Managing Expenses for an Audit

Tracking your expenses is an integral step in managing your business’ finances. Unfortunately, merely writing down what you spend doesn’t cut it anymore.

When the IRS wants to have a look at what you’re writing off, or a potential acquirer for your small business wants to see how you spend your money, without any expense organization, you could end up deep over your head.

The following three tips for expense management will help survive your next audit:

1) Keep All of your Receipts

Anytime you spend over $75 on a business expense the IRS will require a receipt for it. But any business expense under $75, you are required to provide “convincing documentation” that the expense was actually incurred for a business purpose. While a calendar entry will provide some proof of a business expense, leave no doubt in your auditor’s mind by saving and collecting all of receipts, not just the expensive expenditures. There are plenty of portable receipt scanners out there such as ProOnGo Expense and Neat Receipts, but whatever you do, make sure you have a way to easily collect and store your receipts.

2) Log your Miles

Warren Buffet wrote-off his bicycle on his first income tax statement as a transportation cost at the age of 14. While you may not ride a bike to work, you can certainly write off the miles you drive. If you drive 20 miles round trip for work every day, then you could can write-off $10 for every day you drove to work in 2010.

3) Track both Business AND Personal Expenses

If you’re undergoing an audit, the main objective is to convince the auditor that the numbers you keep are dependable and accurate. This is why keeping track of your personal expenses, in addition to your business expenses, can give your auditor more confidence in your math. If you demonstrate you have a full understanding of what you can and can’t write off as business expenses, you will instill that much more confidence in your numbers.

An audit can be a major headache. Fortunately, expense management is a powerful tool in protecting yourself in case of an audit, so make sure you take the proper precautions the next time your write off your next business expense.

 

After Christmas Sales for 2010 May Have Fallen Short of Expectations

In the past many shoppers have been persistent in their efforts to find the ultimate bargains after Christmas. Retailers also anticipate huge crowds after Christmas as they continuously boast about the sales and bargains that customers will receive. They are hopeful that customers will come out eagerly buying that gift that they did not receive for Christmas. December 26, 2010 the crowds were smaller than expected. This reduction in the after Christmas shopping crowd came as a result of either in climate weather or just overall lack of funds. Now on the east coast in particular crowds were low because it was slammed by snowstorms. These snowstorms kept many would be bargain shoppers at home. Some stores were even offering extra discounts to people who were bold enough to fight through the storm to continue their shopping. Now the economic factor played a role also in the low customer turnout for after Christmas sales. If you really think about it, from a financial standpoint people cannot spend what they don’t have. Then there were some people like myself who were just overly frugal. Like other people I want to be able to weather the economic storm that we are going to face in the United States in 2011.

I went out to do some shopping but my purchases were so minimal I noticed that the after Christmas sales were not as good as they had been in the past. One thing that I observed while shopping was that most people were using cash instead of credit cards when they made purchases. I also refrained from using my credit cards because it makes no sense to be paying for items next year that were purchased the previous year. People are trying to get out of debt. Reduced consumer confidence also played a major role in people spending less money after Christmas. One stunning fact that consumers realized this year is that they have to get back to reality after the Christmas holidays. They took in consideration that they have to be prepared to live the other 364 days of the year.

Bloomberg News, Snowstorms smothers index after Christmas shopping, New Jersey Business.com

Gray Pilgrim, After Christmas Sales 2010, Buzzle.com