Posted on May 3, 2023 @ 05:11:00 AM by Paul Meagher
In the last few years, my year end book keeping efforts for our farming venture resulted in a group of text files with each text file dedicated to different expense categories. I also had a text file for income and one for the calculation of taxes collected and paid out. The files were all neat and organized and ready for auditing if it ever came to that. I was audited once and no major issues were found (they generally do have to find something to justify their time). The audit was triggered by a larger than normal tax refund I claimed because I purchased some farm land to add to our farm property and was able to claim most of the sales tax back as we weren't generating much farm income at the time and where I live farm income from hay sales does not require collection of sales tax which was our major source of farm income at the time of the audit.
This year as part of my yearly effort to improve my bookkeeping system I decided to develop a web application called Expense Tracker that would allow me to input and review my expenses online. I developed 4 objects to implement the relevant functionality: ExpenseCategories, Expenses, ExpenseReport, and ExpenseReadWrite (for importing expenses in text file format and viewing them prior to committing them to the bookkeeping database). I refined the Expense Tracker code base in the context of inputing expenses and discovering issues as I went and fixing them. The resulting web application is not something I would release to the general public but it is good enough that I was able to input this years farm expenses into my Expense Tracker and I was able to view a report of my categorized expenses with total cost and total sales tax calculated as well as costs and sales taxes paid out over all categories of expense. I was able to enter category costs directly into my income tax forms.
When I was entering expenses, one feature that became handy this year was an optional "Note" feature for expenses. There are some expenses like Machinery Fuel, Truck Fuel, Electricity, and Internet for example that generate quite a few invoices during the year. Rather then entering each one individually, I found it easier to enter the total cost and total sales tax paid over the year as one expense claim entry. The date of that expense was the billing date of the last invoice for the year. In the "Note" box for that expense I entered a breakdown of all the expenses that I had accumulated into text file and totaled up. This saved me from having to enter all my expenses individually. If I had the time I could have developed some code to import the text file as individual expense entries but the "Note" feature was a big time saver this year and allowed me to complete my taxes without further pressure before the deadline.
If you tell people you created your own bookkeeping software they are likely to inform you of an app or some other software like Excel they use to track their expenses. There are lots of options out there. My experience, however, is that given my background as a web developer it was not that difficult to develop personal expense tracking software so why not develop something that meets my particular expectations? What would make it more difficult is if I was making a commercial product and had to spend alot of time refining the product for different devices, making it secure and making it look nicer.
What are some improvements to my bookkeeping software that I would like to make?
- The "business use of home" and "business use of vehicle" categories of expense can be tricky because you are not claiming the full amount of the entered expenses. Because I had to meet a deadline to file my taxes of May 1st, my expense tracker didn't address this issue and I made manual adjustments to correct for this.
- When you purchase more expensive items, you can't claim the full cost in the year of purchase but only some percentage depreciation for that year. I do not currently handle depreciated costs and I made manual adjustments to correct for this.
- I don't have an income tracker. The income tracker would allow me to enter income by income category and generate a report of the income coming in from different farm ventures: Concerts, Weddings, Camping, Hay Sales, AirBnB, Bike Rentals, and eventually Wine Sales. Concerts may need to be broken down more into Ticket Sales, Merchandise Sales and Food Sales as we like to separately track these categories of income and expenses.
- If I have an Expense Tracker and an Income Tracker, theoretically I should be able to create a farm dashboard that reports what my year-to-date totals are for: Total Revenue, Total Expenses, Sales Tax Collected, Sales Tax Paid Out, Profit.
After many years of making a conscious effort to improve my bookkeeping systems, I'm starting to feel a sense of mastery and that next year will not be a long drawn out process to get my books ready for income and sales tax reporting. We have started entering our expenses so far this year into the Expense Tracker and will hopefully be entering expenses on an ongoing basis rather than throwing receipts in a folder because we are too busy to keep track of expenses and waiting until year end to sort it all out.