B&M Financial Management Services, LLC

Tuesday, February 26, 2019

Why You May Just Be Bad With Money

Here’s a question for you. If a stranger with a mic and camera came up to you at your favorite coffee shop while you were enjoying your steamed almond milk latte and asked you your favorite sexual position, would you tell them?

If, in that same scenario, rather than asking about your favorite sexual position they asked what your bank account balance was. Would you tell them?

That’s exactly what Gaby Dunn, of the newly published Bad with Money: The Imperfect Are of Getting Your Financial Sh*t Together, did in the premiere of her Bad with Money podcast. To satiate your curiosity, everyone answered the sex question and refused to answer the account balance question.

Dunn made her name as a personality for Buzzfeed and YouTube and her wildly popular first book, I Hate Everyone but You. Her Bad with Money podcast is a money show ‘for the rest of us,’ and was a project she undertook because, as Dunn claims she’s honestly bad with money.

Dunn appeared on the Queer Money® podcast to talk about why her generation is turned off by traditional financial advice and the systemic challenges marginalized communities, including the queer community, face today. In a culture that celebrates the fabulous no matter how fake, Dunn’s take on money is a breath of fresh air.

Being bad with money

“Even though my whole thing is radical transparency, there was one thing I [was keeping] secret, and that was my money situation,” says Dunn. This is what prompted Dunn to start her podcast, Bad with Money, and provide a unique take not seen in traditional money media.

“As I learned more and more about my own money situation and other people’s money situations, it became clearer to me that [money] was more of a social justice issue than I had previously realized,” Dunn says. She continues, “All the advice is for middle- to upper-class, able-bodied, largely straight, cis white people.”

Being about the rest of us

“It’s better to look at something through a specific lens rather than a generic one,” Dunn continues. Especially with money, the traditional advice alienates large segments of the population. When you’re concerned about your job security or physical security, the financial security promoted through traditional advice seems unreachable. Now, today, there are alternatives now.

Dunn’s show started with her talking about her talking with people about their experiences with money. By the second season, Bad with Money became as much about the social issues about money as money itself.

This is about when Dunn assumed the show description of ‘money for the rest of us.’ Today her show looks at money through a female, person of color, queer, disable, neuro-atypical lens. Dunn wants to reach people with her message who traditional resources aren’t reaching.

Being turned off by traditional money media

Dunn says that traditional finance media is condescending, it doesn’t consider most people’s ‘real lives,’ and, she argues, the shame is palpable because “everyone can’t start their retirement savings in kindergarten.” Dunn explains that traditional financial advice isn’t connecting with broader demographics and younger populations because it often leaves out the disenfranchised and minority communities, both economically and demographically.

Dunn says one of the best things she learned during her first season was from a disability expert who shared that disabled people are discouraged from earning more than $2,000 monthly (and sometimes less) or they risk losing Social Security Disability (SSDI) benefits. Thus, when traditional money media suggest having a certain amount of money by a certain age, they’re losing whole segments of the population. After a while, Dunn says, “it feels classist.”

Dunn says, “the best people to talk about money with are people from your same demographic because they likely have similar lifestyles, risks and concerns.” This is one of the benefits of the gig economy.

Once upon a time, there were three television channels for everyone, and those three channels had to speak to the largest demographics in order to sell the value of advertising on television. Today, with podcasts, YouTube, blogs and social media, nearly every demographic can find money experts from their community.

Being inundated with financial education and not being educated

To be true, contrary to popular belief, there’s a lot of financial education out there. From the internet to cheap books on Amazon to podcasts to YouTube videos, there’s a lot of financial education and much of it is good.

Why is it not connecting with so many Americans? Dunn attributes this lack of connection to systemic issues. “For so many, there’s almost no economic mobility, and no matter how much individual advice you follow, there are so many historical factors to consider that the traditional advice almost doesn’t apply.”

For marginalized people, Dunn continues, “There are a million ways to punish you.” Most people, when presented with enough challenges, give up or find the path of least resistance. The latter is often the most criticized.

