, professional LLC will earn from seeing clients (fee collected at time of service), teaching a class each semester at the university (W2) and maybe a few hours contract at my current clinic (1099). It will have a few expenses, such as professional fees, travel/conferences, therapy supplies, etc.

I have a good CPA who manages all the filing of taxes, but I'm becoming very stressed about how to keep records to give to him. I don't want to miss out on deductions because of poor records, and I don't have a ton of time to do things like this, either. The CPA is a fan of quicken, but it looks intimidating to me. This end of business is just overwhelming to me, but I won't have enough volume (still trying to stay part-time so I can be available for my 3 kiddos) to justify hiring someone to do this.

So, my questions are: how do you maintain your records? Is there a program you recommend? How do you keep/organize your receipts? Mileage logs? Do you submit all of the deductions quarterly or yearly? Do you have a set time a week/month to do these things, or you do it daily? Anything else that I should be asking???

Any advice is very appreciated, we should be up and running in a month... yikes!!

 

[loves to dive]

I'm a bookkeeper for a small computer consulting firm, I use Quickbooks. My honey owns his own computer consulting firm, just himself and he also uses Quickbooks. Most accountants use it as well so you can just transfer the whole thing over to them at tax time. I find it very easy, it has a time tracking and mileage tracking feature, we don't use it because as a computer company, we wrote our own in Lotus Notes. It's really easy, you write a check, it records it in whatever account you set up for that vendor. You write a paycheck, it records it in the appropriate labor categories. I used a huge cost accounting package before this because we had close to 100 employees with a government contract and this is so much easier. You can even do it on line if you want, I don't I use the stand alone package. It's not expensive and pretty intuitive. It has set ups for different kinds of businesses to make it easier. I would check with your accountant before you set it up to see how he wants to see the accounts.

 

[loves to dive]

Oh, and another thing. Are you planning on doing your payroll taxes yourself? If so, you will have to apply to the state and IRS for your tax status, they will tell you if you do it quarterly or monthly based on your payroll size. Again, your accountant can help you with the paperwork for that, I did it all myself but I'm a bookkeeper so I knew what to do. As far as receipts, I do it the old fashioned way, I set up folders for vendors and stick the paid receipts in there. Monthly I scan them into the computer and at the end of the year I shred them. You could skip the folders and just scan but I'm old. Mileage logs can be done in QB or you can buy a good old fashioned mileage book and track it that way, entering it every month. We pay our employees mileage when it's turned in. It's a reimbursement for us since we use IRS amounts, no reason to complicate it. Since I'm a real live bookkeeper, I enter things as they come in, but there is no reason you couldn't do it once a week.

 

[davper]

Your CPA is your best source for what to use. He knows your business better than anyone else here. Trust his recommendations. Everyone is just going to give you what has worked for them. Their needs are not going to be same as yours.

 

[rnorwo1]

Thanks for all the info, Loves to dive. Do you just use a printer/scanner to scan your receipts or do you use one of the gadgets specifically made for receipts?

Your CPA is your best source for what to use. He knows your business better than anyone else here. Trust his recommendations. Everyone is just going to give you what has worked for them. Their needs are not going to be same as yours.

True; however, I am very interested in what has worked for others, as well as just general advice to simplify this part of being a business owner. There are so many products and gadgets out there, if I can get the field narrowed down while doing my research, it would be helpful. And, most importantly, I'm looking for cost effective ways to do this, so I think the budget minded folks on here may be helpful.

Thanks for any help!

 

[bearzabout]

If your records are not very complicated, you could just record them on a spread sheet in excel. You will also need to keep track of your mileage so you can deduct that expense. Keep a handwritten record of miles dates, miles driven, job name, odometer readings, etc and input the records into Excel (I designed a form with formulas to calculate mileage expense and use a separately form for each month). I use the current per mile rate allowable by the government per mile driven.

I use an Excel spread sheet to add up expenses paid using a company debit card, reimbursable expenses (paid by cash or a personal card), inventory used, sales and mileage. It is an easy, cheap way to calculate the net profit that I use on my taxes at year end. This only works well if you have a small amount of transactions. We have an LLC so there is no payroll. We pay estimated taxes each quarter and file a 1065 return with K1s for each partner annually.

I always keep manilla envelopes in my car to hold receipts since they are so easy to loose. I update records in the computer regularly so nothing is forgotten. A debit card on the company's checking account makes keeping track of transactions easier.

 

[Narnia_girl]

Have you seen the T-shirt that says, "I'm an English major, you do the math"?
Yeah, that's me. But I still have to use some accounting software and Quickbooks was easy to learn and easy to use. You can download a free 30-day trial to see if you like it.

 

[rnorwo1]

If your records are not very complicated, you could just record them on a spread sheet in excel. You will also need to keep track of your mileage so you can deduct that expense. Keep a handwritten record of miles dates, miles driven, job name, odometer readings, etc and input the records into Excel (I designed a form with formulas to calculate mileage expense and use a separately form for each month). I use the current per mile rate allowable by the government per mile driven.

