Three Business Expenses You May Be Missing

Ever think about buying a new vehicle and then all of a sudden you see that vehicle everywhere?!

It’s not that those vehicles were not there before. Everyone did not just take your great idea and go purchase the exact same make and model.  

No, it’s that your mind wasn’t looking for or paying attention to those vehicles because it didn’t have reason to bring them to your attention. But now that you’re thinking about that vehicle more your brain goes “oh let me show you!”

Kind of like these three business expenses. They are easy to overlook simply because they are not always ones we pay attention to.

Business Expense #1 You May Be Missing: Payment Processing Fees

If you collect payment via a payment processor they likely take a small percentage as a fee for processing the payment. For example, let’s say you provide a 1:1 coaching session for $500.

If you take payment via Stripe the transaction will look a little something like this:

Customer Pays $500

Stripe Takes $14.50 as a processing fee

Stripe Deposits $485.50 into your bank account

This would be recorded in your bookkeeping as:

Revenue $500

Payment Processing Fee $14.50

Which then shows a Net Income of $485.50 (which is what was deposited in your bank account)

It would NOT be recorded as:

Revenue $485.50 (the deposited amount in your bank account)

The second way of recording shows the correct amount of money you actually received, but it does not show the whole picture of what the client actually paid, the expense you incurred, and the resulting money that was deposited into your account. So just recording what was put in your bank account does not give an accurate financial picture of your small business.

Business Expense #2 You May Be Missing: Client Gifts

If you give a gift to a client it can go a long way in increasing your word of mouth advertising! Whether it’s a welcome gift, holiday related gift, closing gift, birthday gift. Any and all of those help you stand out from your competition. 

And while there are some limits, it is considered a business expense! The IRS currently caps the expense at $25 per client per year. However, that does not mean your gift should only be $25 or less. If you feel a bigger client gift is better - give the bigger gift! 

And record the full amount of the gift in your bookkeeping. The IRS is constantly updating and tweaking the rules, so be sure to let your tax preparer know so they can help you decide what amount is best to file on your taxes as a client gift expense. 

Business Expense #3 You May Be Missing: Referral Bonuses

If you pay someone as a thank you for passing along your name and information to a new client that is considered a referral bonus. This person can be a client, family, friend, or anyone else you know who referred someone to you for the services you provide. 

They do not have to be a past or present client in order for this to qualify as a business expense. You can give a referral bonus to anyone who meets the qualifications you set. 

For example, my referral bonus is available to anyone who refers a new 1:1 client to me when the new client they sent my way signs up for monthly services.

Depending on how you pay the referral bonus, which will most likely be cash or check, if you pay a single individual over $600 in one year you may need to file a 1099. But there are LOTS of reasons you would NOT need to file a Form 1099 even if you did pay someone over $600…

For example, if you paid someone via PayPal, Stripe, Business Venmo, Quickbooks, Square or Credit Card - you do NOT need to give them a Form 1099! Even if you paid them over $600.

For 95% of small business owners who pay other people - this is true!

Moral of the Referral Bonus Story

Just keep track while doing your monthly bookkeeping, consider using one of the payment methods mentioned above to avoid needing to file a 1099, and talk to your tax preparer in November or December to get all your ducks in a row.

Now You Know!

So while you may have ignored these business expenses in the past, now is a great time to start tracking them!

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I know that you know your bookkeeping needs to be done every month. I also know it’s not something you’re the most excited about doing.

Creating a simplified system may help!

I have some quick tips and a monthly bookkeeping checklist in the Profit Plan Blueprint. It’s full of great information to help you understand your numbers and get your own bookkeeping done consistently! Grab it below!