Tracking Expenses The Old Fashioned Way

teThe best hint anyone ever gave me for keeping track of my business expenses was decidedly low-tech. A writing buddy, complaining about how disorganized she was with her records, mentioned that she just threw all of her receipts into a cardboard accordion file and then took the mess to her accountant in January. The proverbial light bulb went on over my head: “Aha! An accordion file! Why didn’t I think of that?”

Until that point, I had fancied myself on the cutting edge of expense record-keeping: I had designed a spreadsheet that kept a running tally of business expenses, and I always knew at a keystroke how much I was spending on subscriptions and fax paper or what my total deductible business expenses were on a year-to-date basis. But my receipts and cancelled checks were just piled in a shoe box. If I ever got audited, it would probably take me days to sort through all the paper. And I’m sure that I was losing deductible expenses because I was losing receipts.

Although my friend doesn’t know it, her system can work, and it provides the bare minimum for anyone out there who hates tracking expenses but doesn’t like being disorganized. But first, here are the three main reasons for logging your expenses.


For most of us, taxes are the main reason we track expenses. Every dollar that you spend on deductible business-related activities can save you 50 cents or more in federal, state, local, and self-employment taxes–so it’s crucial that you document those expenses exactly.

But there are two more important reasons to keep these records. One, in many cases, you can pass on these costs to clients (and even mark them up) if you have adequate documentation. And two, you need to keep solid expense records to run your business better. Expense records provide valuable data that you can use to improve job estimate, make purchasing decisions, and estimate your year-to-date tax situation.

Unfortunately, it seems there isn’t one perfect system that will allow you to track both pass-through expenses for your clients and tax expenses for yourself. Most independent businesspeople who create a lot of both kinds of expenses keep pass-through expenses together with their invoicing systems and use a separate money-management program to track expenses for tax filing and business-management purposes.


To start, though, here’s a paper-tracking system that can easily stand alone or lay the basis for a moe sophisticated system: Designate a box or folder FINANCES TO BE FILED. (I use a green–for money–folder, which I keep in a plastic sleeve that hangs on the wall.) Make this container your sole receptacle for receipts, cancelled checks, and notes to yourself about expenses whenever they come in.

When it comes time to record your expenses in your (paper or computer) ledger, work from the box. As you record the receipts, put a control number on each receipt that corresponds to a number in the ledger program you are using. For example, if you have a receipt for photocopying costs, and you enter that expense on line 18 of your ledger, write “18″ on your receipt. If your program gives you transaction numbers instead of line numbers, use that number. Or assign your own number to each entry.

The cardboard accordion file is the ideal place to store receipts once they’ve been recorded. Label each section of the file with a category that corresponds to a deductible expense. For example, have a category for supplies and another category for freight. These are separate categories on the Schedule C income tax form that all sole proprietors must file. As you record the receipts, put them in the appropriate section of your folder.


Here are the three categories of software solutions for tracking business expenses.

Money-managers. For a small business, many of the personal financial managers such as Quicken, Managing Your Money, MacMoney, and MoneyCounts work quite well for recording expenses. These programs are all based on principles of double-entry accounting–although they hide it from you for simplicity’s sake–and they let you set up your own categories for income and expenses.

Set up expense categories that mirror the categories on the tax forms, such as the Schedule C. At the end of the year, you can just call up a report for each category, or–if you select compatible programs–export your business-expense data directly into your tax-preparation program.

Money-management software also allows you to record your income. For example, Managing Your Money will do a quick year-to-date tax calculation to make sure you are paying the right amount of estimated taxes.

Spreadsheets. If you are comfortable with basic spreadsheet software, you may want to set up your own ledger for tracking business expenses. That’s what I did, using the spreadsheet module in Microsoft Works. My worksheet looks like a ledger; it has a separate, automatic-totaling column for each expense category on Schedule C. There are columns along the left of the spreadsheet for the date, receipt number, amount, and expense category. If I want to see all of my expenses for a particular category together, I simply sort the entries by category. I number my receipts with the line item of the expense as I’m entering it. Since I use my spreadsheet to record my income as well, I always know roughly what my taxable income for the year looks like.

