When you run your own accounting business, there are several critical things to keep your finances in order and the money rolling in. Learn how you can keep your accounting business a money-making machine with the tips below.
Remember that you can increase your earnings as an accountant by earning your CMA designation – now, you can even study for the CMA exam online!
Separate Your Business And Personal Expenses
It’s essential to have a separate business bank account for your savings and checking. This saves you time when you need to add up your deductible business expenses.
From the start, it’s wise to use separate bank accounts for personal and business purchases. If you put money into your accounting business out of your personal account, be sure that the contribution is documented.
Keeping a separate business bank account and credit card also helps you reduce your legal exposure to your business debts if you have an LLC.
Usually, you cannot deduct your personal expenses on your business tax return. If you use your property for personal and business use, such as your vehicle, then part of the time you use it for your accounting business is deductible. Other than that, deducting your personal expenses on your business tax return is illegal. You will pay a stiff penalty of 75% plus the extra tax owed if the IRS catches you.
Track All Expenses
Categorize and label all expenses, and keep track of your cash flow to ensure you can take all the tax credits and write-offs possible. Use a business credit card for every purchase, and you won’t have a mess of receipts in your wallet. Using your credit card also means you can get rewards and cashback for purchases.
Your accounting software stores copies of invoices and checks paid. When you can only use cash, you can use digital copies of your receipts in the software.
Record Your Income Accurately
Revenue from sales, loans, and other infusions of cash are easy to forget, but you need to keep track of your cash flow. If you don’t, you may underpay your taxes, and you can get hit with harsh IRS penalties.
Take The Time to Update Your Books
Take time each week to get your paperwork organized, and don’t let receipts and invoices get out of control. Be sure to keep to the time that you put aside every week. This can save you a lot of annoying catch-up work when tax season starts. Accounting software can help you save time by categorizing your expenses and income. It also can reconcile bank accounts and business credit cards.
Monitor Labor Costs
Paying your workers, including yourself, can eat up as much as 70% of your budget. Keep track of overtime, benefits, and perks you have so you don’t overpay or underpay. Also, be careful in calculating and paying payroll taxes; they have different deadlines and rules than income taxes.
Be Ready For Big Expenses
Replacing equipment, upgrading computers, and tax deadlines shouldn’t surprise you. High costs can surface during a slow month so have cash saved up. On the plus side, the IRS lets you deduct as much as $1 million of equipment and business property in the year you buy it, rather than depreciating it over time. So even if you have to lay out big bucks now, you’ll enjoy some nice tax breaks later.
Running an accounting business can be a profitable endeavor. If you remember these helpful guidelines, you’re sure to make more money and stay organized.