Being in a world ruled by Gaby Dunn

If Gaby Dunn ruled the world, she’d “eliminate shame about money because it presents so many problems that people don’t even approach it.” Dunn would encourage “people to stop taking their financial circumstances as a personal failure.” She’d make clear that “People who are born on second base didn’t earn a double.”

Being willing to talk about sex more than money

So, what’s Dunn’s take on why her coffee shop experiment exposing people’s willingness to talk about their sex lives and not their account balances? “You seem ‘cool’ talking about sex, and people want to be ‘cool.’ Money isn’t cool. Money’s boring,” she says.

Dunn continues that, especially because of social media, everyone wants to be “living the dream.” No one wants to claim to have a poor sex life. Money’s an embarrassment for many. So, they dismiss talk about money, especially something as quantifiable as account balances, as too personal. One wonders how people would’ve responded to questions about their income, as incomes are a point of pride for many people.

Too often, and to an extent it’s true, that social justice warriors are dismissed as trying to tear people and systems down. But many are trying to help everyone get a fair shot, create true opportunity equilibrium. That’s Dunn’s mission and why she’ll continue being bad with money.

Source: https://www.forbes.com/

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Monday, February 25, 2019

Tax Tips and Traps for Your Startup Business

For a startup business, avoiding tax hassles begins the minute you make your first business decision. Everything from leasing office equipment to choosing your business structure has some bearing on your tax obligations. To avoid common tax traps, here are three areas where you need to pay special attention.

1—Official Start Date

Your business start date is not necessarily the date you make your first sale or the date you’re issued a Federal Tax ID number. Whether you’re a brick and mortar operation and/or an e-commerce website, your business officially starts when the business begins operating, has expenses and has the potential to make a profit.

The year in which you start is the first year for which your business should file taxes (and the first year when you can deduct qualified startup costs on your tax return). Deductible startup costs include anything related to investigating starting a business or related to the actual opening. For example, expenses such as advertising, marketing, travel and wages to consultants or contractors are deductible, as are research costs such as surveys, site selection and employee background checks.

2—Business Formation

Your business’s legal structure has huge implications for your taxes throughout your business’s life. In your first year of operation, expenses related to setting up your corporation, LLC or partnership are deductible. These expenses include state incorporation fees, legal fees, organizational meetings, and salaries for temporary directors.

Your legal structure also determines how you file taxes and what tax liabilities you incur.

Sole proprietorships are the most common business structure because they are the easiest to form and have the least amount of paperwork. The business is owned and managed by an individual proprietor; all business income or losses is reported on the proprietor’s personal income tax return. This is called pass-through taxation.

There are two types of partnerships. General partnerships have two or more partners; all the partners manage and are responsible for the business’s debts and operations. Limited partnerships have both general partners and limited partners; the limited partners are investors and not involved in day-to-day business operations. Business income and losses are reported on the partners’ personal income tax returns.

A C corporation is considered a separate legal entity from its owners and shareholders. It’s costlier and more complex to form than sole proprietorships and partnerships but protects owners and shareholders from liability for the corporation’s debts or lawsuits. Under the 2018 Tax Reform law, C Corps are taxed at a flat rate of 21 percent.

Limited Liability Companies (LLCs) combine some elements of a corporation and some elements of a partnership or sole proprietorship. It protects owners and shareholders from personal liability but has a more flexible management structure than a corporation. LLCs are treated as pass-through entities unless the members elect to have the business taxed like a corporation.

The S Corp is not a legal business entity type in and of itself, but rather a special election made by either an LLC or C Corp with the IRS. Companies that elect to be S Corps receive the same liability protection as LLCs and C Corps; however, S Corps can choose to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes. March 15 is the deadline to elect S Corp status.

3—To Buy or to Lease

Before you buy or lease office equipment such as computers, copiers, scanners and machinery, understand how the IRS views lease payments. In theory, lease payments are deductible, but if the leasing company offers a buy-out at the end of the contract, the IRS may reclassify your lease as a sale. In general, the business purchase of long-term assets (items lasting a year or more) must be depreciated over several years, unless you choose to deduct the entire amount at once under Section 179 of the tax code.

With April’s tax deadline quickly approaching, ask your accountant for suggestions on steps you can take at startup to save on taxes in the future.

