Starting and running a business involves a lot more than people realize. It is imperative that you start - from the get go, to keep track of expenditures, no matter how small. No business that is successful does it out of a shoebox full of receipts. The IRS won't accept that, and neither will potential investors - and you never know if you may need them someday.

It is amazing that people think they are doing real well because they are making money. Some wonder why they are not seeing any benefits from it. Good income does not necessarily generate into profits.

Accurate accounting of expenditures and income show what you are really doing, and if you are making a profit or taking a loss. You are able to see if there is a need to adjust prices or tighten the belt. Many have lost their business because of poor record keeping.

Working from home there are many expenses that most people would not think to keep track of, but that add up when it comes to profit and loss. It is not just a matter of having a computer and a website. If you think that, you are doomed from the start.

After many years of working as a bookkeeper, and sometimes with businesses that did not keep decent records, I would like to offer a few tips. If you are not good at keeping records yourself, hire someone who is. If you don't have the money for payroll expenses there are people who work on a contract basis who can help you out. There are also virtual assistants, people like me, who do bookkeeping for small business online by having them send their receipts and tracking it through a software program, like QuickBooks. This way an accurate accounting of profit, and loss can be seen.

Keep in mind the following for tax purposes and tracking expenditures:

• Home Office - You must set aside an area of your home to be used EXCLUSIVELY for an office. The IRS is very fussy about this. If you need to use a closet, make sure it is not also a storage area. If using a bedroom, do not have a bed in the room. For the IRS, take the square footage of your room and divide by the square footage of your entire home area to get the percentage of usage.
• Equipment - Keep track of the equipment you use. If it was purchased before you started your business you can amortize it on your taxes. Keep a record of when you purchased each item, and for how much. This would include any piece of equipment valued at over $50 - computer, fax, telephone, scanner, modem, router, desks, printer, shredder, back-up drives, lights, etc.
• Utilities - All utilities connected with your business should be included in your expenses. You will need to find the percentage of usage for your business against the entire house bill. This would include: electric, telephone, heat, cable or Internet connection, etc.
• Website - All items associated with your website will be deductible from your business. This includes: web hosting, gateway, Merchant account server, autopilot program, newsletters, ad-sense, affiliate programs, etc.
• Inventory - The cost of any items you are going to re-sell are a business expense. If you are selling items you made yourself, the cost of materials and the cost for YOUR TIME should be documented. Be certain to come up with a competitive hourly rate and make sure you actually keep track of your time.
• YOUR SALARY - Unless you are running a non-profit organization you need to pay yourself. You can do this by either an hourly rate or take a draw, but stick to one or the other. DO NOT TAKE MONEY OUT OF THE TILL UNLESS YOU ARE TAKING A DRAW AS A SALARY, AND THEN ONLY DO IT WITH DOCUMENTATION. If you take income as an hourly wage, or salary, you cannot take money out of the till. This is VERY IMPORTANT. The only way you can do this if it is for business expenses, and then you need receipts.
• Taxes - Always check with the local taxing authority to see what kind of taxes you are liable for. If you charge sales taxes, you need to pay the state-taxing unit monthly. You can also deduct the percentage of your homeowner's taxes (refer to the percentage of square footage). You also will need to pay Social Security taxes on yourself, even if you don't have any other employees. Check with the U. S. Social Security Department on how to do this.
• License Fees - The cost of incorporating and any licensing fees needed to sell your product are deductible (Note: If you sell something without a license, where one is required, the fines are heavy).
• Insurance - Take the same percentage used for the home office as the percentage of deduction off your homeowners or rental insurance. You also can deduct health insurance as a part of your employee benefit package. If you have employees that you pay, this is also deductible.
• Auto Expenses - Any time you utilize your vehicle you can deduct the cost of fuel, oil, repairs, maintenance, lease/car payments, licensing fees, taxes and insurance that are associated with the business.
• Supplies - Any supplies needed: paper, paper clips, pens, etc.
• Software - All the software programs purchased for your business - this includes any marketing plans, downloads, etc.
• Education/Seminars - Classes or seminars you take to improve your business, or your skills to run your business are deductible.
• Networking - Costs associated with networking your business presence, or any meetings you attend that require expending any money (this includes meals - as long as you can verify that they were for business) can be deducted.
• Employees - Most people who work from home do not have employees; therefore do not have to worry about paying salaries out for them. If you do, it is very important that you wend in W-4 forms to the government, and deduct taxes from their checks. Then, you MUST pay the state, federal and any local agency on a regular basis. Usually the states require you to send the deducted payments at least weekly. Federal government has a set schedule they require payroll deductions be made by, and will give you a coupon book that you can take to your bank. Check with local area if they require deductions for city or county.

There are probably numerous other expenditures that you can take that I have not listed, but this should give you an idea that setting up a home business is not just about getting sales. You'll never know if you are really making a profit, or loosing your shirt, unless you have accurate records to access.