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Taxes – woohoo, right? Bookkeeping, double woohoo…lol! I know this is not the favorite topic for the self-employed (or anyone, for that matter), but it’s a fact of life (ugh). So, if you’re an affiliate marketer or any type of online business owner, how do YOU keep your accounting records? I’d like to show you how I do my books to keep up with everything and be ready for taxes – and then hear your ways for doing it.
Bookkeeping and Accounting for Online Business Owners
First off – I am not an accountant or a tax attorney or any other type of expert in those fields. Also, I am talking as a US citizen here as I don’t have a clue about taxes and accounting for other countries (sorry).
In short, this post is geared towards those working online, that live in the United States, and that operate as a sole-proprietor or single LLC (ie, your business tax form is included as part of your personal 1040 form – most likely as a Schedule C addition to your 1040). However, my solutions work really well for all types of “Schedule C” type businesses – it doesn’t have to be an online business.
For those of you that are in a hurry or don’t care to read any further about the “how” and the “why” regarding my bookkeeping system for my internet business, and would rather get straight to the “what”…
If you’re not in a hurry, great! Let’s keep talking…
Bookkeeping and Taxes for Internet Marketers 101
When you work for yourself and report your earnings/losses for taxes (ie, sole proprietor or single LLC), it goes on that Schedule C form that is included in your personal tax return (ie, no special “other” returns – all is included in your 1040).
Self Employed “Schedule C” businesses are pretty much:
Money Made from That Business
Less Money Spent ON that Business
Equals what you pay taxes on.
Regardless of that money all going through ONE bank account or not – if you earn it, you pay taxes on it. If you spent it to earn that money, you get to deduct that amount from the money earned.
Income – Expenses = Taxable Income
And that taxable income part from the bottom line of your Schedule C is then reported on your 1040.
ALWAYS check with your accountant or tax professional for YOUR situation, ok? This is just a general over-view of how it works.
Got all that? Good – let’s talk about how to keep up with all this.
BookKeeping for MY Online Business
I’ve been working online for right at 5 years now and the bookkeeping/accounting stuff has always been a thorn in my side. Ya see, I’m an Excel type girl – I’ve always done all my record keeping for my online stuff in a good ol’fashioned spread sheet. Believe it or not, using an Excel spreadsheet was a BIG improvement for me. I’m a paper person at heart – I love having things like that in a tangible form that I can touch (yep, I’m weird)
Now, that worked for me for quite some time. I am pretty comfortable with a Schedule C form so I have a good grasp of what I need to be keeping up with so it’s available come tax time.
BUT – it really ONLY worked for ME. *I* know how I do things… *I* know why I did this or did that – but no one else would really “get” it without some explanation from me. This also caused a lot of issues for me come tax time because *I* had to take the time to “decipher” it.
And, above all, the TIME I was wasting doing it this way was ridiculous.
That’s not smart.
Now I’ve never been accused of being the brightest bulb on the tree, but the more and more I reflect back on it, the more I realize that this was so NOT the best way for ME to handle things.
I wanted things better – more organized – better info for me at a glance – less time spent DOING it – and something someone ELSE could easily decipher if need be.
For me, 2012 became the year that “if need be” happened. I’ve brought my hubby in as my CFO and he is now doing my books for me (it’s that ‘time’ thing and he is simply MUCH better at business numbers than I am) so it was time to find a GOOD solution (and my accountant sure appreciated it too…lol).
My accountant recommended some various software I/we could use for record-keeping, but none of them were exactly what I wanted.
Here are some of the things *I* wanted.
1. I wanted it to be web-based.
I didn’t want a software program that was only available from ONE computer. I have a massive desktop computer that I use when I work in office, but I don’t always WORK in my office – and I don’t always work from HOME either. I’m on the go so my bookkeeping needs to be available on the go too. I wanted my books available to me wherever I had internet connection.
That also meant that I could log in from my computer (or whatever device) AND my hubby could log in from HIS – no peeking over each others shoulder or needing to share one computer because that’s where the books are.
Also, I personally wanted a way for my accountant to log in to my account if I needed her too. Why drive all the way to her office when she can just log in and talk to me about things, ya know?
