Organizing Your Business Expenses

For many busy business owners, tax season sneaks up on us.  We’ll spend hours and days gathering receipts, organizing invoices, and summarizing the data in preparation for filing our income tax returns. 

Then we promise ourselves every year that we’re going to do better.  We say we’ll stay on top of things next year and it won’t be as stressful.  But yet, here we are – again!

I know exactly how it feels!  For years I was this person I’m describing.  I hated it.  It was a whole lot of unnecessary stress.

A few years ago, I said “enough” and I started creating a system for organizing my business paperwork.  After a few tries and revisions, I can finally say I have a system that works.  And most importantly, I have STUCK WITH IT!

Vacation Rental Business Toolkit

I call it my Business Toolkit.  It has all the worksheets I need for organizing, summarizing, storing, and tracking everything for my vacation rental business.

One of things I especially love about it is I always know where to find the information for each rental.  If I want to know what color we painted the bathroom in rental #1, I have the paint brand, color and code in the Toolkit. 

Here’s another example – we had a washing machine break down this summer.  I had the make and model number in the Toolkit and was able to easily order the part I needed without being onsite or bothering our guest.  

The Toolkit has saved me more hours and more stress than any other system I’ve used.  But still, if you don’t take some initiative to put some additional steps in place, it will still leave you with more work to do than is necessary.

In this article, I’m sharing some tried and true tips for organizing your vacation rental business expenses.  I know that if you follow these tips, it will save you HOURS of time and free you from the stress of being unorganized.

1. Commit to a Monthly Routine

Without a doubt, getting into a monthly routine with working your business expenses is key to organization success.  

It doesn’t take a lot of time when you have all the tools readily available. 

The best time for me to record my expenses is at the same time I am paying bills.  For me, that’s twice per month.

When recording my expenses, I use the Income and Expense Tracker and the Bill Tracker from the Business Toolkit. 

The Bill Tracker is handy for having a quick glance to see what bills are still due for the month and which ones have been paid.  I can quickly see the due dates to know if I have misplaced (or have not yet received) any of the monthly bills.

Once I pay the bill (online banking), I record the expense on the Income and Expense Tracker. 

During the first week of the month, I record the Income.  A report from my Vacation Rental Desk software tells me the prior month’s income and the taxes (lodging & gross receipts taxes) that are due.

This is also a good time to review your profit or loss for the month.  

No matter what method you are using to track your expenses, don’t wait until the end of the year to summarize them.  Commit to a monthly routine and you’ll be stress free when tax time comes around.

2.  Have a Separate Business Checking Account

A separate business checking account will make your business much easier to organize.  Deposit all of your vacation rental income into your business account.  Likewise, pay all of your expenses from the business account.

If funds run short in the business account, transfer money from your personal account.  Don’t pay expenses from your personal account.  Also, if you have extra funds in the business account, you can transfer that money to your personal account.

Any online banking software should have the option to select the checking account from which the bills are being paid.  

In addition, most online banking platforms have reports that can be exported to Excel by vendor.  It’s a good idea to run these reports annually to have a record of all business expenses.  You can then compare those banking reports to your monthly summary as a double check for accuracy.

3.  Dedicated Business Office Space

Dedicated office space for your business will assist in keeping you organized.  In addition, having a dedicated business office space can be deductible as an expense on your Federal income tax return.

I have a small “mailing station” area in my business office.  That space contains everything I need for preparing any bills or business correspondence that needs to go out in the mail – envelopes, mailing labels, return address labels, and stamps.

You’ll be more productive if you keep your business office space uncluttered. 

Everything should have a place and everything should be in its place. 

Oh, I know!  I have this problem, too.  But trust me.  When you put things back in “their place” each and every time, your productivity will increase and your stress will decrease.

To maximize productivity, have all the office tools you need easily at hand.  A stapler, paperclips, sticky notes, pens, paper, binders, notebooks, and other basic office supplies should have a dedicated spot in your office.  Don’t waste time hunting for something – put it back in its place after each use. 

4. Create a Consistent Filing System (Paper and Electronic)

A consistent filing system is one of the most important steps for organizing your business expenses.  You will need a paper filing system and an electronic filing system.

Organizing Your Business Expenses with a Paper System

Having specific filing cabinets or or filing drawers for your business files ensures that your business expense receipts and invoices remain separated from your personal expenses.  

