Hobbies, start-ups, and technologies

Don’t Let the IRS Reclassify Your Business as a Hobby @ Entrepreneur: As a follow-up to my reader Q&A last week regarding the difference between a business and a hobby, here are some tips for keeping your business legit.

How to Turn Your Hobby Into a Business @ Bplans: More on this week’s theme: did you see this great resource from Bplans on turning your passion into business.

10 Mistakes That Start-Up Entrepreneurs Make @ Wall Street Journal: Launching a start-up can be tough, but if you learn to avoid beginner mistakes, you’re already on your way. “Make sure there’s enough margin in your pricing to enable you to bring in other people. Clients generally don’t mind outsourcing as long as they can still get face time with you, the skilled professional who’s managing the project.”

Five Technologies That Will Increase Your Cash Flow This Year @ Forbes: Cash is king. Keep it that way by using the latest tools and tech.

5 Year-End Tax Savers for Businesses @ Cisco & Co: As we’re coming up on the end of the year, consider how your invoicing and expenses could benefit (or hurt) your tax bill.

Saving time with simple bookkeeping systems

I was recently working with a client and we discovered that their bank had overpaid one of their vendors by over $500! That can be a lot of cash for a small business. It’s easy to think that something like this won’t happen, and if it does, it’ll be an easy fix. But what if that $500 becomes $5,000—or even $50,000? The obvious answer is to stay on top of your books and keep them clean, but for small business owners, this can be time consuming and distract from the big picture. The solution: set up a system.

Today I’d like to share with you one of my bookkeeping strategies, which can help you systematize what kind of bookkeeping tasks you should be doing, if any, at any point of your day/week/month/quarter. Properly implemented, this strategy will serve to minimize your overall time spent bookkeeping by only focusing on the tasks you need to do then-and-there. So let’s get started!

(As always, this strategy is meant as a guide and does not mean that everything listed will be applicable to your business. In fact, your business may have more “to-do’s” than are listed below. The basic guidelines below will, at the very least, help you get started.)

First, let’s break the types of tasks into four main categories: Daily, Weekly, Monthly, and Quarterly.

Daily:

  • Process and send any invoices to your clients/customers
  • Add any expenses you may have occurred (if you work with an online program such as QuickBooks Online, accept any new transactions in the banking register)
    • If any of your expenses are reimbursable, directly connected to a client, or part of your Cost of Goods Sold, make note of that here
  • Record any bills you may have received
  • Put your receipts from the day’s activities in one place
  • Record any checks you have written

In other words, if you did anything in your business that is connected to money (if you worked, sold something, or spent anything), note of it in your accounting system.

Weekly:

  • Confirm that all invoices that needed to be sent have been sent
  • Pay any bills that need to be paid
  • If you use an online accounting system, accept the transactions from your banking center. If you use an Excel or simple-style method to keep track of your bookkeeping, enter all of your expense transactions (any time you spent money)
  • Scan your expense transactions to make sure that everything has been coded/posted to the right expense account (and mark any transactions that you’re not sure what to code to as “Ask My Accountant”)
  • For any invoice that is past-due by 30 days, call and follow up with your client for payment

Personally, my daily and weekly tasks are pretty intertwined. The biggest thing to pay attention to is making sure you’re getting paid. As soon as you’re able to send an invoice – get it out. While we hope that our clients will be timely with their payments, it’s not always the case. The sooner we can get the invoice out, the sooner the client can be followed up with and your payment secured.

Monthly:

  • Wrap up any daily/weekly task that needs to be completed
  • Reconcile your bank and credit card(s)
  • Run and analyze your monthly reports:
    • Balance Sheet
    • Profit & Loss
  • Set aside money for taxes (as always, consult a tax professional)

Quarterly:

  • Wrap up any daily, weekly, and monthly tasks that haven’t been completed
  • Pay quarterly taxes (if applicable; again, consult a tax professional)
  • Review any outstanding invoices and make a decision as to whether those debts can be collected or not
    • Write off any invoices that you know can’t or won’t be paid (hopefully you’ll never be in this situation!)