2. MUST integrate with PayPal
Majority of my money flow is through PayPal – and hand-entering all those transactions is a nasty job (and VERY time-intensive). I wanted a bookkeeping program that easily integrated with PayPal so all my transactions imported in easily and quickly (automatically would be ideal).
3. Birds Eye at My Bottom Line
A big problem for me with my Excel spreadsheet system was that I never really knew where things stood at that exact moment. Simple questions like, “How are things going this month?” took math and deciphering my system. My new system needed to enable me to see instantly, at a glance, how things were going at any given moment.
4. Schedule C Integration
Ideally, I wanted to find a program that took my income and expenses and went ahead and kept updating my Schedule C so *I* could literally see how things were going. Naturally, it wouldn’t be THE Schedule C that I filed, but it would be a “mock up” so I could visually get an idea of how things were going (and so could me accountant).
5. Estimated Taxes
It would also be pretty nifty if I could also have a way to see what kinds of estimated taxes I might need to pay (this varies for everyone so please talk to your accountant about your specific situation)
6. Must Integrate with Other Accounts
Who knows, I might want to integrate a bank account or a credit card. I wanted that flexibility and I wanted it to be “push button” – not a transaction by transaction thing.
7. Must Offer Push Button Reports
I like line graphs and pie charts as much as the next person. And yes, it’s way more cool when it’s YOUR money you’re looking at…lol! I wanted a way to push a button and know things like – “How much have I spent on domain names this year/month/week?” or “How much have I made from xyz affiliate program this year/week/month?” – things like that.
8. Must Allow For OTHER Transactions
Yes, integrating with PayPal and automatically pulling those transactions each day was a must for me – but I didn’t want to be LIMITED to that. If all I needed way PayPal info about my earnings and expenses – well, I’d just log into PayPal, right?
But what about when someone mails me a check? Or a direct deposit into another account? What if I pay for something with cash?
I wanted to be able to manually enter transactions that have to do with the bottom line of my business. Remember, it’s not necessary for all transactions to go through ONE checking account, but all transactions MUST be accounted for. I wanted ONE place to easily account for EVERYTHING money-related for my business dealings.
Speaking of paying for something with cash or some other way OTHER than PayPal… I wanted an easy way to keep up with those receipts too.
10. Must be Mind-Numbing EASY to Learn and Use
Above all, once I found all the 9 requirements above, I knew without a shadow of a doubt, that it had to to easy to learn – and super easy to use. Let’s be honest, if it’s too hard to learn and set up – and/or too hard to use on daily basis, we won’t use it, right? Maybe it’s just me, but I know that *I* won’t use it if it’s a pain in the butt…lol!
There you have it – my “Wish List” of things I absolutely wanted in my new business accounting program. Naturally, I wanted my info to be safe and secure – and have the ability to download and upload things (but to me, those parts are a given). Above all, I knew that if I was going to change my wicked ways with my Excel system, my new system was going to need to be PERFECT for me – or else I ain’t doing it…lol!
So I set off on my mission trolling the internet looking for my perfect solution.
The Online Business Accounting Software I Found – and Now Use
I trolled a lot of forums listening on conversations others have had about the very thing I was looking for – What accounting software or program to use.
The eBay forums were the most helpful as those that sell on eBay really also needed a solution like I did being that the majority of their business transactions happened via PayPal. Turns out eBay sellers and Etsy sellers kept mentioning one accounting program.
And get this – IT’S FREE
I kid you not – it’s FREE for as long as you want to use it. The most it will cost is $9.95 a month IF you upgrade to their Plus option (which seems to add more to the estimated taxes part).
Not only is it FREE, it also had every, single option I required. Yep, all ten of those things on my “Wish List” have been found in this free small business accounting program.
It integrates with PayPal VERY easily…one click and all your transactions are right there (and it will go get them FOR you automatically)
It integrates with all kinds of other accounts, too. You can add your bank account(s), credit card(s), Amazon sellers can add their accounts too. Just amazing at how many different accounts you can integrate.
All the reporting and “mock” Schedule C stuff is right there… My bottom line at any given second is right there as soon as I log in… My estimated taxes are right there… Pretty little pie charts available as soon as you log in too. Heck, it’ll even keep up with your mileage too!