Time and expense trackers. People who bill their clients for many of their expenses need a different kind of record-keeping system, and the one that I hear the most about is Timeslips III for MS-DOS and the Mac.

Timeslips is a big program that enables you to track and invoice jobs done for hourly rates. It also lets you bill clients for expenses associated with different jobs. Once you set up your own categories of pass-through expenses (such as printing, travel, and the like), you enter expenses with a few keystrokes. The program will mark up the pass-throughs according to your instructions, add sales taxes where appropriate, and invoice the client by job title.

Scott Anderson, of Bellingham, Washington, runs his writing business with Timeslips and MoneyCounts. He keeps his cash-flow expenses on MoneyCounts for year-end tax accounting. But for expense pass-throughs he uses Timeslips.

Anderson thinks Timeslips helps with job estimating. “With the time- and expense-tracking features, I can easily track all the cost associated with preparing a newsletter for a client. Once I have done two or three newsletters of the same nature, I can give new clients a reasonable estimate of the total cost of their projects,” he said.


Sometimes tracking your expenses can feel like as much work as your main job. But without a viable system for seeing what you’ve spent, your main job can go down the tubes. So use the ideas outlined here to set up some method to track expenses–whatever works for you is as good as money in the bank.


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Registering Users Can Mean Solid Profits

nurBefore you start registering users of your company’s Web site, experts say you should ask two questions: What do you want to know, and how can you help your prospects by knowing it?

The result of the Web registration process is a registration database. This can be a valuable tool, said Seth Goldin, president of Yoyodyne, an Irvington, N.Y., company that runs contests aimed at collecting such databases for marketers, but only if you follow the rules.


The first rule, he says, is request only what you can use, then use it. Second, scale the back-end that houses the database so it can grow as your customer base grows.

“It’s easy to maintain a database of under 10,000 people. But when databases grow past that point, many companies have been hurt by being unable to respond, via e-mail, to market demands from the database,” Mr. Goldin says.

As for what data to collect, Kim Bayne, Colorado Springs, Colo., author of “The Internet Marketing Book,” suggests you ask the same questions of Web visitors you’d ask visitors at your trade show booth. “You want to know if they’re a tire-kicker or serious buyer,” she said. “You want to know whether you’re reaching the right market.”


Michael Paolucci, president of Interactive Imaginations, New York, which runs the Riddler games site, suggests matching databases. “If I can get a name, an address and a phone number, I can find exactly who that person is in the real world, and from there I can go to [Lombard, Ill.-based] Metromail [the nation's largest seller of direct mail lists] and find out all I need to find out about him.

“The Internet isn’t going to solve your marketing problem entirely,” he added. “Use it to bridge your entire ad campaign. The key is you have to know the name and address.”

Whatever data you get from your Web site, however, treat it carefully. “People like the fact they’re behind their screen, that they can get information they want and you can’t see them,” said Ms. Bayne. So if you want to build an e-mail mailing list, ask registrants if they want to be on it – don’t assume they do.

If you’re courteous and collect information slowly, you can build quite a database, said Linda Della, VP-marketing for Likeminds, Sebastopol, Calif. You can then use “collaborative filtering” to recommend products.


Rotten Tomatoes (, a Web site run by Likeminds’ parent company, Songline Studios, provides this technology. On Movie Critic, demographic data is combined with users’ tastes in movies to deliver recommendations for films.

Such “preference data” becomes a profile that can predict with pretty high accuracy what products you’ll want. Likeminds calls the concept “cybergraphics.”

Collecting that data, however, requires new skills from marketers, said Sandra Vaughan, senior director-corporate marketing for Los Altos, Calif.-based BroadVision, a Web site operator that also sells services to personalize sites. “When you’re asking people questions on a Web site, you have to make sure the person gets value for the answers,” said Ms. Vaughan.


Since the data is sensitive, it must also be used carefully. “All our customers state their privacy policy on their sites. Make it clear how you’re using information, and what you do with it,” she says.

