The topic of the home office came up recently when a reader asked a question on one of the COLE Publishing online forums. The poster wanted advice on how to set up a home office. This got me thinking. Maybe other PROs have been getting by with, as this poster described, “a calendar notebook and five boxes filled with invoices.” So I’ve compiled some of the essentials necessary to successfully operate a small business from home.
A ROOM WITH A DOOR
I don’t know where the forum poster in question was keeping that calendar and the five boxes of invoices mentioned in the post, but it would be best if they were in a room with a door. Doing business on the kitchen table gets old really fast, since work has to be cleared away to make room for food at least once a day. A corner of the bedroom doesn’t exactly scream professionalism either. And a work center in the family room? Forget it, unless you have the rare ability to tune out Sesame Street blaring from the TV or teens playing video games.
Find or create a space you can use exclusively for business. Having a door to close will improve productivity when you are inside and help you relax and leave work behind when you call it a day.
FURNITURE AND STORAGE
A comfortable chair and roomy desktop are essential. After that, it’s all a matter of style. I don’t mean decorating style so much as work style. If you do business on paper the old-fashioned way, you’re going to need filing cabinets and maybe some storage boxes. But before you head to Staples, check with your lawyer or accountant and find out how long you need to keep documents. Invest in a shredder or deliver outdated paperwork to a shredding company.
CONNECTING WITH THE WORLD
While in your home office, you’ll need to connect to the world. If you always work from your office and nowhere else, you can use an inexpensive desktop computer. Laptops cost a bit more, but allow you to work remotely. If you want the best of both worlds, a laptop hooked up to a full size monitor and keyboard is the way to go.
Internet and phone service must also be considered. You might want to upgrade your home Internet to the fastest speed possible to boost productivity. As far as phones go, you could add a second landline to separate personal from business calls, or use your cellphone as your business “line.” That, like the laptop, allows you to work remotely. Be aware, however, that cell reception can vary from one part of a house to another. If you plan to locate your office in the basement for example, you may not get good cell coverage there and require a landline.
MEET AND GREET
Plan ahead for the times you need to meet with people. Do you want potential customers and support people coming to your home? If not, offer to go to them, or find a quiet coffee shop where you can meet over breakfast or lunch. Another option is renting a meeting room somewhere. Meeting space is often available to rent in public buildings like libraries and community centers. There are also businesses dedicated to renting out meeting space by the hour or day.
IRS REQUIREMENTS
One benefit of having a home office is that it may enable you to take a tax deduction. But the IRS has strict rules about how to qualify. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively as your principal place of business. The amount you can deduct depends on the percentage of your home used.
In the past, one would have to calculate the percentage of the home used exclusively for business. If the office was 10 percent of the total size of the home, then 10 percent of home expenses like utilities were deductible. However, thanks to a tax code revision the IRS calls the “safe harbor” method, which began with tax year 2013, taxpayers can more easily calculate their home office deduction.
Multiply the square footage of the area of the home used strictly for business purposes by the prescribed rate of $5 per square foot and you have your tax deduction. The deduction cannot go above $1,500, or 300 square feet, however. To get more information go to www.IRS.gov and search for IRS Publication 587, Business Use of Your Home.
A BACKUP PLAN
Unlike renting an office, working out of your home means there’s no landlord to call when the power goes out or your office floods. You need to protect your business. Make sure you have not only power strips to protect electronic equipment from surges, but invest in a battery backup, called an uninterrupted power supply. Regularly back up your information to an external hard drive or to the cloud. And if you back up to a hard drive, store a backup off the premises in case of fire or natural disaster.
Also consider how you’ll keep working in the event of a prolonged power outage in your neighborhood. Find a quiet place with free Wi-Fi, comfy chairs and an understanding staff like the local library or a coffee shop you frequent.
INSURING A HOME OFFICE
You already have insurance on your vehicles and inventory, plus homeowners insurance, so your home office is covered, right? Well, maybe. Ask your insurance agent if you need a rider that expands your homeowner’s policy to cover the business. The cost of such a rider is usually minimal – $100 to $200 a year – but will provide a few thousand dollars worth of additional coverage. You may want to go a step further however, and add a policy that covers the office equipment specifically and liability for injury in case the deliveryman slips and falls on your front walk.
TAKING CARE OF BUSINESS
As for the online forum poster who asked about setting up a home office, all the readers who responded advised the purchase of accounting software. I can’t really add to that advice other than to say I agree wholeheartedly. Accounting software means reduced paperwork and, therefore, less storage needed. The result? A nice tidy office, less paper to buy, shuffle and file, plus less time wasted trying to find all the right documentation come tax time, possibly fewer billable hours by your accountant and a feeling of true professionalism … all from the comfort of home.
