Start Your Books Right!
It seems everyone is trying to create an at-home source of income in this post-2020 world, which is amazing. I love seeing this shift, but it's important to remember that income not taxed through payroll WILL be taxed at the end of the year. So it may not be fun to get ahead of it, but it will relieve all the uncertainty at the end of year.
So, let’s start your books off right!
When doing my initial research to start this blog, I read anything and everything I could get my hands on. I am definitely more of the nerdy, prepared type that you wanted to throw a spit wad at in high school. But I do not feel comfortable doing a big thing without either:
a) consulting an expert in the field I know little to nothing about or
b) doing my own research that is data-based and drawing logical, educated conclusions.
That being said, everything I read in terms of what other bloggers were recommending for accounting software was FreshBooks. I honestly thought I was missing something. I have worked within many different accounting software (including good old spreadsheets) but never FreshBooks. So I went down the path of researching FreshBooks.
What is the difference with FreshBooks?
For the most part, FreshBooks and QuickBooks are almost exactly the same +/- a few things. The ultimate difference is FreshBooks charges based on billable clients while QuickBooks bills based on version and users.
If you are heavy into client-based selling, where you need to generate invoices and do not have another system handling invoicing, check out QuickBooks.
If your business does not base its income on billable clients/customers, or you have another invoice-handling system, check out FreshBooks.
For industries like blogging, where there can be little to no billable clients, FreshBooks can be a great option!
Overall what I found is that while I do believe bloggers advertising FreshBooks most likely do use it and like it - FreshBooks is very easy to be affiliated with while QuickBooks is notoriously difficult. So, truly look over all your options and figure out which one will work best for YOU.
Are there other options?
Yes! Tons! FreshBooks and QuickBooks are just two with a big online presence and have most of the annoying kinks worked out of their system. They also have the easiest-to-use features.
If you are on a strict budget (first I am proud that you have a budget! Great job!) and want something more than spreadsheets but are not ready to commit to a monthly fee, use Wave. The only thing they charge for is running payroll or process payments. It is not super user-friendly, but it will definitely get the job done. If you are not used to the usual accounting software, you might not even notice a difference at all.
But, there are a slew of other accounting software systems out there. Both online and for your desktop. The top being Sage, Xero and GoDaddy but the list is seemingly endless.
That's cool and all, but I don't even know what I need in order to pick a software.
Fairsies! What I recommend is outlining the following and then seeing which software works best within these parameters. Don't forget to add any other essentials that may not be on this list because this is just a universal base layer list:
How many users do you expect to need access to your books?
What sort of accessibility do you want/need; online or desktop?
How much invoicing will you be doing and what capabilities will make this easiest?
Do you want/need automation features like connecting your bank accounts and receipt management?
Do you want/need to run payroll and what does that look like?
Do you want/need additional features like mileage or employee tracking?
Do you want/need 1099 tracking and reporting?
What is your cost limit?
Basically, look at the administrative functionality that you know you need and then see what flashy thing they are offering to incentivize you. The flashy, I've learned through my many adventures of software and entrepreneurship, is surface level and rarely a thing that is genuinely valued within my business but it can sway my position when my basics are covered.
Always know your basics, your foundation. If you don't know what that is, ask someone you trust to guide you through figuring it out because otherwise, your path will be much more difficult. And business is difficult enough, right?! Be as kind to yourself as possible.
I picked my software, now how do I start my books off right?
Next, you need to set up your Chart of Accounts. This is the foundation your entire books are created on. If you are unfamiliar with accounting, I HIGHLY recommend paying someone to set up your software and explain how everything works.
I understand that when you start off, you are probably not in a place to pay a bookkeeper full or even part-time and that is okay. Truly, I get it! However, that means this is another vital hat for you to wear and it is important that you have the tools at hand to succeed. This means education!
Something I would like to point out, though –
If you are trying to set it up by yourself to save money but you do not have the background or knowledge in accounting, it will cost you way more if someone has to go in and fix things than it would have been to set it up properly, to begin with.
Genuinely, I do not want to dissuade you if you are feeling confident in handling it!! If you are confident then I believe in you! But if you are on the fence, please seek help as it will save you so much in the end; time, sanity and money.
Setting up is the hard part, maintenance is always easier because you already did all the initial work. But now that you have your software of choice and your Chart of Accounts, you are ready to hit the ground running!!
Check out Essential Bookkeeping Terms to help you on your bookkeeping journey.