Selecting a Starter Bookkeeping System That is Right for You
So now that 2022 is over, it's time to wrap the year up financially.
What was your revenue? What were your expenses? And your profit?
Or is your bookkeeping system a shoebox? Or a system you don't understand?
Maybe you are even waiting for your tax guy to tell you how you did.
I've found this is so common with small business owners that are also struggling with money anxiety and trying to build a business that supports them and their life.
Maybe these reasons resonate with you:
They are confused by the accounting lingo.
They are afraid to see how much money they are actually spending (often more than they are making).
They think bookkeeping will take too long (done right, for the typical service business it's 1-3 hours a month and it will save you tens of hours at tax time).
They think they don't have the knowledge (also not true - it does not have to be complicated or require a lot accounting knowledge).
They think of their business finances as a necessary evil (when the truth is that knowing their numbers is a key to building a thriving business).
So if you are ready to treat your business like a business in 2023 and not a hobby, start here: pick a bookkeeping system.
The key: picking one that works for you and your business. This means one that isn't too complicated for your needs and knowledge and not too much for your pocketbook.
The main goal for a bookkeeping system for coaches, consultants and other service business owners: to track revenue and expenses so you know where you are at and can use this data to make decisions. It doesn't need to be complicated and I advise business owners to avoid doing more than they really need:
Here are your primary options:
Quickbooks Online
Cloud based software that is the most popular system for small business in the US.
It starts at $30 a month for 1 user. They do run discounts for 50% for 3 months or free 30 days.
I generally don't recommend this to service business owners in the early stages. It has a learning curve and without some type of accounting knowledge, can be overwhelming. It's generally overkill UNLESS you have product inventory or need to track accounts receivable or have W-2 employees.
Often when companies use QBO, they have an accounting firm or knowledgeable bookkeeper behind the scenes doing the daily tasks (for which you'll pay for additional users as well as incur the cost of those experts).
Wave/Freshbooks
These are accounting packages that are targeted at business owners without any accounting knowledge. Less complicated to learn than QBO, but offers many features of a traditional bookkeeping system. Cloud-based like QBO.
Wave has a free option, but you pay for certain features. Freshbooks runs from $15-$55 a month. These have more limited functionality than QBO, but better reporting than a typical spreadsheet or YNAB.
These can be a good compromise between a spreadsheet or YNAB and QBO. They are good if you want to generate traditional accounting statements (balance sheet, income statement, cash flow). However most entrepreneurs only care about an income statement (your revenue, expenses, and profit), so again, overkill for most service business owners.
YNAB
Cloud based budgeting app that is popular in the coaching and online business space. It's targeted to people who want to get personal finances in order, but can be used in the same way for business.
Cost is $99/year with 30 days free.
It's strength is that it allows you to focus on budgeting your money, which most accounting apps don't do.
You will get some basic reporting, but it doesn't produce a conventional accounting statement.
Spreadsheet
This will suffice for most solopreneurs. It's a really good solution if your income is inconsistent and you don't have a lot of transaction volume.
You want to track revenue and expenses by type. You'll want to create some basic analysis that allows you to see your revenue and expenses and profit (difference between the two). A spreadsheet that just lists transactions is better than a shoebox, but reporting is what turns that data into information.
You may eventually grow out of this, but it is a good and simple option in the early stages of your business. And a good spreadsheet system makes it easy to convert to a traditional bookkeeping system when the time comes.
I don't recommend this if you have W-2 employees, carry inventory, or need to track accounts receivable. Those needs typically are what move you to a traditional accounting package.
Want an easy solution for 2022?
Go check out Simple Financials Made Easy, my Google Sheets template for small business owners. It combines the ease of a spreadsheet with 8 custom prep-built, easy to understand reports.
You'll get everything you need to know each month where you stand. And it will make tax prep a breeze. It was designed specifically for coaches (but can be easily adapted for other service type businesses - just email and I'll help you do that).
You reports include:
Profit and loss detail and summary, for the full year and by month.
Cash flow report
Expense and revenue detail
For $79, you get instant download and 30 days of email support.
>>>> Click here to get Simple Financials Made Easy <<<<
What system are you going to use? What bookkeeping questions do you have? Email me at carla@carlamoats.com.