If you do your homework, you can get great results, said Donna Iu-Colano, director of interactive services for 1-800-Flowers, Westbury, N.Y. Ms. Iu-Colano’s registration database is based on a “mail concierge program” launched in May 1994.

“We invite people to register important dates with us, and we send reminders via e-mail,” she said.

Members of the program spend $10 to $15 more per visit than those who aren’t in the program, and receive an average of 10 e-mails a year. Contests and games help build traffic, and new registrants are offered discounts as incentives to return.

“The cost of maintaining the database and issuing reminders is nominal,” she added, and the benefits are huge.

Registration database rules

* Don’t ask for something unless you’re going to do something with it.

* Get real names, address and phone numbers, so you can match Web data to other databases.

* Every question you ask cuts the response rate.

* Ask just a few questions at a time to build a complete customer profile. Build a relationship, not just a registration list.

* Provide a quid pro quo – indicate clearly how the answers you get will benefit the people giving them.

* Respect privacy. Don’t share, or sell, data without telling customers up front.

* Integrate your registration databases with other information – both your own and commercial databases.

* Don’t respond to telephone queries via e-mail, or e-mail queries via the phone. Respect customers’ contact preferences.

* Use profiling to provide value. Give business customers a customized look at your Web, or give consumers recommendations that fit the preferences they’ve given you.


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Marketers Take The Baton

mttbAs the era of cost-cutting to raise profits draws to an inevitable end, companies are starting to cast about for new ways to boost the bottom line.

The result: A renewed focus on marketing-driven top-line revenue growth, say executives at E.I. du Pont de Nemours, United Parcel Service and others, both through traditional marketing methods as well as emerging, non-traditional means.

“From 2000 to 2005, Du Pont was mainly driven by cost metrics; now we’re driven by growth metrics,” says George Cattermole, director-corporate marketing for the Wilmington, Del.-based conglomerate, which had $43.8 billion in sales in 1996.

“We want to increase the value of our stock 15% per year and we don’t think you can get that through cost-cutting,” Mr. Cattermole adds. “You have to start to grow your revenue. As markers continue to expand, if you don’t grow you lose market share.”

The profit growth of recent years has often come from major cutting and massive layoffs that, while painful at times, left corporate America stronger and more productive. However, these companies have now reached the end of this profit-building strategy, since more trimming would remove the muscle they need for long-term growth.

“Business marketing is alive, well and growing like mad,” says Ralph Oliva, executive director of the Institute for the Study of Business. Markets at Pennsylvania State University, University Park, Pa. “Once cost-cutting is over, there’s a need to understand where growth comes from, where profits come from and how to develop additional finesse to get ahead of that curve.”

Joe Pyne, senior VP-marketing for Atlanta-based UPS, agrees that companies such as his are starting to look once again to their marketing strategies as they move toward the next growth phase.

“We’re no different from any other company. There’s a seesaw of cost reductions, customer demands, increasing revenues and introducing new products,” says Mr. Pyne. “We’re looking to be more efficient with [budgets] we have and are placing an emphasis on business-to-business marketing.”

In line with that, traditional outlets remain an important part of the marketing mix even as electronic resources gain firm footholds.

Ad growth in trade pubs

For example, Brian Kardon, senior VP-marketing for Cahners Publishing Co., Newton, Mass., says his company continues to see strong ad growth in its trade publications.

Readership of trade magazines, Cahners research shows, has remained strong and largely unchanged during the last decade, despite an explosion of information resources at readers’ disposal.

Direct marketing also is benefiting from this new corporate direction. An updated Direct Marketing Association study projects that business-to-business direct marketing sales will grow more than 10% annually until 2001, outpacing consumer direct marketing sales and total business-to-business sales in the economy overall.

The exhibition industry, as well, is expected to grow at an average of 6% per year until 2001, says the Center for Exhibition Industry Research, Bethesda, Md.

Trackability critical

Part of the reason these tried-and-true venues remain popular is they are easily trackable. That, marketers say, is important as accountability grows as an issue.