Hopefully this little guide will help give you a starting place for what you can be doing at any given time for bookkeeping. Properly implemented, this kind of step-by-step approach will help you save time in the long run. To keep myself on task, I use a calendar to provide me with reminders and notes of what I need to be doing (i.e.: “Invoice clients X, Y, and Z, complete monthly reconciliation,” etc.), so that all I have to do is show up and get it done.

Have your own time-saving strategy to share or want help forming one for your business? Message me at sarah@sarahvanloon.com!

Reading habits, e-commerce empires, and incorporation

How to Find Time to Build Your Ecommerce Empire While Working a 9 to 5 @ Shopify: It’s tough working a “normal” 9-to-5 job and trying to run a business on the side. You’re what this author calls a “sidepreneuer,” and though the tension between day-job commitment and entrepreneurial passion project can be daunting, it’s not an impasse.

Getting a Grip on Estimated Quarterly Taxes @ Bench Blog: It can seem like a pain for small business owners to pay taxes four times a year, rather than one, but if you do it right, it’ll save you money in the long run (and make for fewer headaches, too).

This Postal Connections Franchisee Is Not Content to Just Mail It In @ Entrepreneur: “I love the freedom it gave me. I’m a born leader, and I like to make the decisions that matter. I like having control. With no office politics or useless corporate bureaucracy, things move very fast. There’s nothing stopping you from turning your dreams into realities. But it doesn’t come easy — you’re putting in tons of hours, but it’s all worth it.”

7 Actions to Take After Incorporating Your Business @ Entrepreneur: So you’ve officially incorporated your business, but what do you need to do next? Nellie Akalp, CEO of CorpNet, offers seven solid places for you to keep your momentum moving forward. “They’re simple steps and will keep your business legal and protected for years to come.”

How Changing Your Reading Habits Can Transform Your Health @ FastCompany: What are you going to spend 30 min on this weekend to make you a better boss, entrepreneur, and human being? “People who read find it easier to make decisions, plan, and prioritize, and this may be because they are more able to recognize that difficulty and setback are unavoidable aspects of human life.”

Spotlight: Reader Q & A

In a previous reader Q&A we’ve covered what to do to find your accountant for your SB and get yourself all set up. This time, we’re covering another Q&A from a slightly different angle.

Hi Sarah, I love your site! I’ve been running my business for a little while, but I guess I’ve been treating it more as a hobby than I have a real business. What do I need to do to transition from hobby to bona fide business?

– Reese

Great question, Reese! The simplest answer is to keep track of your income and your expenses, with as much detail as you can, but before we dig into that I want to go right to the source – the IRS.

Continue reading “Spotlight: Reader Q & A”

Startups, taxable free stuff, and quitting your small business

Ten Steps to Get Your Startup on Track @ Shopify: Great job getting your new online store up and running! Here are ten accounting tips for you to make sure you’re starting off on the right foot.

Taxable Complimentary Stuff @ TaxMama: Let’s say you got a whole bunch of free stuff from a client or contractor. Then at the end of the year, you get smacked with a $10,000 1099MISC. You can’t sell or use the free stuff you got, so do you still need to pay for it? TaxMama answers.

5 Reasons Why I Quit My Own Business to Work for Someone Else @ Entrepreneur: Just because you know you’re an entrepreneur doesn’t mean you’re obliged to grow your small business. Sometimes it makes sense—and will serve your small business better in the long run—if you play a bigger game.

9 Smart Habits of Highly Effective Networkers @ Inc: Networking is part of doing business, but networking events can sometimes feel awkward or purposeless. The key lies in knowing how to read the room—and being humble, authentic, and helpful. It helps to have some business cards, too.

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My favorite accounting sites for new small business owners

When I was first learning accounting and bookkeeping, I was hungry for anything break down the accounting process clearly and simply, without putting me to sleep. That’s a lot easier said than done.

I know I’m not the only small business owner who didn’t start out with a background in accounting, so today I’d like to share with you some of my favorite sites that will get you feeling like an accounting superstar in no time. If you’re an entrepreneur just starting out on your own, but want to understand some of the fundamentals yourself, read on.

Continue reading “My favorite accounting sites for new small business owners”

Small Business Owner

Reader Q&A: When should I get an accountant?

This week I’m featuring a reader’s questions about when to get an accountant, and what that process might look like.

