Knowing whether your work from home business is making a profit or loss means taking control of your business finances and managing your income, expenses and customer information.
If you do not know the basics of accounting or bookkeeping, try to learn the terminology or invest in software tools or a bookkeeper/accountant. Get to understand what terminology such as a balance sheet, break-even analysis, break-even point, cash flow statement and income statement means.
Online bookkeeping courses such as Accounting Coach (free online bookkeeping course), So you want to learn bookkeeping (free online bookkeeping course), Small Business Accounting and lynda.com (tutorials on using Quickbooks) may be of help.
Good record keeping is essential and to do that you have to be organized.
Get into the habit of putting time aside each week to update your records.
Sort and file your receipts in categories such as office rental, equipment rental, utilities, equipment purchases, etc. This makes it easier to prepare your tax returns as well.
Separate your business and personal finances by keeping separate bank and credit card accounts. This will make it easier to keep track of all your business expenses and save you a lot of time.
If you want to be paid, you will need to keep track of your income through your customer invoices and payments. Late payments are not good for your profitability.
Sort and keep all receipts, invoices, deposit slips, credit card transactions, cancelled cheques, documents, etc. relating to your business:
- Sources of income,
- Direct expenses,
- Overhead expenses and
- Business assets
When making the decision as to whether you will do the bookkeeping yourself or buy home business accounting software or use a bookkeeper or accountant, do not just make a decision based on costs. Remember, if you do not have the expertise, you may waste valuable time and make mistakes that may be costly.
For example, if you are earning $50 an hour and a bookkeeping service is charging you $30 an hour, it would make sense to use the service and use your time to generate income. Even if they charged you the same as what you earn per hour, the time they will take will be less than the number of hours you will lose trying to sort out your finances.
Consider all the options, time involved and your accounting skills and then decide on whether you are confident enough to do it by yourself with the help of some accounting software tools, whether you can do some of it or whether you prefer to use a professional service.
Remember to store your records for a minimum of 3 years.
Based on reviews, this is the best accounting software for small business:
There is free accounting software for small business offered by NCH software.
Shoeboxed.com is a great online filing system for all your business paperwork.
Whether you make a profit or loss depends on your business finance, therefore you have to track, organize and manage it well.