- Hi everyone. I'm Attorney Aiden Durham
with 180 Law Co. in Colorado, and you are watching
All Up In Yo' Business. (upbeat music)
(keyboard clattering) In this episode of All Up In Yo' Business, we're gonna talk about
tracking business expenses. I'm gonna give you guys some tips for tracking business expenses, let you know why it's
so important to do so, and then we're gonna cap it off with some of my favorite apps and tools for tracking business expenses, but first don't forget to
like, subscribe, and share, and check the description for links to additional
information and resources. Okay, so most of us didn't
decide to be self-employed because we wanted to be bookkeepers, but nevertheless, a fun side effect of being self-employed is that we often get to be our
own bookkeepers, web designers, receptionists, and our
own lawyers, sometimes, despite my protests otherwise, but regardless, even if you
have a bookkeeper, accountant, CPA, or somebody else handling
your businesses bookkeeping and accounting, properly
tracking your business expenses is going to make all the difference. And if you can set up a good system for tracking your expenses
early on from the very inception of your business, then it's
gonna make everything else that much smoother and more
efficient moving forward. We can also easily get
lost in the day-to-day of everything else, having
to do with our businesses. So entering all your receipts and doing the books gets pushed back to the back burner and
next thing we know, boom, it's three months later and we're spending an entire weekend trying to get caught up, but if you've got a good system in place and take advantage of different
tools and apps and programs, the rest of it can be set
up largely on autopilot. So why is it important to keep good track of business expenses? Easy, because it's gonna
help you save money on taxes. When we prepare a tax return every year, we have to tell the IRS how much and what kind of income we've
earned over the past year and if we earn income
from being self-employed, we usually need to use Schedule
C to report that income. In a nutshell, we use
Schedule C to tell the IRS how much revenue your business received, how much you spent to
keep your business running and the net income or loss for the year. We don't pay taxes on the
revenue our business receipts. We only pay taxes on the
profit or net income, which is the money we received
minus the money we spent, any ordinary and necessary
payments that you make to run your business are
considered business expenses and business expenses are
deductible on your Schedule C, meaning that we get to
subtract those expenses from our businesses taxable income. Business expenses
potentially can be anything. Again, as long as it's considered
ordinary and necessary, then it's gonna be a
deductible business expense, but here are a few examples
of common business expenses, advertising, bank fees, consulting
fees, professional fees, contract labor, dues and
subscriptions, mileage, office supplies, postage,
printing, payroll, software, travel, utilities, and so on. So that's why it's so important
to track business expenses, so we know what to report on our taxes and so we don't miss any
potential business deductions and end up paying more in
taxes than we actually have to. So let's say if the business
made 100,000 last year and you don't deduct any
of your business expenses, then you're paying tax
on the full 100,000. Let's pretend your
average tax rate is 30%, that means you're paying 30,000 in taxes. And by the way, I'm saying
30%, just as an example, I don't mean that all of you
are gonna be taxed at 30%, but if you properly tracked
your business expenses and they total, let's say, $40,000, that 40,000 is deducted from the 100,000 and now you're only paying
taxes on the $60,000 of profit or net income. That means you're paying $18,000 in taxes as opposed to 30,000, and
that's a pretty big difference, but we're also doing this
to make things easier on ourselves come tax time. We don't want to waste our valuable time
combing through boxes of receipts and trying to piece together
our tax returns in time for the filing deadline or even worse pay somebody
like our accountant or CPA to try to make sense of our chaos. And it's not just enough that we track what the expenses are. We often need to remember
why we spent that money. Meals for example, are often
deductible business expenses, but it makes a difference
if we bought that meal, let's say, during a business meeting, or if we bought it while
we were on a business trip. Again, we can deduct anything that is ordinary and necessary, and we wanna be able to prove
that it was both ordinary and necessary if the IRS
ever comes and knock in. So having a good system in place to track your expenses is
gonna save us time and money in addition to reducing
your overall tax bill. Best practice is to make a regular habit of tracking business
expenses throughout the year. We don't wanna wait
until the end of the year to record all of our expenses. If we regularly track
our business expenses throughout the year, that makes it easier for us to keep a close eye on our business's financial
health, makes it easier to budget and put money aside in savings, and helps us see exactly
where every dollar is going. It doesn't matter if
you do it daily, weekly, monthly, quarterly, just make
sure you dedicate some time on a regular basis to track
your expenses in bookkeeping, or even better take advantage
of the millions of programs, apps, software, and other tools available to automate all of it for you. Seriously, there's like
actually zero reason for you to manually track all of your business expenses or income. We can quite literally use technology to do all of that for us. So here are some of my
favorite tools for tracking and managing business
expenses and finances. Let's start with the free stuff because it's cool if you don't have to spend more money just to track where you're already spending money. First your bank. A lot of banks are starting to incorporate expense tracking tools into their online banking platforms. I bank with Chase and I have
a Chase business credit card. You can categorize payments and expenses and see your spending report right there in the online banking platform. Now I mentioned this because
it's probably already available for a lot of you and it's
free except for any fees that your bank's already charging you, but I wouldn't totally rely on this method of tracking expenses. If you have very, very few expenses then I guess it could
