Monthly Archives: June 2013

Budget is not a bad word

Just say the word “budget” and people change the subject. Their eyes glaze over.

Budgets are useful for personal and business purposes and don’t have to be some giant detailed document that rules your life. It’s a guide; a plan; and it’s certainly not cast in stone. A budget reflects what you think/hope/want to happen. It can help you make decisions – whether to spend or not your money, look for another or additional job, or raise your prices.

Let’s create a quick budget. Grab a piece of paper.

Write down all your fixed expenses for the month. Examples would be rent, insurance, utilities, software subscriptions, loan payments, etc. Include amounts put aside for equipment purchases and taxes.

Now write down your best estimate for your variable monthly costs. These would be merchant and/or bank fees, independent contractor fees, continuing education, office supplies, salaries and travel expenses.

Total up all those numbers you just wrote down. That’s your “break even” point; how much you have to sell just to keep the doors open. Now add in how much the business should be paying you each month (if not already added in above).

If nothing else, just writing down a quick budget like this can quickly streamline and prioritize your to do list.

Take a look at your accounting software to see if it has a budget feature. If it does, enter the numbers from the budget you just created. This will allow you to run budget versus actual income statements which can be very helpful. And don’t be afraid to change your budget. It’s a tool, not a ball and chain.

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Using your personal vehicle for your business

One of the most commonly asked questions I get is regarding the business use of a personally owned vehicle. There are several ways this can be treated on your tax return and I don’t really want to get into all that. What I do want to help you do is track the right information to provide to your tax professional. This information will help determine which method will give you the best results on your tax return.

1. Mileage: There are a couple ways to do this. There are apps you can download on your phone to track your business miles. Personally, I bought a small weekly calendar I keep on the console of my car in plain sight. I found I needed the visual reminder of seeing the calendar for writing down my mileage. On January 1, (or the day you start using your vehicle for business), write down the odometer reading. Then for each business use of your vehicle, write down the beginning and ending odometer reading along with a few words stating where you went (i.e. meeting with client at ….). At the end of the year, write down the odometer reading again and total up your total business miles. Provide the beginning and ending odometer reading for the year along with your total business miles to your tax professional.

2. Vehicle expenses: This includes fuel, repair and maintenance, insurance, and registration. I like to put this information in a spreadsheet. Remember to look in all your bank accounts for this information.

Once your tax professional completes your tax return, they should tell you what information to track for next year. If you happen to buy another vehicle, start from step 1 of this article for tracking mileage and expenses until your tax professional determines the best method to handle the vehicle on your tax return.

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