For the past five years, Milwaukee-based Rockwell Automation has staged its annual Automation Fair, where Rockwell and its partners meet with customers.

Although the fair is one of his biggest expenditures, it is also “one of the easiest to measure for real, live results,” says Randall Freeman, Rockwell Automation’s VP-global marketing. “We’ve gone from about 3,000 customers the first year to topping 10,000 last year when people from 45 countries attended.

“The real value is the leads we generate – they’re the highest quality we get from any show or any business-to-business event we do all year. And our partners agree.”

As new media develops as a trackable marketing tool, its importance will also climb.

At Du Pont, increasing emphasis is put “on revisiting the marketing process to understand how we can make money with information technology,” says Mr. Cattermole. Information technology “allows for an entirely new basis of conversations with the marketplace,” he says.

Du Pont’s IT efforts include bolstering its database marketing capabilities and tapping the Internet, including intranets and extranets.

Those actions are common to many companies. “The real action on the Web right now is from business-to-business marketers,” says Penn State’s Mr. Oliva.

“We do a tremendous amount of research every year on exactly what customers want and where business is going, and electronic commerce keeps popping up,” says UPS’s Mr. Pyne. “We’re putting a lot of emphasis on providing information that enables transactions to take place and on positioning ourselves on the Net to enable business to take place.”

Spreading marketing around

As business-to-business marketing becomes more targeted and more important, its concepts are being infused throughout companies.

Du Pont’s Mr. Cattermole sees “multi functional teams doing marketing activities” and cites the difficulty of defining a marketing budget when myriad departments are involved. “Research, distribution, manufacturing and sales people are all working on solutions for customers – so how do you put a budget on it?”


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Saving $23 Billion Isn’t Easy

fotnComputers haven’t given us a paperless office yet–but maybe telecommunications will help to take some cars and trucks off the highways. After all, America’s transportation infrastructure is facing a crisis, with demand far exceeding supply. What it we–the people using computers, phones, fax machines, modems, overnight delivery services, and airplanes to conduct business–reduced the demand? What if we substituted telecommunications for transportation?

One of the country’s most respected think tanks recently asked that question, and came up with a surprising answer. Arthur D. Little, the Cambridge, Massachusetts–based research firm, concluded that if Americans could substitute telecommunications for transportation 10 to 20 percent of the time, it would

* Allow six million automobile commuters to work at home.

* Eliminate almost three billion shopping trips annually.

* Eliminate nearly 13 million business trips annually through teleconferencing.

* Eliminate more than 600 million truck and airplane delivery miles annually through electronic transfer of paper documents.

What would this mean to the country? Savings of $23 billion. Most of the benefits would come from increased productivity, with smaller gains from the reduction of energy use, infrastructure maintenance, and pollution. The Little report reaches this conclusion:

“The transportation system is facing a crisis. We can balance supply and demand by reducing the demand on infrastructure, instead of increasing the supply of it. The demand on transportation will certainly be reduced if individuals and businesses are provided with the means to work at home, instead of communting to a place of work; shop at home, instead of having to drive to shops; and conduct business in their offices, instead of having to fly or drive long distances. Also we can substitute transportation of information in paper form by its electronic equivalent.”

Well, this is not news-not to anyone who works for or reads this magazine. But you and I represent the grass roots. Arthur D. Little represents corporate America, the institutions that must back any change in work for its effects to be widespread. The Little report was cited by Sen. Conrad Burns (R-Montana), when he introduced an amendment to a transportation bill last fall. The bill, now law, requires the Department of Transportation to produce a report (due this spring) on the potential costs and benefits of telecommuting.

Now here’s the subtext. In its report, Arthur D. Little “assumes” that a nationwide fiber-optic telephone network is in place–and that without such a network, the 10 to 20 percent substitution level is probably not achievable. “A nationwide fiber-optic network will upgrade the capacity of the existing copper network from 2,400 bits per second (bps) to between 45 to 500 million bps. The effects of this will be dramatic,” the report reads. “Fiber-to-the-home should be sufficient to entice a significant portion of the population to change its behavior.”