Today’s question comes from a reader who runs their own virtual assistant company. They’ve recently started their business, and want to make sure they’re making all the right choices:

Hey Sarah,

Thanks for your help. As I mentioned, I’m just starting out and I think I’ll need an accountant but I’m not sure what they do/what they’ll help me with and why I should have one (I mean, I *know* I need one, but I’ve been filing my own taxes for years so I don’t see why I need to bring one in now), what those first steps for getting an accountant would be, and what the ongoing relationship would look like. I’m nervous about paying a lot of money for someone who won’t be able to do more than I’m already doing. Is it worth it?

 

Alright, let’s dig right in.

Continue reading “Reader Q&A: When should I get an accountant?”

Entrepreneurship, useful questions, and setting goals

A busy week on Twitter! Check out the links below for my weekly roundup.

How to Decide if Entrepreneurship is Right for You @ The Wall Street Journal: “Starting a business is a lot like becoming a parent. Not only do you have to prepare for your start-up emotionally and financially, but you have to be committed to its constant needs until it’s mature enough to hum along on its own.”

How to Ask Useful Questions @ Josh Kaufman: Sometimes you might think you’re asking a good question, but have you given enough context for a solid answer? Does your question respect the other’s time and experience? Has your question indirectly transferred responsibility away from you? Josh Kaufman lays out some solid tips for getting useful answers.

Forget Setting Goals. Focus on This Instead. @ Entrepreneur: Setting goals is smart, but it doesn’t have to be the only method you use for accomplishing what you want. As a small business owner, it’s important to understand the difference between goals and systems. As James Clear writes, “Goals are good for planning your progress and systems are good for actually making progress.”

How to Avoid Work: A 1949 Guide to Doing What You Love @ Brain Pickings: Even though it’s from 1949, this little pocketbook, How to Avoid Work, is chock full of practical wisdom for learning to do what you love. “Despite the occasional vintage self-helpism of the tone, the book is remarkable for many reasons — written at the dawn of the American corporate era and the golden age of the housewife, it not only encouraged people of all ages to pursue their passions over conventional, safe occupations, but it also spoke to both men and women with equal regard.”

Introducing QuickBooks Tutorials @ Quickbooks: Whether or not you’re new to QuickBooks, there’s always more to learn. And fortunately, QuickBooks has recently announced QuickBooks Tutorials! Great for small business owners looking to learn the ropes on their own (but of course, it’s always good to have a QuickBooks Certified ProAdvisor on your side, too).

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Getting the most out of your accounting program

Whether you’re a new or established small business, cash flow is always a concern. It’s important to keep in mind the big picture for your business as it grows, but depending on the size of your team, you need to spend some time in the weeds, too. Accounting is essential, but can be tedious, so how can you get the most out of your accounting program, and how can your accounting support your big picture?

Continue reading “Getting the most out of your accounting program”

Millionaires, leadership traits, and brain-expanding books

Here’s your weekly link roundup! This week, it’s all about becoming a millionaire, key leadership traits, and brain-expanding books.

How to Be a Millionaire @ Forbes: Investopedia weighs in at Forbes on what it takes to be a millionaire. Spoiler: it takes a lot of hard work, skill cultivation, and sometimes—but not always—a bit of luck.

4 Things Successful Entrepreneurs do before Breakfast @ Forbes: Neil Patel at Forbes discusses the four things successful entrepreneurs do before breakfast. But first things first: wake up early, and knock the difficult stuff out early.

5 Visionary CEOs and Their Key Traits That Every Leader Should Master @ Entrepreneur: Good advice from Chuck Cohn, CEO and founder of Varsity Tutors: “You may believe that the leaders you admire are smarter, luckier or more creative than you, but the traits that make them wildly successful can be honed over time.”

The Not-To-Do List: 9 Habits to Stop Now @ FourHourWorkWeek: Small business owners spend a lot of time checking things off the to-do list, but what about the NOT-to-do list? Tim Ferriss lists nine bad habits to cut out, like answering calls from unknown numbers, sending emails first thing in the morning or late at night, and most importantly, hoping that work will fill a void that other things should, like relationships and activities.

The Ten Most Important Books To Expand Your Brain @ Medium: Skip the author’s self-serving preamble at the beginning, scroll down to the actual list of business books for some healthful brain expansion. Especially Malcolm Gladwell’s “The Outliers.”