Source: https://www.business2community.com

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Friday, February 22, 2019

How Often Should Your Business Run Payroll?

Businesses have a lot of options when it comes to how often they pay their employees. Whether it is every week, every two weeks or once a month, there are a lot of factors business owners must consider when deciding how often to run payroll. Company size, legal requirements, payroll budget, whether employees are salaried or hourly are just some of the key considerations.

Payroll schedules

There are four different payroll schedules you can choose from.

Weekly: Payroll is paid every week. This is typically the most expensive schedule for employers.

Biweekly: Employees are paid every two weeks, typically on a Friday. It is the second most expensive payroll schedule.

Semimonthly/Bimonthly: This payroll schedule is often confused with biweekly; however, employees are paid twice monthly, typically on the 1st and 15th or the 15th and 31st. It is the second least expensive payroll schedule.

Monthly: Employees are paid at the end of each month. While this is the least preferred payment schedule for workers, for employers, it's the least expensive option.

Salaried vs. hourly employees

According to Steffi Wu, a spokesperson for online payroll provider Gusto, the type of worker your business employs – salaried vs. hourly – also significantly impacts your payroll schedule. "Companies that mostly employ hourly employees typically run payroll more frequently, for example," Wu told Business News Daily.

Laurent Sellier, vice president and business leader of QuickBooks Payroll, said salaried employees who receive a set amount each period are best off being paid semimonthly.

Payroll schedules for small vs. large businesses

Sellier added that a business's payroll schedule also depends on the overall size of the company. Smaller businesses that employ fewer workers may be able to get away with a more frequent payroll schedule. However, as your business grows, your needs may change.

"As companies grow larger and take on more headcount, a biweekly payroll schedule is typically the preferred schedule for a number of reasons, including cost savings, and it simplifies reconciliation," said Sellier.

Legal requirements

There are both federal and state requirements small business owners must follow when deciding how often to pay employees. These laws establish other important payroll requirements, such as minimum wage rates and overtime. The Fair Labor Standards Act, said Sellier, does not dictate how often a business can pay employees, as long as employers pay employees for the hours they have worked. However, he noted that individual state laws may vary.

"Most states set either a weekly, biweekly, or semimonthly payday schedule," said Sellier. "For example, states like Nebraska and Pennsylvania allow the employer to designate paydays. Arizona, [however], requires employers to pay employees twice a month but 16 days apart."

The cost of running payroll

According to Wu, cost-associated factors, like business cash flow and available debit schedules, typically guide payroll schedules. Since there is no one-size-fits-all approach for processing payroll, your costs will vary based on a number of factors, such as tax requirements, the number of employees, service bundles and, sometimes, your current payroll frequency.

The costs of running payroll exceed the fee the payroll company will charge you. Keep in mind there are additional administrative costs you'll be responsible for. Add-on fees you'll incur each time you run payroll may include, among others, printing paper checks, data entry and direct deposit charges.

Complications

As a small business owner, there are some risks you face processing payroll yourself or having an employee process payroll for your business. The three biggest pitfalls include:

Misclassification: According to Sellier, employers sometimes misclassify the type of worker they are running payroll for. For example, you might pay someone as a contractor when the law says they should be paid as an employee. As the employer, it is your responsibility to review employee classifications and ensure you are accurate and compliant in classifying and paying employees.

Miscalculating overtime: Managing overtime can be a challenge for many employers, said Sellier. This includes either not paying overtime or paying it incorrectly. To avoid miscalculating overtime payments, properly monitor employee hours and the overtime pay rate.

Late payment: Completing payroll on time is a common complication and can be especially difficult for small businesses. This can be avoided by outsourcing your payroll.

According to Wu, many complications can be mitigated by using a payroll system that does the tricky work for you. This includes choosing a payroll system that can automate your payroll and file and pay taxes for you.

Finally, when determining how often your business should run payroll, keep in mind that you can pay salary and hourly employees at a different rate, and this might be necessary, depending on your business.

Most payroll companies give you the option to update or change your payroll schedule, so if you decide your current schedule isn't the best option for your business, you are free to make the switch.

