Business and Personal Expenses

The separation of business and personal expenses should be absolute. Do not commingle funds or expenses. Your small business, even a sole proprietorship, should have a checking account. If you do not have a business credit card, then have two personal credit cards and use one solely for business and the other solely for personal expenses.

Income and Deductions

A deduction is an ordinary and necessary business expense. Business deductions are more than just rent and utilities. Make sure you are accounting properly for all income and expenses.

Some common mistakes are:

• Job expenses classified as overhead expenses or vice versa
• Prepaid expenses not accrued
• Gift card sales and customer deposits recorded as income

Bookkeeping

YOU should review your company records. Certainly this should happen before you send your information to your CPA to prepare your taxes, but there are also many things that you should also review at least monthly.  These include, but are not limited to:

• Reconciliation of bank statements
• Payroll tax payments
• Sales tax reports and payments
• Accounts receivable aging and collections
• Accounts payable aging and payments

Keep Records

Require receipts in order to be reimbursed for company expenses. Make it a company policy – no receipt, no reimbursement. Include yourself in the policy. Generally records should be kept for seven years, but some records should be kept permanently.  See our Records Retention Schedule under the Resources section.