I use an Excel spread sheet to add up expenses paid using a company debit card, reimbursable expenses (paid by cash or a personal card), inventory used, sales and mileage. It is an easy, cheap way to calculate the net profit that I use on my taxes at year end. This only works well if you have a small amount of transactions. We have an LLC so there is no payroll. We pay estimated taxes each quarter and file a 1065 return with K1s for each partner annually.

I always keep manilla envelopes in my car to hold receipts since they are so easy to loose. I update records in the computer regularly so nothing is forgotten. A debit card on the company's checking account makes keeping track of transactions easier.

My first thought was excel. I am familiar, but not proficient, with it, but it's not entirely out of my comfort zone. I don't have any employees or anything complicated. I'll have to google how to get it to add things up for me, haha! I will need to use envelopes or something, too, especially since I will be going between offices.

Have you seen the T-shirt that says, "I'm an English major, you do the math"?
Yeah, that's me. But I still have to use some accounting software and Quickbooks was easy to learn and easy to use. You can download a free 30-day trial to see if you like it.

This is me!! I have a PhD, but I constantly tell people that I chose my profession based off of how many math classes I did NOT have to take! My anxiety goes through the roof with this. My CPA keeps telling me to do quarterly taxes myself to save money, he swears it'll only take a few minutes and is very easy. I do all I can to save money on everything, but the thought of that makes me break out in a sweat!
Thanks for the reassurance, I may do the trial and see. Thanks!

 

[scrapquitler]

I do it very low-tech. I have a box that I put all the bills and papers in all year, and a big three ring binder with looseleaf paper, and I write everything in there. DH is the only employee and he gets paid from only one company, so it's not overly complicated. I subtotal all the categories and hand my list over to the CPA at tax time.

 

[seashoreCM]

Any computer can be used to maintain a spreadsheet or a text file listing all of the building income and expenses.

The advantage of specialized software such as from Quicken (I don't think it is the same company as Quicken Loans) is that all of the addition and subtraction is done automatically and reliably as opposed to manually. (To get subtotals for my accountant I can use a calculator to add up a column of numbers 3 times and get 3 different answers!)

There is a package with both hardware (gadgets) and software called Neat Desk. You don't need that although it might be more efficient than fumbling with your own flatbed scanner. So far I think that giving each receipt or invoice or check a six digit number styarting with 100001 sequentially as scanned is the easiest way to cross reference the originals in envelopes and folders with the scanned files. (Also to cross reference negatives and slides and photographs you may scan).

The LLC should have its own checking account and perhaps a savings account and perhaps a credit card. All the rent goes into this account(s) and all the expenses paid for using that checking account (and/or that credit card).

So you won't be able to earn Disney points or airline miles or whatever using your own credit cards.

If the LLC is running short of funds, you are supposed to write out a round amount of money as a loan to the LLC and depost that in the LLC account. Make a loan note even if you are both the lender and (as CEO or CFO of the LLC) the borrower. Then use LLC checks as needed.

That said, I manage a building (in a trust) and once in awhile don't have a building account check handy and end up using my own money or credit card. What I did is write out a building check in the exact amount out to myself as immediate reimbursement and to make an easily followed paper trail that this was a building expense.

Disney hints: http://www.cockam.com/disney.htm

 

[rnorwo1]

I do it very low-tech. I have a box that I put all the bills and papers in all year, and a big three ring binder with looseleaf paper, and I write everything in there. DH is the only employee and he gets paid from only one company, so it's not overly complicated. I subtotal all the categories and hand my list over to the CPA at tax time.

This is what I have been doing, and it's working fine. I am afraid that with the increase in volume, though, I'll start dropping the ball. I think I'll just try quick books now with the building LLC, and if it is manageable I'll use it with the professional LLC, in the next month or two. Thanks for all the advice, everyone!

 

[bjscheel]

We also use Excel for DH's trucking business, and my employer's law office. One sheet is for deposits that I can total any time I want. Another sheet is for expenses. One column is the date, next is check number (if applicable), next is Payee, then amount, then description. I use consistent descriptions (fuel, insurance, telephone, etc.) so that at year end, I paste the expenses info into a new sheet to be sorted by description and then totaled. Other worksheets can be added if appropriate for your business.

 

[dalmatian7]

I agree with asking your accountant what they prefer. QuickBooks is easy but does take some set up. However, if you or your accountant can get it set up so that all your business is recorded correctly, it should formulate all the year end reports they will need and may save you money in accountant hours during the year.

 

[MolonLabe]

Your CPA is your best source for what to use. He knows your business better than anyone else here. Trust his recommendations. Everyone is just going to give you what has worked for them. Their needs are not going to be same as yours.

This.

Your CPA should be able to tell you what categories you really need to be putting expenses into and helping you get up and running. Usually they will have something pre printed or give you a link or something then have you ask questions afterwards.

The best advice anyone can really give you is to keep detailed records / receipts.

 

[Chelley00]

I'm an accountant and recommend quickbooks to anyone with a small business. There is some set up but once that's done, it's very easy to record everything.

Your CPA will be able to tell you which reports you need to print for quarter and year end taxes.