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Keeping good records is vital for any business. This is especially true for those working from a home office either part time as part of a regular job outside of the home or for those who are working from a home office on a full time basis. As daunting as organizing your financial records may seem, there are some simple ways to help you keep on top of things and make tax season less of a headache.
First, be sure to keep all of your household receipts and your home office receipts separate, and of course keep all of your receipts at least until after the appropriate tax time. Often times people think that they will be able to remember what was for their personal use and what was for their home office or that they can keep track of how much they have spent. However, by the time the end of the year rolls around it may be a lot harder to remember and having the receipts will help you to get an accurate picture of your expenditures. Also be sure to save other important documents such as contracts and account information in a secure but easy to locate manner.
Storing those receipts in a plastic file case or other item that you can easily label and that will keep your records from falling out will make sure that you can find everything when you need it. You may choose to label your sections in the file by either the month in which the item occurred or by income verses expenses with sub-categories based on equipment, medical costs, phone bills, etc.
Using accounting and budget tracking software is also an excellent idea as this can make record keeping review easy while providing digital records for you that you can access whenever you need to. Most of the software out there such as PeachTree, Budget Express, Microsoft Money and Quicken also make it easy for you to get a look at your financial picture from a glance.
It is also a good idea to have back up copies of your files, both digital and hard copy. To do this you can scan paper documents and print digital ones. You may also wish to store a copy of your digital files on a jump drive or portable hard drive that you can store in a fireproof location. That way if Mr. Auditor ever knocks on your door you will not be panicked trying to find old records.
If you have multiple sources of income, having a color coordinated system may also be very useful. This will help you to keep track of which expenses were related to which income stream. Using colored files and pens is a great way to help you do this.
One final tip to help you keep your home office records organized is to simply make it a habit. Learning to get into a regular routine of bringing a receipt home and filing it away will help to make it easier since it will eventually become second nature to you. Also, keeping a ledger with a list of expenses and income will help you in establishing that routine.