Small business accounting is fun for some and a terrifying prospect for others. For me, it has at times been the second … but if I get into it, often I very much enjoy the bookkeeping needed to make a web design business work.
One thing you need to be aware of, if you’re starting a home business for the first time, is that you’ll be responsible for paying Social Security taxes. Perhaps I should mention, this post is being written in the USA! Here, though we may not be making enough to pay income taxes, we’ll still have to pay the Social Security tax, and that will require filing a long-form tax return and declaring deductions, so it is important to have all your receipts on file and your spreadsheet or accounting software kept up to date.
Learning small business accounting is no small feat. You may need to take a class on accounting or bookkeeping at your local community college. If you’re unsure of how to proceed, be sure to do so before you start your business. This will save you a lot of grief later when it comes time to prove and verify your income at tax time.
I suggest having an accordion or expanding file
For a small business, you could make accounting a daily or weekly event. The important thing is to remember to stay on top of the workload. For every hour of work you spend actually creating web pages for clients, you should spend an equal amount of time doing small business management tasks like accounting.
Items to verify, for tax deductions, will include not only your income, but also your costs, such as business license, training costs, professional memberships, books and periodicals that help you in your work, computing equipment, advertising, domain names, hosting, paper, printer ink, basic office supplies, and anything else that pertains directly to your business.
You will want to measure your house, then measure your work space, as those will be needed to fill out your income tax forms at the end of the year. This must be a space in your house that is set aside for your business work only. Keep all your housing expense receipts, including telephone, rent, house payments, insurance, property taxes, electricity, gas, propane, firewood, whatever applies. This will all be deductible, in part, and should be recorded in your accounting system.
Small business accounting can be a lot of fun once you wrap your mind around it. I truly recommend a college level course in accounting. You will feel so much more secure in your business efforts if you get that level of help setting up a system that works for you. However if you can’t get that, there are small business accounting books
I will write more about accounting in the months to come, and am making a spreadsheet for accounting you may find helpful.