You probably thought this column was going to be about the benefits of electronic communications, didn’t you? Of course, someone had to fund Little’s “multiclient” study, and it wasn’t the oil companies. It was six telephone companies and one manufacturer of telecommunications equipment.

Senator Burns warms to the fiber-optic topic himself. “Instead of concrete and steel, our highways of the future will consist of fibers of glass! Think of fiber optics as an information highway on which millions of cars, or bits of information, travel each second. Those cars can go anywhere in the world instantly….Our nation faces many problems, including an overburdened transportation infrastructure, a global economic competitive struggle, and a continuing domestic economic weakness. A close look at some of these challenges illustrates why rapid deployment of an advanced communications infrastructure is so important and [shows] what we can do to speed the development of this vital network.”

According to the Little report, this vital network would carry estimated one-time costs of $300 billion, which would take more than 12 years to recoup at $23 billion per year. So I’m left with this conclusions: Before the telephone industry spends $300 billion wiring fiber-to-the-home, it wants everyone to know just how much good fiber optics will do. In exchange for the ensuing social benefits, they’d like to lobby to use the network to sell movies and whatever other information they can sell. “All the graphics fit for fiber!”

The Little study is a powerful statement in favor of electronic communication. But if the study is perceived as a thinly disguised phone-company lobbying effort, it will be easily dismissed. People on the other side of the fence (like the newspaper and cable-television lobbies) will commission their own studies–and they’ll be suspect too.

We’ve been hearing about fiber optics for nearly a decade. Do we have to endure another decade of talk? Let’s hope the Department of Transportation can produce an objective study that shows big business how to improve productivity with increased use of telecommunications. And then, let’s get wired!


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Get Yourself Telecommuting!

gytImagine that your employer has just said you can work from home two days a week, or two weeks a month. That is, you can try such a work arrangement and later make it permanent if there aren’t any problems. What can you do to abet your chances of success?

You have two goals. The first is to show that you can be more productive than you are in the office. The second is to make your absence from the office as trouble free as possible. Coworkers should be able to reach you easily, and you should receive information and deliver work to the office without causing unusual disruptions of work patterns.

It will not be hard to show a productivity gain; since you’ll have fewer distractions, you’ll produce more. But trying to set up a smooth communications system has been my bane since I began telecommuting in 1985. It will probably be yours too. So whether you work from home on a full-time basis or telecommute part-time, here’s a rundown of products and services you should consider:

Two Business-Telephone Lines. Since you’ll often want to send or receive a fax or computer file while you talk on the phone, you’ll need at least two phone lines. Some people might want three lines, one for a dedicated fax. I have one standard and one hunt line. That is, if I’m on one line, an incoming call bounces to the second line. I use the second line for fax and modem, as well as voice calls. After four rings, the fax machine picks up, so I or the answering machine must get it before then.

Ideally, your two work lines should be separate from your personal lines so that you won’t be interrupted by friends and relatives as you work, and business calls won’t bother your family. I’ve just installed two separate business lines.

Voice mail/call waiting. Even if you have a hunt line that will bounce a call to the second line, you still need call waiting or voice mail on the first line. At least that’s what I’ve concluded. There’s nothing worse for a caller than repeated busy signals; if you’re talking on line one and the fax is receiving on line two, that’s what the caller will get. With call waiting, you can at least acknowledge the caller and take a message. However, I’ve never met anyone who actually likes call waiting.

A voice-mail service from your local phone company is preferable to call waiting. if the phones are busy, the caller will get a recorded message and be asked to leave a message in one of several “mailboxes.” You punch in a code to retrieve your messages. The only drawback to voice mail is that you can’t screen incoming calls as you can with an answering machine.

I have call waiting on my first line (I don’t want it on the second since it interferes with modems and faxes) only because voice mail isn’t yet available in my area. The service costs me $2.85 a month, and I can disable it to avoid possible interruptions. When enabled, it will stop after two clicks if I don’t answer.

