How to Track Your Expenses as a Solopreneur
It’s a fresh new year and I want you to start off on the right foot with your business finances! We’re going to chat about how to track your expenses as a solopreneur, and part of this training is actually going to walk through one of my products to calculate tax - which I'm going to do at the end. So, let’s dive in!
The first step in tracking your income and expenses is understanding why it's so important. If you've been around here long enough, you know what I tell you: knowing your numbers means that you know the story of your business. Your numbers meaning: your income, your expenses, and all the different things that really tell the story. Are you making money? Are you not making money? Where are you spending? Where's the return on that spending? It all comes from the numbers that are inside your bank account.
I'm going to put a little caveat here, and say that I hope that you already have a separate bank account for your business. If you don't - go today or tomorrow and open yourself a business checking account, because it’s vital that you’re separating personal and business expenses.
It's important to know your story so that you can make edits to it. You don't want to wait until the end of the year to read the story of your business and realize you're broke, or you're going broke. You want to make changes before that happens.
#1: Track Your Income and Expenses
I want you to use some type of software, whether it be QuickBooks Online, which I really like, or you're using some type of spreadsheet, such as my Calculated Tax Planner. Every month, you're going to use this software to categorize your income and your expenses into different little areas. I'm going to go over some of those common expense categories in a little bit because I know that that's something that's confusing for a lot of you.
#2: Digitize Your Receipts
So often this doesn't happen! I've been in this industry for well over 25 years, and I have been through so much with receipt management. In the beginning, way back when I was working with my mother, we would have clients who would bring in receipts for their taxes every year because they weren't proactive at all in their bookkeeping.
It would usually be April 15 (total procrastinators) and they would bring in either shoeboxes or even black trash bags, just crammed with receipts! Nothing was in order, and we would go through and make piles for different categories. Long gone are the shoeboxes and the days of the black trash bag.
It is super simple for you to digitize receipts, and I'm going to show you how to do that. So let's pretend that we're OfficeMax right now and we just bought some more business cards. You have two options when you check out: One, they could email you the receipt (that's what I do). Or, they can print me the receipt.
If they print you the receipt, when you get out to your car before you even turn the car on, I want you to take out your phone and go to the camera and take a picture of the entire receipt. Then, open up Google Drive and navigate to (or create) a folder called 2022 Receipts, and put that picture in that Google Drive. You're done. You have digitized that receipt, and now you can throw it away.
Now if you had that receipt emailed to you, then you're going to go into that email and move it into a folder within your Gmail or whatever email system that you're using, called 2022 Receipts so that all your receipts are there at the end of the year.
If you're purchasing items that are $75 or more, you are required to keep their receipts per IRS regulations, and you can use digitized receipts for an audit.
#3: Review Your Expenses Regularly
So you're tracking your expenses and keeping up with your receipts, and that's great! But more importantly, you need to review them to see where you're spending. Are you spending too much in certain areas? Do you have subscriptions that you've totally forgotten about that you're not using anymore? I've been on that bandwagon before.
In the video version of this blog, I gave a shortened version of the calculated tax planner demo, for those who are not quite ready for QuickBooks Online, because there is a learning curve there. If you're not going to take the time to learn it, don't purchase it. And if you're not ready to outsource your bookkeeping yet - this is for you!
Head my Facebook Group - The Calculated Profit Pursuit - to watch the replay! Then…
