How to Track Income and Expenses for a Home Business (2024)

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When you’re your own boss starting out, you don’t have the luxury of a payroll department to handle your financial paperwork. So, you’ve got to do it yourself. To help, here’s a look at how to track income and expenses for your home business.

But first, let’s get something important out of the way:

I’m not an accountant. Or a CPA. I literally have no professional training in these areas. So what I’m sharing isn’t financial advice. It’s simple a look at how I do things for my home business. <=disclaimer

Whew. Now that we got that taken care of, let’s dive into record keeping for your home business.

How to Track Your Income for Your Home Business

I’m guessing one of the reasons you started your home business was to make money. But, if you don’t track your income as it comes in, you’ll never know if you’re profitable or not.

You’ll also have a hard time filing your taxes when April rolls around, since you’ll have to got back and calculate everything then. It’s much better to do a little paperwork each week so it doesn’t get overwhelming.

So, how do you track your income?

You need an income tracker of some sort. If you don’t have one yet, here’s an Excel income tracker that my husband made for me a couple of years ago. It’s what I still use to track my income and expenses. It’s only $2.50, so if you have Excel pick up your copy today. You’ll also get step-by-step directions to help you set it up and put it to use.

Now that you have your income tracker, it’s time to track your home business income. For each bit of money that comes into your account, record the following information:

• Source of money (company or client name)
• Description of how you earned it (blog post, VA services, white paper, etc.)
• How much money you earned
• The date the money made it to your account

If you have multiple streams of income, it’s also a good idea to record what type of income this was. For instance, I have writing, virtual assistant, coaching, products, and affiliate payments on mine.

When you separate them like this, you can easily check your progress and see which was your most profitable category. This can help you make decisions about the future of your business.

Note: There are two main accounting methods out there. I use cash accounting. This means I count my income the day it enters my account, instead of when I send the invoice. Likewise, I count my expenses the day I pay for them, even if they clear the bank several days later.

How to Track Expenses for Your Home Business

Income isn’t the only thing you need to track. You also need to document your expenses. This way, you can see if your business was profitable. Having a record of your business expenses also makes tax time easier. You can typically write off most business expenses, so keep track of them.

For each thing you purchase for your business, you need to record some information. This includes:

• What company you purchased from
• What you bought
• The price you paid
• The date you purchased

This way you can easily see where your money is going, and make sure you’re sticking to your business budget.

Additionally, you should track which category this expense falls into. This makes it super simple when tax-time rolls around, since you can sort your expenses by category when it’s time to report them. You’ll want to look at your taxes to help you with this part, but some basic categories are:

• Supplies
• Postage/Shipping
• Training
• Marketing
• Equipment

When you review your expenses from last year, you’ll get a better idea of the type of categories you need to include. Then you can simply mark each expense and at the end of the year you can see how much you spent in each category. This makes it easy to look for areas you can cut if you need to increase your profit margins.

How Often to Track Income and Expenses

As a small business owner, your business finances are your responsibility. And if you put off doing your paperwork, pretty soon you’ll feel buried under the weight of it. So it’s much better to make bookkeeping a regular part of your routine.

I can’t tell you how often you need to update your income and expense tracker. I typically do it once a month, though during some seasons of life I’ve done it as frequently as once a week.

Find a routine that works for you, and then stick to it. Don’t keep putting it off, or it’ll take you hours to accomplish what you could have done in fifteen minutes if you’d done it sooner.

What Do You Need to Reference to Track Income and Expenses?

To track your income and expenses, you need an income tracker. (Pick up the one I use for $2.50.)

You’ll need to open it in Excel on a computer, so you’ll need Excel. If you don’t have this program, you can find different income and expense trackers online that use Google Sheets or other programs.

Once you have your income and expense tracker open, you need access to a few more things. These include:

• Your online business bank account
• A record of the invoices you sent and their payment information (I use Wave)
• PayPal records (if you use PayPal to collect money or purchase things)
• Receipts for any business purchases (Digital versions are fine)
• Access to any other app you use for business finances

Typically, I start by updating my income. I look through my Wave records, and add any new invoices to my tracker. And since I use the cash method, I don’t enter the income until the money has actually reached my account. This typically happens 2-3 days after a client pays through Wave.

Once I have my Wave invoices inserted, I scroll through my bank records and PayPal looking for deposits. I have a few clients who pay through ACH, using a different invoicing system. I also have several affiliate payments come in through PayPal.

When I enter my income, I use the next line of my tracker to document any fees. For instance, Wave and PayPal both have fees that I pay. This means I don’t get the full amount of the payment received. I mark these as Fees on the expense category.

Once all of my income since the last time I updated my tracker is recorded, I begin working on expenses. I look through my bank records and PayPal, and get everything updated.

A few of my recurring expenses are:

• Canva Pro (annual)
• Microsoft Office (annual)
• SendOwl (monthly)
• Adobe Creative Cloud (monthly)
• ConvertKit (monthly)
• FastComet (annual)s
• Editing fees (as needed)
• Content Creation (as needed)
• Google Suite Email (monthly)

Other one-time business expenses include:

• Courses (Fully Booked VA from Gina Horkey is one I recommend!)
• Books
• Computer equipment
• Power cords
• Headset

Your list of business expenses will likely look much different from mine. The important thing is to keep track of ALL of your expenses.

This way, you don’t pay more in taxes than you need to. Keeping close track of what you spend also helps you stick to your budget and make sure your business is profitable.

How to Track Income and Expenses: Final Tips

Now that you know more about how to track your income and expenses for your home business, here are a few more tips to help you do it successfully:

• Find a method that works for you and stick with it. Otherwise you’ll be double entering things to move from one system to another.
• Keep it simple. Paperwork doesn’t have to be burdensome, so if you feel overwhelmed, take it slow and evaluate what can change.
• Find help if you need it. Bookkeeping isn’t for everyone. And while I believe you should have a basic idea of where your money is going and how much you’re bringing in, it doesn’t mean YOU have to be the one doing all the data entry. There are some great bookkeepers out there who’ll happily do it for you in exchange for some of your money.
• Make it enjoyable. Put on some music, sip some tea, set the mood for working. Keeping track of your income and expenses doesn’t have to be miserable.
• Do it when your kids are in bed. There are some tasks I do when my kids are awake. I even have them help me with some. But bookkeeping is different. I need to focus to make sure I enter numbers correctly. So to minimize interruptions, I do it after I put the kids to bed.
• Do it regularly. As in weekly or monthly. Otherwise it’ll take forever to get caught up.

You Can Track Your Income and Expenses for Your Home Business

If you haven’t been tracking your income regularly, don’t put it off any longer. Each day that you avoid diving into your business finances is one more day that you have to deal with later.

Stop putting it off and get it done. It’ll be a huge relief when you get done.

To help, remember to grab your copy of my Excel income and expense tracker for small businesses. It’ll have you managing your finances in no time.