3 Systems to Track your Money
Starting Jan 1 something in the air changes. There seems to be some unspoken panic that wafts through entrepreneurs as the realization that it’s “year-end”. For some, it’s no biggie; just another milestone in your business. For others, it’s the terrifying reminder that you haven’t done jack shit for the past year (gulp…or more).
So while I can’t rewind time, I can help you get this year started on the right foot. The best way to avoid the January-panic is to keep up with things throughout the year, and IMHO there are three things you can use to do this:
Spreadsheets
Free Software
Paid Software
SPREADSHEETS
Spreadsheets are the simplest, most basic system you can use to track your revenue & expenses. There’s google sheets, excel, and numbers – any of these programs will do the trick. And really you can make this as simple or advanced as you are comfortable with.
At minimum you want to track 6 things for each expense or sale:
Date
Description
In your own words, what the expense/income is
Category
These are standardized ones that you’ll use for tax reporting
Subtotal (before taxes)
Tax
Total
And honestly, if all you do is have a sheet that has a bunch of rows of these entries, this will make your tax prep super easy. You can get fancy with drop-down selections, summary tables, and such, but that’s not necessary. As long as you have this list; you’re GOLDEN!
Spreadsheets are simple, free (except for the cost of Excel or Numbers if you pay for these), and don’t require any advanced knowledge of how to use them. The downside to this system is that it is WHOLLY reliant on you doing it. Everything has to be manually entered, which also means there’s a lot of room for error or things you can miss. And if you save the file on your computer, you risk losing everything if it crashes (aka – don’t EVER just save your docs on your computer – make sure they’re saved to a cloud drive like iCloud, google drive, dropbox, etc).
This is a very low-tech solution and is perfect for when you’re starting out. It’s really just for sole props since it’s too convoluted to track bank & credit cards as well, but if this is you, spreadsheets might be your perfect solution.
FYI…One way several of our clients use the spreadsheet method WITHOUT having to do manual entries is to subscribe to one of our Tax Prep programs. With our receipt-capturing software – Dext – all you have to do is take pictures of your receipts, bills, and invoices, forward emails, or upload documents. Then you (or we) categorize everything and at the end of the year print out the spreadsheet for you! REACH OUT if you want to learn more. [link to contact form]
FREE ACCOUNTING SOFTWARE
If you’re wanting to take the next step in accounting systems, but aren’t interested in the price tag, free software might be the route for you. The only one I’ve used is called Wave Accounting and I thought it was great for a free service.
My favorite thing about Wave was that (besides being free), you can connect your business bank and credit card accounts. To me, this is the BEST reason to upgrade to accounting software (paid or free). By connecting your business accounts, you create a “real-time/live” feed to every dollar in and out. You can ensure you don’t miss any income or expenses that affect your business. This can eliminate the reliance on you to remember to enter each sale/expense in the spreadsheet. You can also use Wave to send invoices to clients and have a direct view of who has and hasn’t paid.
From what I can see (and remember), with a program like Wave, you can’t give others access to support your bookkeeping – unless you pay Wave advisors for this. The functionality is pretty basic so you won’t be doing anything special with Wave but you do need to understand the basics of accounting and their systems to use the system without totally messing things up.
Bottom line – if you’re strapped for cash and confident that you “get” how the software works, Wave is great. If you’re at all thinking that you’ll need help (or someone to do the books for you), you may want to jump in and go for door #3.
PAID ACCOUNTING SOFTWARE
QuickBooks Online and Xero are two of the most used paid accounting software’s out there for small businesses. Amongst a few others, these are subscription-based programs that are designed for both business owners and accountants to use.
There are more “robust” accounting programs that are more designed for accountants or large businesses – Quickbooks Desktop, Sage Accounting, Navision, and others, but unless you’ve got an accounting department, you don’t want to be using these.
My go-to software is QBO; it works with my brain and IMHO is totally user-friendly. I personally find systems like Xero and Freshbooks to be a little too difficult for my brain to navigate, but some absolutely swear by them, so to each, their own.
What I love about QBO (and systems like it) is that we get real-time bank feeds, robust categorization, integrations with tons of other software and systems (i.e. website, POS, receipt tracking, reporting), and great reporting and monitoring features.
Like the free software, you need to have an understanding of accounting and its systems in order to use it, but unlike the free stuff, it’s SUPER easy to invite anyone into your account to get help where, when, and how, you need it.
These cloud-based programs are all subscription-based; they’ll cost anywhere from $20-$100 a month, depending on the features you need and what deals you happen to snag. HINT: our accounting pros get discounts on subscriptions so if you want to NOT pay full price, reach out – I’m happy to hook you up with a discounted subscription, whether you need bookkeeping services or not!
That’s it! As you can probably tell, I’m a huge fan of QBO and unless you’re a small sole prop starting out, it will be what I always recommend.
If you’re that small sole prop, just wanting to make tax time less stressful, my go-to is the Dext Tax Prep Program – basically the high-tech spreadsheet system.
Whatever you choose, choose something. A drawer, box, or bucket where you stuff your receipts throughout the year is NOT a system…let’s get you adulting for real this year.