Most business owners fail to account for their business expenses or the money to pay themselves in their pricing. We enter self-employment to enjoy what we do. However, we often forget that we need to receive payment for what we do. Unless you have a wealthy benefactor, you are to be paid for your services. Psst…the rich benefactors had to earn the money some way…think on that for a moment.
Are you charging enough?
Set pricing will support your business and personal life. If you do not have the income or required expenses for your business, you will not have a business or a home. The starving artist syndrome is not required. You can be an artist or musician and have money! Begin with pricing. When you receive a call to an event, remember the top two most forgotten keys to pricing: charging for mileage and charging for your hired help and other expenses. Create your price based on what you would like to earn and what you need to earn to cover your salary/pay, taxes, and business expenses.
The number one missed business expense is mileage. The IRS (Internal Revenue Service) allows business owners or contractors to write off all business related miles and traveling expenses.The hard part is learning the best way to track the mileage or try to determine a tax deductible expenses. Most people avoid taking the credit out of uncertainty, and that equals thousands of dollars down the drain. Mileage tracking is the reimbursement of the funds used to prepare, arrive, and depart from a business appointment, or event.
The mileage does not only apply to business owners with offices. This could apply to artists, musicians, teachers, or performers. A performer has to schedule and maintain gigs and may have to pay a manager or booking agent. Track the mileage from any business-related meetings, networking, and events. If you are not sure how to track mileage read my blog Mileage Tracking Saves Thousands of Dollars.
Every time we attend an event, we spend money to arrive and depart. We are also using our time which equates to money. The IRS allows a deduction of $.54 per mile. A trip of 48 miles x $.54 equates to $25.92. Imagine this journey twice a month for a year would equal to $673.92 that you can report on your taxes for a tax deduction. We should also charge clients for mileage in our pricing to receive reimbursement for our time and money spent on traveling. In the example above, I gave a deduction of $686.40 for a trip for the year traveled twice a month. That is $25.92 per trip. Include $25.92 in your rate. If your rate is $125.00 per hour charge, $150.42 ($125+$25.42) per hour to include the mileage in your rate. This rate will also change if you hire help.
Covering your expenses
The next biggest lost in business is not charging enough to cover other expenses in our business such as travel, hotels, team members, managers, food and drinks, eating out, supplies, apparel, costumes, equipment, art supplies, studio rentals, and all other expenses associated with your business that have to be paid up front before making money. Track all receipts from spending. Receipts are required for any cash expenses or expenses over $75. However, I recommend tracking all business receipts in order to qualify for the deductions. A lost receipt equals lost money. Fold this cost into your rate. Most business managers will help you to create and charge one flat fee.
Remember you can have more fun in business when you can pay yourself and pay your bills!
If you would like to brainstorm about how to save money or to get started with tracking receipts for business, join me for a complimentary call to get you started!
Y. Michelle Coard is an Accountant and Profit Strategist from Fuquay-Varina, NC. She is the owner and operator of B&P Accounting Solutions, Corp. Michelle helps business owners create and find money and fix any money leaks in their business. She also simplifies the accounting process and makes it enjoyable. Michelle works with clients in-person and virtually.