A Spreadsheet That Won't Fall Apart at Tax Time
Module: Keeping Track of the Money
Okay. You've got your separate account open now, or you're getting there. Good. That's the foundation. Now we build the thing that sits on top of it.
Here's the thing nobody tells you: you don't need fancy software to keep good records. You need a spreadsheet and the discipline to open it more than once a year.
I'm going to say up front, I use a plain spreadsheet for everything. I'm sure QuickBooks is great. I never learned it. My spreadsheet works for me, and it'll work for you too, at the size most of you are operating at right now. If your thing grows into something with employees and inventory, come find me and we'll talk about graduating to real software. Until then, don't let anybody make you feel behind for using columns and rows.
What actually goes in the spreadsheet
Two tabs. That's it to start.
Tab one: Money in. Date, who paid you, what it was for, how much. One line per job or per sale.
Tab two: Money out. Date, what you bought, how much, and a column for category. Groceries. Gas. Supplies. Equipment. That last category is where the clearance-rack scale would've gone, if I'd been tracking anything back then, which I wasn't.
That's the whole system. People make this harder than it needs to be because "spreadsheet" sounds too simple to be legitimate. It's legitimate. The IRS doesn't care if your ledger is pretty. It cares if it's accurate and you can produce it.
Why the separate account makes this easy
This is where last lesson pays off. Once your business money has its own account, your spreadsheet basically writes itself from the bank statement. You're not digging through a personal account trying to remember if that Costco run was for the ward party or for your own fridge.
I'll tell on myself here, because this one still bugs me a little.
After that fellow at church talked me into opening a separate checking account for the catering money, I didn't think much would change. It felt like a formality. Then the first month came and went, and at the end of it I sat down to do my little tally and it took me maybe fifteen minutes. Everything in that account was catering. Everything out of it was catering. No sorting through, no guessing, no "wait, was this the wedding luncheon or was this just dinner." I remember feeling almost annoyed at how easy it was, like I'd been doing something the hard way for two years because nobody told me the simple way existed. Which, to be fair, was true.
I've been a little evangelical about the separate account ever since. This is why. It's not just about looking official. It's that it makes the bookkeeping part nearly automatic, and automatic is what gets done.
Setting it up so tax time doesn't wreck you
A few practical things, in order:
Enter as you go, not in a pile. Once a week, sit down for ten minutes with your bank statement and your receipts. Don't save it for January. I've tried the save-it-for-January approach. It's a bad night.
Keep the receipts, at least for a while. A shoebox is fine. A folder on your phone is fine. You don't need a filing system worthy of a law office. You need to be able to find the thing if someone asks about it.
Track categories that match what a tax form actually asks for, roughly: supplies, mileage, equipment, fees. You don't have to get this perfect. You have to get it close enough that in April you're not reconstructing a year from memory.
Mileage matters more than people think. I've said it before — I forgot my own drive time on a job out to Draper once and ate two hours I never charged for. Same principle here but for taxes: track your business mileage. There's a mileage rate you can deduct, and it adds up faster than you'd guess. A little notebook in the car or a notes app entry after every job is enough. You don't need an app that tracks your whole life.
One caution, plainly: don't guess on tax stuff. I'm not your accountant. I'll tell you what I do and what worked for me, but the actual rules change and they matter, and a good tax preparer for a small side business usually costs less than the mistake you'd make without one. Ask around. Somebody in your ward or your neighborhood does taxes on the side. Talk to them once a year even if it's a short conversation.
In class
Bring your bank statement, real or imagined, from the last month you've been operating. We're going to build the two tabs together, right there, and enter a week's worth of real transactions. I want you to leave with an actual spreadsheet open on an actual laptop, not a plan to make one later. Plans to make one later are how mine sat empty for two years.
Before next time
If you've got a business account started, download last month's statement and just look at it. We'll build the spreadsheet from it together, so there's nothing to prepare beyond that.