In the glorious opening months of 2000, perhaps you were sitting pretty on a $900 Aeron desk chair. Now, in this era of fear, uncertainty and doubt for many a free agent, you may have hocked your Aeron for $280 on eBay and parked your derriere on a couple of milk crates. Yes indeed, this is an excellent time to reduce your expenses.

But a more uplifting approach is to upgrade your system for tracking expenses to maximize client reimbursements and tax deductions. "Independent professionals are giving away money by not keeping good expense records," says Robert Walsh, a CPA with Lighthouse Financial Advisors of Jersey City, New Jersey. "Ninety-nine percent of independents make that error in their first year."

So let’s get down to brass tacks and nail down how to record expenses.

Lay a good foundation for your tracking system by considering how you pay for everything and what kind of a trail those payments leave.

Isn’t it fiscally wise to pay expenses with cash? No. It’s usually better to pay with a credit card dedicated to your business, because each purchase automatically generates a permanent record. It’s best to use a credit card that automatically categorizes each purchase. Use your business credit card as much as possible, even when you’re only spending a few dollars. Also, ask your utility providers if their charges can go to your credit card.

For the credit-challenged among us, how about one of those cards that debits your checking account? "Debit cards are not good for record keeping," says Walsh, because the statements don’t contain enough detail.

If your bank enables you to download checking transactions from the Web directly into your accounting software, that’s another way to make expense tracking easier. When you do spend cash or write a check by hand, record the transaction immediately -- while you’re at the cash register or as soon as you get back in the car.

And petty cash purchases? The key is to have a system in place that makes it as painless as possible for you to record the expense on the day you incur it. Built-in or third-party expense applications are available for handheld PCs like the Palm Pilot and Handspring Visor; you can import the data into accounting software such as Peachtree’s Accounting or Intuit’s Quicken or QuickBooks.

For simple expenses, like auto mileage, you may do just as well using a notebook in your glove compartment or a dedicated section in your daybook. Remember, even with very small expenses for which a receipt is not readily available -- tips for example --"you need some type of log, some explanation of the expense," says Walsh.

Exactly how far will Uncle Sam go in allowing small expenses documented only by your contemporaneous log? "It depends on the auditor’s personality," an IRS representative told us. In other words, get a receipt whenever humanly possible.

After you bill back to clients all reimbursable expenses and categorize the rest for tax deduction, you can analyze the data to see where you might reap substantial savings. For example: Are you spending enough on long distance to justify switching to a high-volume plan to save money? Could you bunch together purchases to make better use of office superstore coupons?

You can also use your up-to-date expense reports to improve cash flow. If you incur a major expense unexpectedly, you may be able to reduce your estimated tax payment for the quarter; consult with your accountant. Also, you can charge clients for expenses on each invoice rather than putting off reimbursement for a painful semiannual reconciliation.

Do keep in mind there may be a tradeoff involved in billing clients for very small expenses. "Billing for faxes, photocopies -- do you want to spend that much time dealing with those things?" asks Steve Milner, an attorney and CPA in Newport Beach, California. In addition, your client might rather be billed at a slightly higher rate than be forced to wade through long invoices of nickel-and-dime items.

True, keeping close tabs on your expenses may not put you back in that comfy Aeron chair. But you could find a few extra bucks for mattress stuffing, just when you need it most.