Source: https://www.businessnewsdaily.com

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Thursday, February 21, 2019

6 Tax Hacks For Small Business Owners

Around the world, businesses are the ever-present lifeline of small and big economies. However, even success comes with long hours and significant investment in money and energy.

Every small business owner wants to save some funds on software, for example, or at the bare minimum utilize their finances efficiently for better profit margins. One of the best ways to save money and meet your obligations is by paying more attention to your taxes. With a few simple, and most importantly legal, tax hacks you can enhance your small business in more ways than one. Here are a few.

1. Make the most of tax filing tools

It’s never easy to file taxes being a small business owner who already has so many things to worry about. However, using tax filing software should considerably lessen your experience with the not so friendly proverbial of ‘death and taxes’. It certainly helps with avoiding errors and severe headaches. The best entrepreneurs, accountants, and mathematicians are often frequent tax software users, so it should be a consideration you take seriously.

Tax filing tools accord small business owners plenty of safeguards they probably cannot afford otherwise. Use these platforms to file tax returns on the web accurately and enjoy full refunds whenever they apply.

2. Mind the morrow

Small business owner can’t take long-term goals lightly. But preparing for tomorrow does help. For instance, you should already have set your retirement goals by now, and if you haven’t – now is the time. In fact, by investing more funds into your retirement today you could end up with handsome tax benefits. Check out IRA tax hacks and harness your taxes with retirement savings.

Don’t stop there. Understanding accounting, taxes and other related financial obligations for your business pays off in the long-run. Think about a CPA course for yourself or a staff member that will allow you to organize your finances and plan your future financial trajectory while meeting relevant tax obligations. CPA exam costs vary between $1,000 and $3,000 with diverse features such as video lectures, pass guarantees, personalized support and audio courses, among others.

3. Don’t throw away financial footprint

Obvious financial footprints some ignore are receipts. Don’t throw them away yet. Lots of receipts for all manner of services and goods are deductible from taxes and can balance your taxable income effortlessly. Depending on your small business structure, you’ll find lots of deductibles you can take advantage of. If keeping paper receipts for months or a whole year is cumbersome, start digital storage for them. Use any of the different apps out there to keep your paper trail digitized by capturing the receipts, storing and organizing them in one unique place.

4. Home office deductions

Do you operate your small business from home? Do you know it’s possible to deduct expenses from it? Yes, you can deduct certain things such as repairs, mortgage interest, internet services and other utilities. To hack this, ascertain the part of your home you’ve dedicated to running your small business operations. Tax software can help calculate the amount while the deduction is open for renters and property owners alike.

5. Keep an eye on tax calendar

You should never miss a tax deadline or wait until it’s too late to comply with tax laws. However, you could be really busy and hardly remember to keep up with everything. With deadlines always on the horizon, you can rely on free tools provided by the IRS to avoid missing critical tax deadlines. Check out the IRS calendar for businesses and self-employed individuals and you won’t miss any tax payment.

6. Mind your business equipment

If your small business continuously purchases equipment all the time you can make something out of it. Familiarize yourself with Section 179 and Form 4562 to ensure your equipment bought in 12 months is an expense for your budding business. In the long-term, this will be invaluable and will bring much-needed cash savings.

Old equipment? Don’t sell it yet. Incurring an ordinary loss (by abandoning it) might be a better option because it’s fully deductible. Study Section 1231 and ascertain how your old equipment will be classified to make some tax saving from it.

Source: https://www.theselfemployed.com

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Wednesday, February 20, 2019

Improve Your Accounting by Using SKU Numbers

Your accounting and financial tracking are vital to the overall health of your business. Yet, it’s intimidating to calculate the sheer number of variables that play a role in determining your finances. Everything from the bankers you work with to the employees you hire affects profitability. And, the tiniest accounting error can significantly impact your numbers.

Developing and regularly using SKU numbers is one of the greatest tools your small business or side hustle can leverage to improve accounting (and profitability).

SKUs vs. UPCs vs. Serial Numbers

SKU numbers may not seem very interesting or very critical to your bottom-line accounting. However, once you see how deeply integrated they are in your business operations, you’ll come to recognize their value.

