By Lisa Tanner, freelance writer and contributor to this blog
When you run a home business, there’s a lot of paperwork involved. And you have to keep your home business records in order. Otherwise they can quickly become overwhelming.
To help you streamline the record keeping side of your business, here are five tips you can use. Most of these are flexible, and work across a wide variety of business types.
However, please remember that I’m not an accountant. To ensure you have your books set up properly, it never hurts to meet with a qualified professional. Find someone who is knowledgeable about the laws in your area, and familiar with your type of business.
Here are the tips we’ll be looking at:
- Make a List of Paperwork Tasks
- Create a Streamlined System
- Implement Record Keeping Routines
- Look at the Numbers
- Partner with a Professional
Ready to streamline the paperwork side of your business? Let’s dive in.
For a complete step-by-step guide on how to start and grow your dream home business, check out my book Make Money From Home.
1. Make a List of Paperwork Tasks
What kind of records do you need to generate and keep in your business? Here are some common ones:
- Bookkeeping information
- Tax Forms
You may have additional records to keep depending on the business you run. Take the time to think through each stage of your business. Write down any paperwork type tasks that occur, and keep them in a running list.
The goal of this list is to help you prepare. By writing them all down, you won’t have to think about what needs streamlined in the next step. You can just glance at this list and get started.
2. Create a Streamlined System for Your Home Business Records
This will be the longest step in the process, but it will save you time in the end. Your objective is to know what needs done from start to finish for each type of record keeping you need to do.
To help you get started, I’m going to share some of the systems I use for the five types of records listed in the section above.
When you run a home business, you don’t just get a paycheck instantly deposited into your account every other Friday. You have to send invoices to clients on a regular basis.
There are many invoicing systems available. I started off just creating an invoice in Word and emailing it to clients. This worked to get me started, but there were definite limitations. So I started exploring my options. I found Wave, and have used it for the past four years.
Here’s why I really like it:
- It’s free for the services I use it for
- You can customize your invoices
- You can send it directly to your client
- There are built in reminders you can use that can be helpful if you have a client who forgets to pay
But there are a lot of other options out there, so don’t feel like you have to use this one. The important thing is to find an invoice system that works for you. It’s an important part of your business, so find one that is user-friendly. You don’t want to dread creating invoices.
Once you get your invoicing system set up, stick with it. It’s much easier to just pick one and go for it than to try to switch all the time. You can get used to the process and streamline much more easily.
One great part about running a home business is that you can deduct your business expenses. But you have to track them to be able to do this.
That means you need to save your receipts.
But don’t worry, you don’t need to stuff everything into an old shoe box. In this digital age we live in, there are definitely better options.
Any digital receipt you get, create a process for saving it. This can be emailing it to yourself and saving it to a particular folder in your email. Or it could mean downloading it to a special folder on your computer. If you go with this route, I highly recommend backing it up to the cloud. You don’t want an unexpected computer problem to wipe out your records.
If you have a physical receipt, you will also need a plan. I use the Scanbot app on my iPhone to snap a quick picture. This creates a digital version, and I then proceed to email it to myself and save in my records folder.
If you prefer to keep the hard copy, consider investing in an expandable folder. You can assign one of the sections to each month of the year. Then, slip the receipt inside the month when the expense occurred, and you’ll have it when you need it.
No matter what system you use, it’s important to stick with it. Otherwise you’ll wind up chasing down receipts come tax season. And that’s not fun.
What’s your process for creating quotes or estimates? Your business may not need this, but if you do, take the time to think through the process. Create a checklist to help, so you don’t forget to add in common expenses when generating the quote.
The easier you can make the process, the more likely you are to create accurate quotes that you are happy with.
You need to keep updated books. This will help you track your business profit and loss. You want to make sure your home business is actually making money.
Come up with a system of accounting that works for you and meets any requirements that exist in your location. I personally use an Excel spreadsheet that my husband built for me. It has macros and automatically calculates things like how much to save for taxes and expenses, lets me see my income breakdowns by each type of work, and allows me to track expenses by categories.
Excel is not the only way to do bookkeeping. It just works for me. You may find something else you prefer. Wave has a bookkeeping component. And many entrepreneurs love QuickBooks online. I’ve had clients use Xero in the past as well. So, there are a lot of options.
You need to find a plan that works for you and is easy to use. If it’s not easy, you aren’t going to do it. And then your paperwork will build up.
You need to file your taxes each year. If that scares you, I highly recommend finding a professional to help. They will need your bookkeeping records (mentioned above).
But no matter who fills out the forms, you must have a record keeping plan in place to make it simple. You also need a way to hang onto all of your records. As a business, you need to retain them for several years in case you get audited.
If you go with a digital storage system, be sure to label your folders by year. That way you can easily find any information you need. You can also print out these forms and store physical copies. But, this will take up a lot of space. Banker boxes are one solution, as you can fit a lot of records inside, in file folders.
3. Implement Record Keeping Routines
Now that you know the how behind your record keeping systems, it’s time to implement the when. When are you going to do all the things?
Time blocking is a strategy that can help you with this. Perhaps you pick a day of the week to do all of your record keeping. Or maybe you prefer to spend ten or twenty minutes each day.
How you do this doesn’t really matter. That you do it does. You must keep up with your paperwork or it will bury you. And unburying yourself from paperwork is a time consuming, tedious process. It’s best just to not let it build up. Done regularly, it’s usually a quick task.
Put your record keeping on your calendar. Schedule the appointments with yourself and then keep them. It’s important and shouldn’t be brushed off.
4. Look at the Numbers
Are you taking the time to look at your records and learn from them? Your bookkeeping systems can help you keep a close eye on your business. These records are like a thermometer that can tell you how your business is doing.
Regularly (perhaps monthly) take the time to analyze your profit and loss. Take time to reflect on the numbers. I use my planner to jot down a few key takeaways each month, including things that worked and things that didn’t. You can learn a lot from , so don’t give up if you have a bad month.
Are there any expenses you can cut? Do you need to outsource some tasks to a virtual assistant so you have more time to work on other tasks?
Only by looking at your numbers can you come up with honest answers for these questions. You have to know how you’re currently doing before you can make any effective changes.
So keep close tabs on the state of your business. Create a business budget so your expenses don’t get out of hand. And learn from your numbers.
5. Partner with a Professional
Somewhere along the way, you will have questions about the record keeping portion of your home business. When they creep up, it’s nice to have a professional you can trust.
For me, my first major question popped up when the state of Washington sent me a Business and Operations tax form the January after I launched. I had never seen one of these before, and literally had no idea how to fill it out.
Thankfully, there was a great accountant in our town who was able to walk me through the process.
You need someone like that, so take the time to find a professional. Partnering with someone doesn’t mean they have to do all the things for you (though if bookkeeping isn’t your forte, you might consider outsourcing this and tax prep). But, having someone who you can turn to when things happen can give you peace of mind.
Don’t Let Your Home Business Records Scare You
Home business records are important. But they are not something to fear. By taking the time to set up your processes and create routines for them, you will eliminate a lot of the headache that can arise when you’re feeling buried and stressed.
A little time planning now will save you a lot of time in the future.
Do you want even more encouragement and help as you grow your home business? Be sure to check out Sally’s Work-at-Home Library. You’ll find so many amazing resources, and a supportive Facebook Group. Check it out by clicking on the banner below.