Start you home based business like a real business from day one. If you treat it like a hobby it will pay you like a hobby. Start with the end in mind. This includes setting up proper accounting systems and records. This can be the “boring” part for many people but if you don’t do it properly it will come back to bite you.
In my days working as a CPA I used to do many Network Marketers tax returns. Many of these people were doing the business part time and had no separate records. It was a mess and took a lot of time for me to sort out.
Here are 11 tips for setting up correctly from day one:
1. Treating your business like a business from day one means setting up a separate bank account for it. The business should have its own financial statements.
2. If you use credit cards use a separate one for the business expenses.
3. Set a budget and stay on top of it. Know what you are spending.
4. Get receipts for everything. They all add up.
5. A percentage of many of your home expenses will be tax deductible – get advice on this from the beginning.
6. Discuss with your accountant the method you will use to claim for any motor vehicle expenses. It is important to set that up correctly.
7. Keep your accounting records up to date. If bookkeeping is not your thing hire a bookkeeper. There is nothing worse than falling behind with your financial affairs as it is then a huge job to bring it up to date (and can be costly).
8. Hire a good accountant. Find out the best structure for you from the beginning.
9. Understand your taxation obligations and make sure you provide for them in your budget.
10. Know what you are making, what your profit is and where you are financially.
11. Cash is King! Cashflow is the lifeblood of your business.