First, you need to know what defines a SKU number. SKU stands for “stock keeping unit.” It is a code made of letters and numbers and is usually six to eight characters long. These numbers are designed to keep track of inventory. They are used heavily in both inventory management and point-of-sale (PoS) software as well as accounting software.

At this point, you may be confused about how SKU numbers differ from UPCs (universal product codes) or serial numbers. UPCs are 12-digit numbers that run along the bottom of barcodes on various products. UPCs are, as the name implies, universal, and can’t be unique to any one store. In other words, two companies selling the same products will share the same UPC for a given product but will likely have two different SKUs.

Serial numbers are unique to each individual product. They are usually used for electronics and other big-ticket items. If your store is selling 20 laptop computers of the same make and model, they’ll all have the same UPCs and SKUs. But, each of those 20 laptops will have a distinct serial number.

Advantages for the Accounting Process

So, why are SKU numbers good for your business’s accounting?

Loss Tracking

For starters, SKUs are one of your best resources for loss tracking. Because each SKU number allows you to track your inbound products, and track them quickly and easily throughout their journey to customers, it’s easy to determine where and how your products are disappearing.

Inventory-based Decisions

Inventory management errors are one of the three biggest causes of profit losses in retail businesses. Yet, SKUs make it much easier to keep track of inventory at each of your locations. This becomes critical the more products you have to track and the more locations you have. With accurate inventory numbers through a largely automated process, your team will be able to make smarter stocking decisions. You’ll lose fewer products, have a more reliable stock in each of your locations, and be less likely to make a bad development call.

Individual Item Locations

Accounting can also determine advanced statistics based on the locations of various items. For example, they can see which stores are ordering the highest quantities of each product and determine where most products are being lost. As an added bonus, warehouse managers and store stockers will find it much easier to track down individual items. This can greatly increase your speed and profitability.

Reporting Accuracy

You know the importance of reporting accuracy, and SKUs can make those reports much more accurate. Because you’ll be scanning your items regularly throughout your operation with unique numbers for each item, you won’t have to worry as much about misleading or erroneous information. That helps create more consistent, reliable revenue projections. Plus, it enables smarter accounting decisions.

Customer Service and Marketing

Though not related to accounting directly, it’s also important to note the benefits of SKUs for marketing and sales and customer service. SKUs can help you learn which products are being bought most frequently (and how). This information can be used to create targeted advertising. They can also improve our in-store experience since you’ll be able to locate in-store items faster or order them from the correct locations.

Creating SKU Numbers

You can generate SKUs any way you want; there are no fundamental limits on what formatting you use or how many characters are to be included. When deciding on a format, make sure you consider the application for which you’re using SKU numbers. For example, if you believe your cashiers will need to commit SKUs to memory, it’s a good idea to keep them short, easy to read, and memorable. But, if you’re working mostly in warehouses, and you have many different products, longer SKU numbers may be advantageous.
Once you decide on the length, select a format that allows you to embed some level of meaning into each section of your SKU code. You could split your code into three sections—a beginning, middle, and end—and associate each of those sections with a different element of meaning. For example, you could have the first two digits represent the broad category of the item, the second three digits represent a specific category of the item, and the final group of digits represents some kind of sequential order.

There are many different assignments and designations you could consider, including:

Store assignment and location. Track which products belong to which store or the location or department where they’re being held.

Sub-category identifier. You can also create groups of numbers that identify a sub-category. These might include “fruits” or “vegetables” within the “groceries” category.

Variation identifier. The last set of numbers or letters should take advantage of subtle variations between different products, such as color, size, or the type of item.

Miscellaneous SKU Tips

To get the most out of your SKU numbers, try these tips:

You Can Use SKUs Again.

Common sense might tell you that once you use a specific SKU number, you can never use it again. After all, these are meant to be unique identifiers. As long as you wait a few years between circulating items, you should be able to use old SKU numbers for new products. The only problem you might run into is customers returning several-years-old items that are no longer in your database.

Begin SKUs with Letters, and Definitely Not Zero.

When assigning SKU numbers, it’s a good idea to begin them with letters. This will help your accounting team pick them out easier in a spreadsheet that’s likely full of other numbers. While you’re at it, make sure your SKU numbers don’t begin with zero. This is because some apps and software will misinterpret your zero to mean “nothing,” resulting in errors.