An alternative to voice mail, which I haven’t tried, is the Phone Mate Private Answering Machine ($130, available through the Hello Direct catalog; [800] 444-3556). You can connect up to three answering machines to your primary answering machine, which tells callers which key lo press to leave a message for which person. if you have more than one person in your home or office, this might be a good substitute for voice mail. This answering-machine system won’t combat the busy-signal problem but will give you the equivalent of voice mailboxes.

Phone headset or rubber cradle. Since you’ll spend more time on the phone than you ever thought possible, you’ll want to make your time as pleasant and efficient as possible. For me, that means being able to type easily while I talk, either to tike notes or to research names and facts on the computer. If I have to crook the phone receiver between my neck and shoulder, moving about becomes very uncomfortable. So I attached a rubber neck rest (available at most phone or electronics outlets for less than $10) to the phone handset.

My next move will be to buy a headset like telephone operators wear. Then I won’t have to cradle anything, and I’ll be able to wander away from the phone as I speak. Plantronics has a line of headsets ranging from $60 to $100. The Plantronics SP-02 ($60) allows you to answer the phone using just the headset.

The Hello Direct catalog offers a line of “HelloSets” that allow you a 30-day, free trial period. HelloSets range from $170 to $370 (for the cordless model).

I have resisted headsets until now because I’ve hesitated to introduce another wire or cord to my desk. The mouse and phone cords already get tangled. But everyone I know who uses a headset raves about it.

Fax/modem. You’ll need a modem if you want to use electronic mail, connect to office computers, or use a local-area network. For most file transfers, a 2400-bps modem will do, but if you plan on sending extremely large files (50K or larger) on a regular basis, consider a 9600-bps modem.

Nowadays, it doesn’t make sense to buy a plain 2400-bps modem; buy a fax/modem and give yourself the flexibility to send documents straight from your computer to a fax machine. Some fax/modems are send-only models and won’t receive faxes. You want the option to receive faxes in your computer even if you also own a stand-alone fax machine. (See “Faxing Power-It’s in the Cards, ” in the April issue.

Most fax/modems house a 2400-bps modem; however, the Global Village PowerPort (Global Village Communications) features a 9600-bps modem.

Fax machine. Why would you want a stand-alone fax machine even if you’ve got a fax/modem? Because you might not want to leave your computer on day and night to receive faxes when you’re not there; and if you receive a lot of faxes, the process could interrupt your work on the computer. Fax/ modems supposedly operate in the background, but unless you have a powerful microprocessor, that background could slip into the foreground.

How much and what kind of fax technology you need depends so much upon the type of work you do that it’s impossible to make concrete suggestions without detailed knowledge of an individual situation. However, since a home-office communications system is meant to make your remoteness from headquarters as painless as possible, you should make your system as flexible as possible. Any potential flaws will be exposed sooner rather than later, and that will only make your absence more conspicuous.That’s why you might want two fax options.

Remote LAN connection. If your office headquarters has a local-area network (LAN), you may want to connect to it from your home office. You can use one of the many remote software products, such as Carbon Copy, which replicates activity on one computer (in the office) on a remote computer (in your home). However, this setup requires that a dedicated computer at the office be turned on all the time.

A smoother solution is to connect your computer directly to the office LAN, so that your computer behaves as one of many nodes on the network. If your office has an MS-DOS-based network, use a Shiva LanRover/L modem, which comes with software that ties you to the network. If your office uses an Appletalk network, use AppleTalk Remote, a software product that runs under System 7.0. In addition to the software, you’ll also need a 9600-bps modem, although a 2400-bps would also work. Once connected, your computer can access the main file server, exchange mail messages, and perform any task that computers physically connected to the LAN can. The only difference is that some activities may take longer to execute.

Laptop computer. When I occasionally spend a full day at the office, I sometimes feel stranded because I’ve left my computer at home. I carry a disk of important files, of course, but miss my calendar, contact list, and any files I forgot to pack. A laptop computer would solve this problem. If you’re setting up a telecommuting office from scratch, consider using a laptop as your primary computer. Then when you travel to headquarters, you can take your entire system with you.


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