Managing your bookkeeping is one of the most vital aspects of staying on top of your business. Still, many people don’t particularly like number crunching and others don’t even know what to do to maintain their records.
What’s the point, anyways? We can all just stuff receipts into an envelope and hand it over to an accountant, right? Well, you could – but it certainly wouldn’t be very smart to depend on your accountant to sort out your mess. Here’s why:
How Much are You Really Making?
Many a freelancer believes that because of the low overhead of remote working, most of the income is free and clear. There are factors that reduce your take-home income, like Internet connection costs, ink cartridges, even the electricity that fuels your computer. Of course, there are taxes, too. Most people are surprised to learn that the $100 they just brought in only leaves them with half in their pocket – and sometimes less than that at the end of the day.
How Can You Take Decisions?
Can you really afford that course or seminar? Should you increase your rates? By how much? Was last month a good one or just okay? Have you really spent that much on books this year? And that surprise tax bill… do you really have to pay that much?? Wait, hang on – where’d that credit card bill come from? Floating along without keeping track of what’s coming in and going out – and having that history handy – means you may have some nasty surprises.
How Can You Take Decisions?
If you don’t know how your business is doing at any given time (and not just at tax time), how can you make informed choices with the lowest risk for your business? You may need to decide whether a new PC is a good investment or know whether an ad campaign increased business for a certain service. You can’t if you haven’t tracked information.
How Much Do You Love Your Accountant?
Some people love their accountant a great deal – enough to subsidize his trip to Florida each year, in fact. When you hand over papers for someone else to deal with, you’re paying them not only to crunch numbers but to sort, file, add and organize expenses. They charge you premium price for that service – accountant rates, not VA rates.
How Lazy Are You?
Ever said this? “I’m not good with numbers.” What about this? “I have no time for bookkeeping.” Or even, “I don’t know a thing about accounting!” Excuses, excuses. Maintaining books on a regular basis takes all of maybe two hours per week or less – and learning what you need to do for record keeping isn’t hard or time-consuming.
How Can You Keep Track?
Many accounting software packages are truly built for accounting dummies. (I know. I’m one of them. Math was never my strong point.) The software doesn’t require new skills or amazing abilities, and it’s all very plug and play. Tutorials on the web and forums let you get answers to questions or learn how to use a special feature to make your life easier. My personal recommendation is QuickBooks, and they even have a budget version available.
You can also use a simple Excel sheet to track expenses and income (because that’s all you really need to do.) Write the names of months across the top columns. Write the description of expense or income (and be specific) down the left side. Fill in the amounts consistently as they occur.
Want to be lazy? This site offers a free Excel sheet already prepared to get you started with tracking.
You’ll be on track, on top of your business and on the ball with financial decisions you need to make.