Work from Broad to Specific.

The beginning of your SKU number should be the broadest, highest-level category. Subsequent sections of numbers should gradually work to become more specific. Ultimately, this results in the most specific, narrowest category you can qualify.

Avoid Letters that Look like Numbers.

You can automatically scan some SKUs. Accountants must enter others manually or review them in spreadsheets. Accordingly, you can cut down on errors by specifically avoiding letters that look like numbers. For example, the letter “I” looks like the number “1,” and the letter “O” looks like the number “0.”

Avoid Using Manufacturer Numbers.

To keep it simple, you might use manufacturer numbers — or an element of them — as your own. However, there aren’t many benefits from this strategy. Remember, SKU numbers should be unique for every business. Therefore, it can be confusing to duplicate SKUs from another business.

Don’t Pack Meaning into your SKUs.

While it’s a good idea to imbue some sections of your SKU numbers with meaning—like using “GRC” for “groceries”—it’s a bad idea to overload your SKUs with meaning. This often results in SKUs that are far too many digits This creates more confusion for your accounting staff.

Shorten SKUs for Manual Entry.

If you’re going to be manually entering your SKUs, try to minimize the number of characters used. The shorter the string of characters in a SKU, the easier it will be for people to remember and the less time it will take to enter. That’s going to save your team a ton of time and hassle.

Using SKU numbers to keep your business finances under control is one of the best decisions you can make for your brand, especially if you have a wide variety of products to track across locations. It takes time to set up a system capable of scanning, tracking and analyzing them. However, it’s worth the effort.

Source: https://smallbiztrends.com

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Tuesday, February 19, 2019

Need Accounting Help? Learn How to Use QuickBooks for Less Than $20.

Boasting a market share of more than 80 percent among small businesses, Intuit QuickBooks reigns supreme in the world of financial management software. That popularity can be credited to its vast lineup of features for invoicing, bill payments, income tracking, inventory management, and more — basically, everything a business could ever need accounting-wise. And with all of these "smarter business tools" accessible on one clean, flexible interface, it should come as no surprise that QuickBooks was recently named the PC Mag Editors' Choice for online accounting software.

Maybe you're already one of the 5.6 million QuickBooks customers around the world. Or maybe your knowledge of the software is limited to its quirky video ads starring Danny DeVito. Regardless, it's worth mentioning that the latest version of QuickBooks can be tricky to use if you're not familiar with its functionality.

QuickBooks helps you make sense of your finances, from demonstrations on how to instantly create accurate bookkeeping documents (i.e, estimates, invoices, statements, and deposits) to tips on how to track customers, vendors, and employees.

Dreading tax season? Not to worry: QuickBooks even includes tools for tackling your tax return. Such as creating income/expense reports and track loans, credit cards, and sales tax, and more.

Who knew accounting could be so, well, tolerable?

Source: https://www.entrepreneur.com
Image Credit: Alpha Stock Images

Friday, February 15, 2019

Receipt and Expense Tracking Still an Obstacle for Small Business Owners & Self-Employed

With tax season looming, many self-employed people and small business owners are starting to sweat their tax deductions. One of the greatest areas of concern year after year is business expenses and receipt capture. In a recent study conducted by the Receipts team at QuickBooks Online, 500 self-employed individuals and small business owners were surveyed regarding their current expense tracking and receipt capture habits.

Questions ranged in topic from what types of deductions self-employed individuals take to how expense receipts are stored and organized to what types of challenges these workers face while trying to keep track of it all.

Of the 500 respondents, 60 percent identified as self-employed, while the other 40 percent indicated they were small business owners. Sixty-five percent of these individuals indicated they have between 1 and 5 employees, while almost 20 percent (19.2) have no employees. A majority of all respondents were single (36.6%) or married (38%) with no children (50.4%) and intend to make a real estate purchase in the next 12 months (50%).

Leaving Money on the Table

Two things became apparent as soon as the data was initially analyzed: self-employed individuals are uncertain what exactly they can deduct and this uncertainty leads to not deducting everything they can. This directly translates to leaving money on the table.

