Properly managing business expenses is not just good business, but also a good income strategy for a solo professional.
As a business-of-one, you will incur fixed costs that cannot be billed back to a client. You also may need to take care of expenses that used to be the role of an employer, like health care expenses, retirement funds, etc. Each of these fixed or variable costs drain income, and managing them well can lead to opportunities to write off expenses against your income bringing more money back into your pocket.
Let's talk about the categories of expenses you should make sure you are accounting for. These are all areas you should make sure you are keeping records and receipts for either through a business process outsourcing partner like MBO, or via your own accounting strategy.
Coming Right Back At You: Costs of Communications:
- Do you have a business related landline?
- Do you send faxes for your business?
- Are you connecting to a database to search for information (like a Lexus Nexus, Dow Jones or Hoovers)?
- What about internet connectivity costs?
- Don't forget the cellphone and data charges for on-the-go connectivity. (Just remember you can expense only the business related percentage)
Pay Yourself Back for Learning On The Job: Tuition and Training Dollars
- Are you taking a class or getting certified?
- Did you pay for an exam or assessment?
- Did you attend a seminar?
- What about textbooks and training manuals?
Put Those Meals and Entertainment On the Books: Business Development Dollars
- Were you at lunch with a business associate or client furthering your mutual goals?
Promotion Pays: Marketing and Advertising Expenses
- Did you create and pay for an ad?
- Did you buy business cards or stationary or create marketing collateral?
- What about PR expenses to promote your business?
- Did you pay someone to help create a better resume for clients?
- Did you pay for someone to develop a site or blog for you?
Taking the Hit out of Healthcare: Expensing Private Insurance
- Are you keeping track of and writing off premiums you pay for private medical insurance?
- Did you remember both dental and health?
- What about uncovered out-of-pocket medical costs for services and prescriptions including co-pays and deductibles?
Home Alone: Get the Benefits Of Buying & Maintaining Home Office Equipment:
- Remember more than just your business computer or laptop
- Think about projectors, test equipment
- Office specific furniture can apply
- Think about set up charges like a Best Buy Geek Squad installation
Running A One Person Show: Misc Office Costs
- Are you buying business related publications?
- Are you renting conference facilities?
- Are you renting office space outside of the home?
- Are you purchasing supplies like pens, printer ink, paper, etc?
- What about paying for shipping and postage?
- Repairs and maintenance also count
- And there's all that software you need to operate from Word upwards
Keeping It Above Board: Write Off Against Professional Fees
- Association fees
- Paying someone for business development or contract solicitation
- Legal fees to help with client issues
- Any services you bought from another corporation to help your business succeed
At MBO Partners, our business managers help our consultants properly track and account for these expenses and see the income benefit at each paycheck, not just at the end of the year. That's worth it for busy solo businesses, and sure beats a 12-month pileup in a shoe box.
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