I am SUPER impressed with Outright – it truly is the perfect solution for me.
I even did a basic set up and then had my accountant log in to get her thoughts (there is a special way to give Bookkeeper Access) – she really liked it too. We both agreed it was a good solution for me. (oh and a quick tip she gave me – set up a category called “Ask Accountant”. That way, when a transaction comes through and you aren’t totally sure what to do with it, just tag it as “Ask Accountant”. That way, any questions I have can be pulled up with a click and corrected as she tells me to.)
Oh, and wait – here’s something else cool regarding receipts.
Ok, let’s say I go to the post office to mail something business-related. I pay cash. They give me a receipt. Knowing me, that receipt goes to the deep pits of my purse never to be seen again.
But then I met this awesome program – and no more lost or missing receipts for me ever again.
In short, it is an online receipt filing system (if that makes sense). They give you a free app for your iPhone or smartphone. When I get a receipt, I simply take out my phone and take a picture of the receipt with the app on my phone. They then verify the receipt for accuracy (with a real human) and then file a digital copy of my receipt AND sends it over to my accounting program automatically so it’s in my books – just about INSTANTLY!
Way wonderfully awesomely fantastic!
It’s only a few weeks into 2012 and ALREADY I feel SO much more organized and SO much more on top of things – AND I have a system in place that my wonderful hubby can use to keep me on track 24/7 – always able to know anything I need to know regarding my online business, my earnings, my taxes, and my bottom line.
I have to admit that when I sat down and thought about exactly want I wanted from my accounting program, I pretty much thought I was really reaching for the stars (ie, no way in heck I was gonna find something that fit my needs PERFECTLY).
You know that feeling you get when you find EXACTLY what you want AND it’s FREE? Holy Wow! Nothing like it!
I strongly encourage (my version of “insist”…lol!) that you take some time and go try OutRight out and see how awesome it is.
You can find it here.
If you’ve ever wondered how to keep up with money and taxes and expenses from your online business – this is a GREAT solution.
Also, if you find you have questions or need some help – they have amazing support and a great knowledge-base. I had a few questions while setting it up for my needs and they were Johnny On The Spot to answer. Very impressed.
I think the “toughest” thing for my accountant and I to work out with each other was this – my Online Business has MANY, MANY income streams. I’m not like a typical brick and mortar business in many ways. Take for example, a restaurant – they do ONE thing to earn income – run a restaurant. Or like a self-employed plumber – he/she does ONE thing…provides plumbing services.
My bottom line comes from MANY things online – affiliate marketing, optimization services, my own products, etc etc etc. And very few expenses I have are only for ONE specific part of my business. For example, when I shared my article marketing strategy, there are tools I use BUT I don’t ONLY use that strategy for only my affiliate stuff… I use those tools for other things that generate income too.
So that makes me a little… well, a little “weird” in an accountants world so we pretty much settled on this…
If I earn it online – it’s my income
It I spend it in order to make money online – it’s my expense
And I needed to find a really good way to keep up with all streams of income and all expenses so I could both know my bottom line at any time AND be ready tax-wise at any given moment.
While all that might sound silly to y’all – I needed that clarification in my head. Sometimes I would talk myself in circles about all this tax stuff with things like, “Should I do a Schedule C for each TYPE of income I earn online?”
(I’m telling ya – just spend one day in my brain and you will want to beat your head against a wall….lol!!!)
Once we talked it out I realized that I was over-complicating things. All I needed was one reliable place to keep track of it all – and that’s what this small business accounting program it conjunction with this receipt tracking program do for me.
Now I’m not talking legal things here – I’m talking purely tax and book keeping stuff for my situation. Thing is, I know there are lots of “Me’s” out there that might be talking their selves in circles too.
My advice – get a great free program to keep your books all in once place like the free online accounting program I use, then use this to keep up with your receipts AND have them recorded in your accounting program, and get a good accountant to help you keep up with tax liability and file your tax forms.
Our time should be spent on doing things that bring money in. There is only so much time in a day and only so much ONE person can do. When we spend lots of time on our books or other maintenance parts of our business, we lose time we COULD be out there doing things that actually improve our bottom line.
Ok – so tell me – what has been YOUR solution for doing your books?