Image: the evolution of the shared economy by UDEMY
The huge growth in such platforms such as Uber, Airbnb, Elance and Airtasker has made the sharing economy take off into the stratosphere. With it brings a new perspective on owning and running a business.
So what does this mean for you if you have jumped on board this sharing economy? If you want to have a successful enterprise, the same business fundamentals apply — you still need to treat your endeavour, no matter how small, as a running, operational and functioning business.
The common trap I see most often by people in this new market space is that they treat it as a hobby or as a casual venture. They don’t take their business seriously, which can lead to sloppiness, especially in their record keeping and in accounting.
So whether you are renting a room out on Airbnb or transporting passengers with your own family car — or even offering up your academic skills to proof and copy edit someone’s high school essay on the other side of the world — treat your new enterprise as a fully functioning business.
Tips for budding sharing economy entrepreneurs
Keep good records
As with any business, no matter how small, you need to keep track of your income and expenses. It will be much easier at tax time when you send your financial information into your accountant or when you prepare your own income tax return online.
Most sharing business platforms, such Airbnb, Uber and Elance, take the income collection and recording out of your hands by capturing the sale automatically and depositing it into your bank account. However, you also need to clearly and concisely capture the expenses you incur in running your business. Don’t rely on hundreds of pieces of paper, receipts or dockets to do this.
Get organised from day one and progressively record and keep track of all your business expenses.
Adopt user-friendly accounting software
Because you are running a business you need to get serious; it isn’t a hobby. But it doesn’t mean that you need to have a degree in accounting or pay thousands of dollars in software costs.
As you embrace the online economy, also embrace an online solution to simplify your bookkeeping. Accounting software like MYOB Essentials makes business bookkeeping easy — it’s cloud based and mobile. With MYOB Essentials you can access your accounting records on any device and from any location. A mobile business tool is a great complement to a mobile or online business.
Keep some money in the jar
If you are new to business, a word of advice: set some money aside on a regular basis, perhaps monthly, to pay for your future tax and to help with cash flow during leaner months. While it’s great to partake in this new and exciting sharing economy, you don’t want to run out of your most valuable resource, which is cash flow.
What expenses can I claim?
The general rule is that anything you spend on providing your customers with your services or product can be claimed as an expense. For example, if you are providing accommodation through Airbnb, then all expenses relating to it can be claimed. This could include:
A portion of your home electricity, heating, cleaning and pest control. This can be claimed on a square-metre basis depending on the size of the room you are letting as a proportion of the whole area of the house.
Food and amenities that you offer to your guests.
Laundry of linen and towels.
Internet, if provided to your guests as part of their stay.
Upkeep of the property. You certainly want curb-side appeal when having guests stay at your home, therefore a portion of your yard, mowing and maintenance costs could be claimed.
Any specific appliances that you purchase for guests such as hair dryers, fans and heaters. When I stayed with an Airbnb host in Austin, Texas, I was provided with a washing machine, daily breakfast, and free internet as pay of my stay.
If you are providing a ride-share service and using your own private car, then there is a whole host of car expenses that you could be entitled to claim as business expenses.These could include fuel, car repairs, car insurance, car cleaning and upkeep.
If your car is split between private and business use, then you will need to use a logbook to calculate the percentage of private and business use.
Don’t forget you can also claim all the ancillary expenses that you incur to make the ride memorable and more comfortable for your passenger. This would include bottled water, any music that you have purchased to play in the car, as well as car accessories to enhance your customer experience. If the expense relates directly to the provision of your service, then don’t forget to claim it as a legitimate business item.
The same approach of claiming business expenses applies even if you just provide your services as an online freelancer. When I wrote my latest business book, The Collapse of Self-Managed Superannuation Funds, a graduate of English Literature in Los Angeles copyedited and proofread my manuscript. Dylan was on Elance offering his proofreading services. This means that any expenses Dylan incurs to run his online editing and proofreading business can be claimed. This includes his computer, home office equipment, internet connection, printing and stationery, and editing software.
When thinking about your entitlement to claim business expenses, the rule is simple: whatever you share and use for your customers, be it your car, your home, or your skills and intellectual property, you can claim a share of the expenses you incur in providing those services.
While platforms such as Uber, Airbnb and Airtasker allow us to trade and share our resources, talent, and skills in a virtual world, old-fashioned business principles will never be replaced. Keep good accounting records, be organised and methodical in recording all of your business expenses, and adopt a simple online accounting software package that will support the growth of your business.
Embrace the new wave in global online trade. It’s certainly an exciting time to be your own boss, and the opportunities are endless. But keep your feet planted solidly on the ground in knowing that you are running a proper functioning business and, as such, you need to be accountable for it.
About the author: Matthew Snelleksz is an entrepreneurial accountant at Snelleksz & Co, a boutique CPA firm in Brisbane Australia. He specialises in creative and proactive solutions for his business and investor clients with a focus on high level tax minimisation and structuring advice. Matthew has over 20 years experience in taxation and business advising in Australia and London. This article first appeared on the MYOB Site here
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