For most of us, the financial side of things can feel a bit daunting. It feels overwhelming to balance a checkbook. Who even knows how to properly reconcile an account? And then comes tax time-I dread tax time. Pulling out receipts, trying to organize bank statements, figuring out what I can write off, and getting it all organized before the looming April 15th deadline is anxiety-inducing. If you are an entrepreneur, that task can double.
Bank reconciliation ensures payments have been processed and cash collections have been deposited into the bank. The reconciliation statement helps identify differences between the bank balance and general ledger balance, and to process necessary adjustments or corrections. A general ledger is the main accounting record of a company or organization.
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Big thanks to Miriam Hobson and Tina Tidwell at FNB Oxford, who were kind enough to answer my questions. Tina walked me through the process of setting up a business bank account. How your business is structured depends on the paperwork you will need to open the account. For example, when creating an account for an LLC (Limited Liability Company), you will need the business' tax ID number. You may need organizational documents, business licenses, or personal information for the business owner. Check with the bank of your choice for the documents they require when opening an account.
Tina also walked me through the types of business bank accounts available. Checking accounts are the most common form of business bank accounts. Depending on your business needs you may also want a savings account, credit card, or merchant services account for credit card processing. FNB offers all of these options. Check with the bank of your choice to see what they offer that fits your business's account needs.
When deciding on a bank for your business consider a few factors:
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Do you have an established relationship with a particular bank?
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Is the bank convenient for you?
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Does it offer the services you require?
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How does the online banking system work with your bookkeeping software (if you are using one)?
It is best to keep your business accounts separate from your personal ones. It will improve your ability for expense tracking and reconciling your statement. Deductible expenses will vary from business to business; however, a few remain standard across the board. You can deduct office expenses including office supplies (printer ink, paper, rubber bands, etc.) and a home office.
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Business Expenses are the cost of operating a trade or business. These expenses are usually deductible if the business operates to make a profit. General business expenses include things like office expenses, home office, and business-related travel expenses. If you use your personal vehicle for business you should track your mileage and gas expenses. You will be able to claim a business mileage deduction
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Capital Expenses depreciate-you can deduct them on a depreciation or amortization schedule over time. These assets include business start-up costs, business improvements, and vehicles.
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Cost of Goods Sold-If you create or purchase products for resale you must value the costs of goods sold, or inventory, at the beginning and end of each tax year. These expenses can also include the cost of raw materials, storage, labor costs for production, and certain overhead such as studio space.
Track your expenses-know your costs in life and business. Track your materials used, supplies, time, and any operating costs. When I assisted in bookkeeping for a local photographer we used a spreadsheet with various columns to keep tabs on expenses. There was a column for travel, office supplies, utilities, and freelance contracts. You don’t necessarily need fancy accounting software to track expenses.
If you need more detailed information about business expenses or banking please reach out. I have more information than I could fit into two paragraphs. In the future, I will look into various bookkeeping software to help with banking and expense tracking. If you have a system that you use and love I definitely want to hear about it. Shoot me an email at
Andrea Drummond