Easiest way to make recurring payments to contractors

[Chad Miles]

Hello BP!

Today I was curious about paying contractors. I have a contractor that is doing some financial analysis work for us right now and since we will be paying him every 2 weeks, I wanted to know what you thought the easiest way to pay was. 

We want to make sure that come tax time, we are all taken care of, but writing and sending a check every 2 weeks also does not seem efficient...

We have thought about using an app like Venmo to send money, but wonder if that leaves enough of a paper trail come tax time?

Any suggestions? 

Thanks, 

Chad 

[Daniel Chang]

Chad,

You definitely want to talk to a bookkeeper.  Your question makes me think you aren't keeping books at all.  

Keeping books is tracking all income and expenses of your business, as well as assets, liabilities and equities.  If the business is simple enough, you can just use an excel spreadsheet.  A lot of small business owners, including myself, use Quickbooks.  There are other softwares out there.  Or just hire a bookkeeper.  The typically run $50-$60/hr.  

What you use to pay someone, whether it's check, cash, wire, or Venmo doesn't really matter.  What matters is that it's an expense to your business and recorded as such and properly recorded in the correct accounts.  As a example, if I pay a contractor $10,000 by wire, and incur a $25 wire charge, then my bank account drops by $10,025.  I need to make sure I bookkeep a decrease of $10,025 from my cash account, expense $10,000 to the professional fees account, and expense $25 to the bank fee account.  

Good bookkeeping is incredibly important to make sure you are accurately paying taxes and have books to show IRS if they audit.  It is also incredibly important for year over year financial analysis, to see where you are overspending and where you can improve.  For instance, I can look back and say "my utilities expense account increase 25% from the previous year" and then investigate as to why.