Most filing cabinets have equipment for holding hanging file folders.  The hanging file folders help to separate your individual files and make your system more organized.

I have hanging file folders in my filing cabinets for each expense category on IRS Schedule E.  Inside of each hanging folder are manilla file folders for each vendor.  My invoices are filed inside the manilla file folders by vendor and in sequential date order.

Separate your files for each rental.  Schedule E expenses are reported separately for each property.  It is best to file your expenses separately in case you need to gather that information for one particular property.

File your paperwork no less than monthly.  Don’t let the papers pile up or you’ll start getting behind, your desk will become cluttered and you’ll lose precious time with decreased productivity.

Organizing Your Business Expenses with an Electronic System

The same goes for your computer’s electronic files.  Create folders for your vacation rental business files in the “Documents” area of your computer space.

Just like the hanging folders, create folders for the generic categories of your business, then add additional (more specific) folders inside.  Save your individual files inside of a folder. 

Files should never be saved on your computer without being inside of a folder.  That would be the same thing as laying a piece of paper on top of your filing cabinet.

When you get an electronic copy of an invoice in your email (i.e. Amazon), save the file immediately in your computer’s electronic filing system. 

Record the expense during your monthly routine.

5 . Know What is Tax Deductible & Search for Hidden/Forgotten Expenses

There is no way any of us could memorize the tax code.  Most business owners hire an accountant – a Certified Public Account or Certified Tax Preparer – to take care of the “numbers” side of the business.

Even if you rely on a great accountant to prepare your income tax return, you should still be aware of the basics for what is considered a deductible expense.

The IRS Publication 527 has specific information for vacation rental businesses.  Be sure to familiarize yourself with the regulations.  You may be surprised to learn there are deductible expenses you weren’t aware of.

Look over IRS Schedule E to see the categories of expenses and the layout of the form.  This will give you an idea for how the calculations are made.  Then you can maximize your deductions for your income taxes.

Hidden/Forgotten Expenses

Unless you’re SUPER organized, you’re probably missing some hidden or forgotten expenses that could be tax deductible.

There may be times when you need to pick up some supplies for your vacation rental and you pay with cash.  That receipt may be hiding in your purse, or the console of your car.  

I keep a clear baggie in my purse just for that purpose.  That way you have a place for the receipt and you can easily file it away during your monthly routine.

Other hidden and forgotten expenses include vehicle mileage, meals, home office expenses, expenses from your personal account, credit card expenses, and email orders.

Make sure you have a system or checklist as part of your monthly routine for capturing these expenses.

Develop A Vacation Rental Business System

Organizing your vacation rental business expenses isn’t rocket science.  Sometimes we just need a nudge and the tools to get us moving in the right direction.  

Whether it’s a paper or an electronic system, is entirely up to you.  As you’ve seen in this article, my system is a combination of both.

If you’ve been struggling with organizing your vacation rental business expenses, it’s time to put a system into place.  I invite you to take a look into the Trendy Hospitality Business Toolkit.

Wouldn’t it be awesome to have the tools you need to be more productive, save time, and get organized?  It is amazing how much more productive you can be when everything you need is right at your fingertips in an organized fashion.

The unique thing about my Business Toolkit is that I have been using it for a couple of years and I know it works.  It’s made BY a vacation rental owner FOR vacation rental owners.

What’s Included in the Business Toolkit?

The Toolkit has over 50 pages of Vacation Rental specific worksheets, checklists, planners, and trackers.   See more details of the pages that are included in the bundle on my Etsy shop.

Monthly Calendars
Yearly Calendar
Income & Expenses
Bill Tracker
Budget Tracker
To Do List
Deep Cleaning Checklist
Cleaning Checklist
Maintenance Tracker
Rental Home Info Sheet
Remodeling/Updates
Seasonal Planning
Shopping List
Mileage Log
Contacts/Addresses
Blog/Social Media Planner
Marketing Ideas Worksheet
BrainDump
Motivational Quote Sheet
Password Log
Guest List
Guest Correspondence

+ MORE

Try the Annual Revenue and Expenses Worksheet for FREE!

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If you have any questions about the Toolkit or this article, please email me at connie@trendyhospitality.com.