Business Expense Tracking 101: How to Track Expenses Without Losing Your Mind (or Your Receipts)

I recently chatted with someone who is starting her own business. She is young, excited, and eager to begin, but had a lot of questions—particularly about tax planning. Starting your own business is a thrilling adventure, full of promise and potential. But with the excitement comes the responsibility of managing your finances wisely. Proper expense tracking is key not only to staying organized but also to maximizing your tax deductions. As I started listing possible deductions for her business, I realized this information might be helpful to anyone thinking of starting their own company. So here it is—a list of ordinary and necessary business expenses that you may be able to claim:

Office and Operational Costs

Imagine walking into your well-organized office every morning. Everything from your ergonomic chair to the printer ink plays a role in your business success. Keep tabs on:

Startup and Organizational Costs: While not technically a tax deduction, these costs are considered capital expenses. They include expenses related to setting up your business, such as legal fees, incorporation costs, and initial marketing expenses. Keep detailed records, as these costs can be amortized over several years¹.
Office supplies: Stationery, furniture, computers, and software subscriptions.
Utilities and Rent: Your office space needs to stay powered up and connected—don’t forget the rent, electricity, and internet bills. Equipment leases, vehicle leases, and other leased assets may also be deductible.

Inventory

If your business deals with inventory (manufacturing or resale), you can deduct the cost of goods sold. This includes the cost of products, raw materials, storage, direct labor, and factory overhead¹.

Professional Services

No entrepreneur is an island. Sometimes, you’ll need a helping hand from professionals:

Legal and Accounting: Fees for lawyers, accountants, and consultants. Subscriptions to industry publications and trade associations also count.
Employee Expenses: Your team deserves the best. Track salaries, benefits, and training to keep them happy and productive.

Marketing and Advertising

Getting the word out about your business requires some investment. Keep track of:

Digital Presence: Your website is your digital HQ. Add online ads and social media tools to spread the word.
Promotions: From business cards to branded swag, make sure everyone knows your name.

Travel and Meals

Client lunches and business trips aren’t just fun—they’re deductible!

Business-related travel expenses, including airfare, lodging, meals, and transportation, can be deducted.
Entertainment expenses (like taking clients out for dinner) are also deductible, but there are limits.

Insurance

Protect your business from unexpected hiccups:

Business Insurance: Ensure you have general liability, professional liability, and property insurance. The cost of the business owner’s health insurance, business continuation insurance, and the business owner’s policy can be 100% deductible¹.

Home Office Deduction

If you’re working from home, you can claim a portion of your household expenses:

Home Office: If you have a dedicated home office, you can deduct a portion of your home-related expenses (like mortgage interest, property taxes, utilities, and maintenance) based on the square footage of your office space.

Think of accounting software like QuickBooks or FreshBooks as your financial assistant, helping you keep everything organized and accessible. Opening a dedicated business bank account and credit card is crucial for clarity, as it separates personal and business expenses. Regularly updating your financial records will save you headaches during tax season and ensure you’re always on top of your finances.

Embarking on your business journey is an exciting time, and effective expense tracking can set you up for long-term success. By staying on top of your expenses, you’ll be prepared for tax season and gain valuable insights into your business’s financial health. Remember to keep meticulous records, categorize your expenses properly, and consult with a tax professional to ensure you’re taking full advantage of these deductions. So, gear up, stay organized, and watch your business soar to new heights!

Need help navigating your financial journey? Contact us today for personalized advice and support – jennifer.jenkins@bluestonewp.com. Let’s make your business dreams a reality together!

¹_{Intuit turbotax. (2023). Taking Business Tax Deductions. Retrieved from https://www.turbotax.intuit.com}