This is the first in a series of articles prepared to assist small business owners and owners of home based businesses, ensure that they are maintaining appropriate business records.
So, you have already started either your own home business, internet business or home based business or you are considering doing so. Whether your business be internet based or otherwise, I will refer to it as your Home Based Business in these newsletters. I hope you will find value in this Newsletter and those that will follow.
My own experiences in setting up an internet based home business office are very real and quite recent. I therefore thought that if I could pass on some of the tips that I have been given or have learned, maybe I can save some of my reader’s valuable time and maybe money also. So please use these articles as a good base training tool for your home based business.
The first thing that I have found to be of great value is to maintain a logbook highlighting the daily activities in my home based business. This is certainly not essential, but let me provide a few valid reasons to maintain such a record. Preferably your logbook should not be loose leafed. It should be a book that is either bound or has a spiral spine. Show clearly the date before you commence each day. Refer to it as your Home Based Business Log Book and keep it up to date at all times.
When a logbook is full, put a label on it showing the dates covered and then start a new log book. Things to record are really up to you, but I have found it useful to record phone numbers for leads or contacts and details of any telephone calls made to leads particularly. I also record web pages I have visited and make a summary of useful information found on each site. Please do not fall into the trap of saving all your websites into your computer’s favourites file, because it will soon become too crowded and you will never find what you are looking for. Even if you extend your History file to include the last 6 months of visits, you will still experience difficulties finding what you are looking for.
The log book is also a good place to record usernames and passwords as you sign up at various sites. I know that you will need to maintain a more permanent record of this information on a spreadsheet or something similar, but initially you will usually be given a password that you will never remember. So enter the information into your spreadsheet record once you have changed the password to something more suitable to you.
Perhaps a more critical reason to maintain your logbook is that it will provide proof that you are operating a bona fide home based business venture should the tax man come calling at some future date. (more on the tax man cometh, in a later newsletter).
I am sure that one of the main reasons that you have started your own home based business is so that you can earn income. Unfortunately, this brings us to more record keeping. This time, however, you really do not have an option unless you have an accounting or bookkeeping package that will assist and keep the required information for you. When your income starts to come in it is essential that you record the following information.
The date you receive the income,
Who paid this income to you,
the amount that you received.
Even if you have money deposited into an account such as Paypal or some similar internet transaction vehicle, you still need to keep a record. The best place to record this, if you do not have an accounting package, is in another small bound book. I would suggest that you start a new page each month and total your income at the end of each month.
Why do you need to keep this record? Because you are going to need it to complete your annual income tax return. Don't think for one moment that because your income is being earned in cyberspace, that you will not be required to declare it as income to your tax authorities. The same goes for income that you obtain from foreign companies also. The penalties for not declaring your income can be very expensive should you be foolish enough to try and then get caught. You are required to report all income you receive from your home based business on at least an annual basis.
This includes
Income from sales
Commissions or bonuses you receive for sales and the sales of others who work for you or who are down line from you if you are operating an MLM Business.
Prizes, money and awards you receive because of sales you make.
Include interest income, amounts recovered from bad debts you deducted in a prior year, and other miscellaneous income.
Further topics in this series are as follows:
Number 2, General Expenses,
Number 3, Purchase of Goods for Resale,
Number 4, Deductions for Use of Home Office,
Number 5, Home Entertainment Costs,
Number 6, Automobile Costs,
Number 7, Depreciation Costs,
Number 8, Business Meals,
Number 9, Salary Payments to Children,
Number 10, Travel Expenses,
Number 11, Demonstrators Samples & Promotional Tools,
Number 12, Gifts,
Number 13, Here Comes the Tax Man,
John Ritchie,
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