Savvy Business Owners Track These Three Business Expenses

David: “It’s a write off.”

Johnny: “Do you even know what a write off is?”

David: “Yeah, it’s when you buy something for your business and the government pays you back for it.”

(one of my favorite Schitt’s Creek quotes)

I wish it was that easy… and that it actually meant you got paid back for your business expenses. 

However, even though we don’t get paid back dollar for dollar for our business expenses, they do reduce our income which in turn reduces how much income we pay taxes on. So it does reduce taxes, just not in a dollar for dollar type of way.

Even though it’s not a dollar for dollar type reimbursement. It’s still very important to track and record every business expense.

I find many small business owners already use these three business expenses, they just don’t always realize they are expenses or they are not sure how to categorize them. 

First: Business Development Expenses

Any courses, memberships, books, or coaching that level up your knowledge to build and run your business are business development expenses. It is any education used to improve or maintain the skills you need to run your business. 

Some examples would be a course to understand how to use Pinterest (Jenna Kutcher has an amazing one!), a membership that shows you how to strategically use the time you have (I see you Holly!), or bookkeeping strategies that show you how to earn the profit you desire (not revenue but profit in your pocket - thank you Crunch Your Numbers!). And those are just a few of my favorites, but you get the idea.

All these expenses and others like them, can be recorded and tracked as a Business Development Expense.

Second: Professional Services Expense

Any professional service fees that are necessary for your business to function are also a business expense that is easy to miss. 

These commonly include legal services and accounting/bookkeeping services you hire out. They do not include courses you take to understand the legal or accounting side of business - those are still expenses under the first category of Business Development Expenses.

However, when you have a problem a lawyer helps out with. Maybe some paperwork, writing a contract, legal questions you have, or if you’re having issues with someone suing/not paying/requesting a refund that goes against your contract, etc. That is a professional service fee.

The same is true if you use a local CPA to help file your taxes, or a bookkeeper helps you set up your software, or you reach a point where you want to outsource your bookkeeping (not saying you ever have to do that I’m just saying it is possible to reach a point where you would rather hire it out) - those are all examples of a professional service fee.

Third: Dues & Subscriptions

Any software or online subscription for which you pay a monthly or annual fee for a tool you use to run your business is an expense and would be classified as a Dues & Subscriptions Business Expense. 

Common examples of this expense include Canva, Kajabi, Google Drive Suite, Adobe, Microsoft Office, Convert Kit, Xero software, Honeybook software. This is not an exhaustive list, but these are some of the more common expenses I see for small business owners.

Pro Tip: If you have membership fees you pay to level up your knowledge to build a successful business - like instead of a course it’s an ongoing membership expense - those are not Dues & Subscriptions - they are still considered Business Development Expenses.

Now What?

I’m willing to bet you already have a few of these expenses that you use regularly, but you may not have known they were business expenses. Or maybe you knew they were expenses, but did not know how to categorize them. 

I will admit I use to list out these expenses assuming my local CPA would categorize them appropriately on my tax return. The first year he just listed them all under miscellaneous expenses. 

So technically they were claimed as business expenses, but having all my business expenses labeled as miscellaneous is not really great as that can be an auditing red flag, which I would rather avoid at all costs.

It was an easy problem to fix, I just had to explain what those expenses were. Which is also a friendly reminder that if your bookkeeper or local CPA is not familiar with online businesses it can be very easy for them to not understand an expense and categorize it incorrectly or miss it altogether. 

Pro Tip: When you hire out help it is beneficial to know whether or not the individual is familiar with the type of business you run. 

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