Business expenses and the interest on your business credit card are tax deductible so it is important to keep track of these expenses during the year. If you ever receive an audit, you must be able to prove the purchases were made for business purposes and were properly recorded.
Save All Receipts
The most important step to tracking your business credit card expenses is saving receipts. This includes everything from minor trips to the coffee shop for business meetings to airline tickets. Whenever you are using your business card, you must ask for a copy of your receipt. It is advantageous to use your business card for all business-related expenses. That way, you have your expenses all in one place, and you do not have to dig through any individual or personal cards in order to track any charges in question. Get business cards for any individual in your company who will be using the account and require receipts for every purchase.
Record Expenses on Reports
At the end of each day, week or month, you should enter the expenses into a ledger for your financial report. This is most commonly done through programs like QuickBooks or other accounting services. If you have a software program, much of your expense report can be automated. Remember: interest on the charges is also deductible. Therefore, you must track interest payments you make to your business credit card in addition to the regular payments you make toward principal debt.
Copy Copy Copy
Business owners who fail to make copies of receipts and reports run the risk of losing everything in the case of theft, computer virus or natural disaster. Even files saved on a computer are not safe. You should make hard copies and duplicates of receipts for storage in a fireproof and waterproof safe. In addition, it is wise to back up all computer files on an external hard drive. You can also use an online data storage service if you do not have in-house servers.
Get Ready for Tax Season
When it comes time to file your taxes, you will have to categorize business expenses. For example, some expenses will be deducted under 'Cost of Goods Sold' while others will be capital expenses. Capitalizing expenses allows you to defer taxes until profits result from the expense. This can provide relief in the given tax year, but not all expenses can be capitalized. If you are not an accountant, hire one for assistance with this process. Start by dividing the receipts and expenses into categories as you see fit. Any questions should go before your accountant in order to ensure you are getting the greatest tax benefits.
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