According to the study, more than 50 percent (55.4) of respondents do not deduct all of the expenses they can from their taxes every year. In fact, only 15 percent (15.2) of those that responded stated they deduct 100 percent of what they can annually.

When examining why self-employed individuals don’t take all of their deductions, in addition to being uncertain of what can be deducted, people can’t remember all their expenses (21.8%) and don’t deduct everything because they lose their receipts (17.4%).

While it’s unfortunate that these obstacles keep self-employed individuals from taking all the deductions they could, it’s encouraging that these challenges are easily addressed.

QuickBooks Receipt Scanner is designed to keep receipts all in one place and works fast, so it doesn’t disrupt a busy business owner’s day

Organization is Key

Of course, one of the key elements of any tax deduction is keeping and organizing the necessary receipts. Nearly 8 out of 10 respondents (79.6) stated that they could be better or a lot better at organizing their receipt. Only 20 percent (20.4) felt that they had no room for improvement where organization was concerned.

This margin for improvement leads to a high margin of error as well. Seven out of 10 self-employed individuals (69.8) stated that they lose a receipt at least once per month; while the other 30 percent (30.2) said they never lose receipts.

Plus, many self-employed individuals don’t keep their receipts for the express purpose of using them as a tax deduction. When asked to rank the most important reasons that they hold on to receipts, respondents stated it was in case they wanted to make a return. Tied for the second most important reason were the following: to keep product warranties; to keep track of how much is spent on business and expenses; and finally, to deduct expenses at tax time.

Physical vs. Digital Tracking

When asked to describe how they organize their receipts, only 16.8 percent of respondents stated that they keep track of their receipts digitally. That means that more than 80 percent of self-employed individuals are still relying on shoeboxes, coffee cans, file folders and their wallets as a filing system.

However, 20 percent (20.5) of respondents expressed a wish for a better way to keep track of their receipts, while another 8 percent (8.2) said that they spend too much time keeping track of and organizing their receipts.

Similar to understanding what receipts are necessary to keep for tax deductions, it would appear that a lack of knowledge regarding other expense tracking and receipt organization methods is what is preventing self-employed individuals from using a more secure tool.

Uncertainty Breeds Stress

Perhaps the most upsetting statistic revolved around the amount of stress that self-employed individuals feel when it comes to expense tracking and receipt management. Two out of 10 respondents stated that they feel stress related to expense tracking at least once every two to three months, while 13 percent of respondents feel stress on a monthly basis. That means that three out of every ten of the survey respondents are feeling some type of stress related to expense tracking on a fairly regular basis. When combined with the over 50 percent (53.8) of respondents who also feel stress organizing these business expenses, tracking these expenses and receipts are obviously providing self-employed individuals with another layer of stress they don’t need.

The Biggest Struggle

When asked what their biggest struggle was relating to tracking their business expenses, self-employed individuals were able to easily articulate these obstacles in their own words. Of all the responses, an overwhelming number was some version of the following: “keeping track of every expense.”

Other themes that were repeated included:

Misplacing or forgetting to separate personal and business expenses

Knowing what can and cannot be deducted

Keeping everything organized

Work Smarter, Not Harder

Fortunately, digital tools have evolved to help self-employed individuals to keep track of their expenses and receipts. With QuickBooks Receipt Scanner, a smartphone camera becomes a scanner. By taking a photo of the receipt, a digital file is uploaded to QuickBooks. Now, losing a receipt isn’t the end of the world; the digital image will remain and can be used when it’s time to review expenses at tax time.

This functionality directly addresses a set of challenges that self-employed individuals repeated throughout the study: keeping track of the receipts, finding the receipts, and putting the receipts all in one place.

Weird But Necessary

Despite confusion regarding what can be deducted, survey respondents were able to recall some of the more … odd items they have deducted for business-related purposes. Some of our favorite responses:

Trip to the Zoo

Banana

Cow

Shrunken Head

Mustard

Dog Walking

Inflatable Snowman

Feather Duster

There were a few other more “colorful” items, but we’ll keep this PG for business purposes.

Methodology
QuickBooks surveyed 500 self-employed people about their business expenses and receipts throughout the US in May 2018. The sample was selected by Pollfish. QuickBooks welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium.