![]() This might be a separate office, money you expense as a home office deduction, interest on your mortgage payments, or something else. Payments made towards your office lease, rental, or purchase expenses. If this is the case, you should categorize those expenses. You might pay towards certain other employee benefits. Use this category for making payments into a business retirement plan, like a 401(K). If your business provides you with health insurance and pays premiums on your behalf, be sure to categorize them appropriately. You should also categorize payroll taxes and other deductions on your salary costs. If you pay a salary or run payroll for your business, you’ll need to categorize whenever you make a payment to employees. This list is not exhaustive-the names used in your accounting software may be different-but it will give you a good starting point. Here’s a list of business categories that you can assign spending to. ![]() When you go through your bank transactions, get the details of any spending, and assign it to a business category in your accounting software. When You Spend Money, Identify What You’re Spending It OnĪccurate records are essential to getting your categories right. This is the essence of bookkeeping, and it’s a good habit to review your transactions on a regular basis. The easiest way to stay on top of business finances is to reconcile your bank statements against your accounting software. Most accounting software like QuickBooks, Xero, or Freshbooks will come with business categories already in place, and you will be able to add or amend them as needed. You should choose categories depending on how easy they make it to financially manage your business. For example, a property management business may have dedicated categories for different types of maintenance and repair, while a leasing business may categorize according to the equipment they rent out. The right categories for a small business will vary depending on the needs of the business owner. Use these categories for accounting to make it easier to prepare your tax documents.ĭecide on the Right Categories for Business Expenses.Run a “ Profit and Loss ” report that will identify where you’re spending the most.Each time you spend money, determine what you’re spending it on.Review and reconcile your bank accounts on a regular basis. ![]()
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