As with a lot of businesses, sometimes the paperwork and accounting can be more work than actually building your business. In our story we talked about how we built Direct Sidekick based on my wife’s experience when she starting her direct sales business. Tracking her income and expenses was not something she was used to doing. Once she started using Direct Sidekick, she used the monthly accounting process below to make it almost automatic for her. Here is the exact process she uses to make her direct sales accounting a breeze.
Before we get into the specific processes there are a few things that need to be done. If you’ve already done these, just skip over them. Later, you will use these in your monthly direct sales accounting process.
Open a business bank account
First, you should open a separate business checking account that is used solely for your business. This keeps things separate and easier to track. Plus, you know exactly what is coming in and going out of your business just by looking at this one account.
Ideally find an account that pays cash back on transactions without charging you fees. Many consultants I know also use a credit card for their business to earn points or cashback. If you do this, just be sure to pay it off monthly to avoid interest charges.
Set weekly or monthly reminders
If you are anything like us, if you neglect a certain task for a while it gets hard to start it again. That is how it can be with your record keeping. Setting weekly or monthly to-do’s is a great way to keep up with it.
We like to set a weekly reminder in our calendars for each Friday to log into our Direct Sidekick accounts to refresh our transactions, add our receipts and verify the categories are correct.
We also set a monthly reminder for the first Friday of the month to add the prior months mileage into Direct Sidekick as a mileage transaction.
Pick up a large manila envelope or accordion file folder
Pick up either a large manila envelope or better yet an accordion file folder. If you go the accordion folder route you can put all receipts and purchase orders for the month in monthly slot for easy lookup later. Now keep all the receipts for anything you spend money on. If you are ever audited by the IRS this is the way to prove your numbers.
Setup a mileage tracking system
As mentioned in the direct sales tax deductions article, mileage can be a great tax deduction even if you don’t travel that much for your business. And it can be an amazing deduction if you are a party plan company and you travel a lot for parties and events. Tracking mileage can be done in one of two ways. Either a paper mileage log or a mileage tracking app. We personally use MileIQ and it is so easy.
Now whenever you travel anywhere for your business you can deduct your mileage. This includes going to the bank, or the office supply store, or the grocery store to pick up supplies for your business or an upcoming party. Just be sure to add good notes whichever way you decide to track your mileage. It makes it a lot easier later.
Sign up for a Direct Sidekick trial
Next, sign up for a trial of Direct Sidekick. With Direct Sidekick you link your account(s) and we automatically import and categorize your transactions for you each time you sign in. You can do this manually as well if you choose.
It also makes your inventory management a breeze!
Do these when they happen
Enter inventory transactions
When managing inventory for your direct sales business it’s best to take care of each stock transaction as it happens. That means adding your purchase order into Direct Sidekick when you receive a shipment. It also means removing an item you decided to keep for personal use right when you make that decision.
Track your mileage
Whether you are using a paper mileage tracking log or a mileage app, like MileIQ, it is best to log that trip right after you take it.
If you are using a paper tracking log you need to write your beginning mileage and ending mileage in your log for each trip.
If using a tracking app, it can sometimes be easy to forget about it. It’s easiest if you swipe your mileage for each trip when you’re done instead of having to make up for a months’ worth at one time. Worst case set a weekly reminder and don’t exceed that.
File your receipts
Anytime you do a transaction file that receipt right away. You don’t want to lose those receipts as they are your proof for your tax deduction. If using Direct Sidekick, you can take a picture and add it to your transaction with any notes you want to remember.
Do these weekly or monthly
Log into Direct Sidekick to update transactions
Once you connect to Direct Sidekick we automatically import and categorize your transactions for you each day you log in. You can do this either weekly or monthly, but I wouldn’t extend more than that. One thing to do when you log into your account is to navigate to your transaction and verify the expense categories.
Add dollar amount for mileage to Direct Sidekick
We prefer to do this monthly with a reminder in our calendar as mentioned above. Simply total up your mileage for the prior month and multiply by the mileage rate of 57.5 cents per mile. Then add it as a transaction with a date in the prior month using the “Car & Truck Expense” category. For example, if you traveled 50 miles the month prior you would enter $28.75 (50 x .575).
Do these annually for your taxes
Calculate your home office deduction
The home office deduction is a great benefit of being a direct sales consultant and working from home. Check out this article to see how it works: Home office deduction for direct sales consultants.
You will need to do a few calculations and follow the IRS’ rules on when you can and cannot claim the deduction but assuming you can, it is a great benefit. Anytime you can reduce your taxable income you save money when paying your taxes!
Use your Profit & Loss Report to do your taxes
If you work with an accountant to do your taxes just print your Profit & Loss Report from Direct Sidekick and bring it with you to your appointment. If doing your own taxes, use the information from your Profit & Loss Report when filling out your tax forms.
Since you’ve been following along with this direct sales accounting process and keeping track of everything you are all ready as soon as the new year starts!