work just fine for you, but most of us are gonna want something a bit more substantial. Keeping with the simple and free trend Mint is
another really good option. If you're not familiar with Mint, it's an online budgeting
platform that connects to your bank accounts and automatically downloads
all of your transactions, then you can categorize all of your income and expenses and create spending budgets and see where all of your money is going. I have been a longtime fan of Mint, but mostly for my personal budgeting. Kind of like what I
was saying about Chase, you can view spending reports and track where you're spending money, but it's not really gonna
give you like detailed reports or financial statements. Now, if you're old school or
just a fan of spreadsheets, Excel is a really good option. I guess it's not technically
free since you still have to buy the software, but I'm including it in the
free category or Google Sheets, which is actually free, most of the time. You can literally just have a simple spreadsheet of expenses. The dollar amount, who was paid to, why, the date of the expense, it
doesn't have to be fancy, or it can be fancy and you
can create spreadsheets to track and categorize expenses and cut cashflow and budgeting and more. So those are a few simple
and mostly free options for some basic expense tracking, but most of us are gonna
need a little bit more and this usually means some kind of full blown
accounting software. There are a lot of options out there, but there are a few things
that we wanna look for when we're trying to decide
which one to go with. First, make sure it's a program
that syncs with your bank. Almost all of them do that these days, but it's gonna make things so much easier if your accounting program
can just automatically pull in all of your transaction
data from your bank, as opposed to you manually
entering that information. Find one that offers a mobile app, so you can record your expenses on the go. A lot of programs have apps that include automatic
mileage trackers, for example. If you're a gig worker or
if you drive a lot for work, a mileage tracking app
is gonna be a lifesaver. It's also great if the
mobile app allows you to scan and save digital
copies of your receipts. It's good practice to hold
onto all of your receipts for at least three years
in case of an IRS audit. Many programs allow you to
scan your receipts on the go and you can attach them
to each transaction for further record keeping. Finally, bonus points, if it
integrates with other apps. A lot of programs have the ability to integrate with e-commerce
platforms like Shopify, you can integrate with your CRM systems or email marketing tools and so on. So most programs, you're
gonna have to pay for it if you want all of the
great bells and whistles, but there are some really good options that are free or offer free plans, and I'm gonna link to all of these things in the description, so you
guys can check 'em out later. Wave, Wave apps has a
great accounting software that is completely free to use. I'm a big fan of Wave. ZipBooks is another popular one, and they offer a free plan, though a lot of their features are gonna
require the paid plan. One that I think is very cool
is GnuCash spelled G-N-UCash. It's a free open source software that has a lot of accounting capabilities. The only downside though, is
that since it's open source, there's not really a whole
ton of support available if you need help setting it
up or with troubleshooting. Like I said, you can get a
lot out of these for free, but the additional features that you get with some of the paid options really might be worth the costs, which brings me to some of the more traditional accounting and bookkeeping tools. QuickBooks is a heavy
hitter in this category, and it does way more than
just tracking your expenses. QuickBooks really can
be used to handle all of your finances, running
payroll, invoicing, and accepting online payments, tracking your expenses and bills, and of course, managing
taxes and so on and so forth, but QuickBooks can easily
become pretty overwhelming just because of how much it can do. So if you're brand new to the scene and you don't already have an accounting or bookkeeping background,
it might be too much for you, unless you're gonna hire somebody to set it up and manage it for you. But FreshBooks offers a
lot of similar features to QuickBooks, but it's
a bit more simplified and would be a good option
for service-based businesses and solopreneurs and
freelancers and stuff. And then Xero is another
good option, similar to QuickBooks and FreshBooks. Lastly, outside of these full
blown accounting programs, there are a lot of great apps
on your phone that can help with tracking business related expenses. MileIQ, I love MileIQ. I used MileIQ's mileage
tracking app for like six years. I only just recently canceled
a few months ago only because of COVID-19 though and because I'm not driving
for business anymore, I really just stay home now, but up until then, I
used it on a daily basis and it was well worth it. MileIQ uses GPS to automatically
track all of your mileage and then you can categorize your trips and calculate your business mileage. If you're a gig worker or
you drive a lot for work, MileIQ is gonna be life-changing. Everlance is a another
app that's really similar to MileIQ from what I understand, I haven't used it myself, but it does have a GPS
tracker to log your mileage and you can stand digital
copies of receipts into the app as well. Both MileIQ and Everlance, they offer free and paid plans. Shoeboxed is a really cool app that I recently learned about, that it helps with tracking and categorizing your receipts too. And lastly, Expensify. This is gonna be primarily useful if you have employees
who are gonna have a lot of reimbursable expenses, or if you have a lot of expenses that you reimbursed to yourself. Again, I'm gonna link to all of these apps and stuff down in the description, if you guys wanna check 'em out. So when it comes to tracking expenses, the bottom line is this,
have a system in place from the very beginning, make it a regular habit to track review, and categorize your expenses, and finally, take advantage of tools and programs to automate
as much as possible. That's all for this episode, folks. Drop a comment below, let
me know what you think and don't forget to check
the description for links to all the products that I mentioned as well as additional
information and resources. Thank you all so much for watching. I'm Aiden Durham, and
I'll see you next time. (upbeat music)
