Apps and Tools to track your personal finance goals (business finances simplified)
When you're starting your own business, there's a lot to consider. One of the more complicated aspects is how to divide your finances between personal and business. The lines get even more blurry when you're a sole proprietor instead of having a separate EIN (tax ID) for your business. In this post, I'm going to guide you to set up your business finances as a sole proprietor (self-employed) small biz.
I want to start with a disclaimer - I am not a tax accountant, accountant or even trained in accounting. I am married to an accountant and I have been doing my business taxes for 6 years, though, so I do have a pretty good understanding of this thing. I also am a systems nerd, so I have developed a pretty good method to track my business budget, savings, checking, bookkeeping, and taxes. If you're not sure about any of this, I highly recommend meeting with a real-life accountant or someone like the amazing Melissa Whaley.
Bookkeeping
This term alone can be overwhelming, but really bookkeeping is just tracking your income and expenses and making sure everything balances out. The more you can automate this process, the easier your life will be in the long run.
The tool that I use for bookkeeping is Quickbooks Self Employed. There are plenty of free alternatives to QB if you're just starting out, Wave Accounting was my go-to for years. But - if you use turbo tax to file your taxes every year, the Quickbooks integration is the biggest time saver EVER (more on this later). You also get a free year of Quickbooks when you file your self-employed taxes through Turbo Tax or you can use this link and get 50% off your account.
Whatever you end up using, connect your bank accounts to your books and then all you have to do is categorize and split transactions as they come in. I update my books once per month, mostly because I don't have very many expenses or income streams to go through. It takes me about 15 minutes to categorize everything and then I have a really clear view of my net profit or loss.
If you don't have a business account that you're using yet, that leads us to the next piece...
Checking Accounts
No matter what your business structure is, you NEED a separate bank account from your personal funds, and 99% of the time, you need something more than a PayPal account. When I was starting out, I had a whole $3.00 in my account, so I needed something free and quick to set up. I ended up landing on a 360 account with Capital One and I have absolutely loved using them. You can sign up for a new account in minutes and get a debit card and everything set up online.
I wanted a bank that would connect to my bookkeeping accounts and be easy to manage online so I didn't have to go to a physical location. A lot of banks offer this now, but Capital One has a ton of features that I really love and I've used a lot in my business.
One of the best things has been being able to set up multiple savings accounts to manage my business sinking funds.
(BTW, If you have more than $3 to deposit into the account, at least $250 to be exact, you can get an extra $20 with this link: https://capital.one/2DkNiaQ - Yay for easy money. Also, I get $20 when you use that link too so yay for supporting small businesses.)
Savings Accounts
As my business grew, I was using more and more tools to help me run things, and those tools had both monthly and annual billing plans. As I grew, I wanted to sign up for the annual plans so I could save some money but I needed to put aside funds every month to make sure I was saving for those big bills. Capital One makes it super simple to set up a bunch of savings accounts and transfer money between all of them.
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I have a tax savings account, where I put 25% of all my income for tax time.
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I have a savings account for my Squarespace and domain expenses with Google.
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I have a savings account for my course and newsletter host, Podia.
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I have general savings where I keep 15% of my income.
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And lastly, I have income savings where I put 20% of my business income to pay myself out of every month. I don't pay myself a full 20% every month, I have a set amount, so this little reserve allows me to keep a stable income for myself to keep my personal finances on track.
The rest of my income sits in the checking account, gets tithed and goes toward things like SD cards, calendars, coffee with clients or other small expenses.
Budgeting
You might not think budgeting is necessary if you have a good bookkeeping and banking system set up - but I love me a good spreadsheet. My husband and I budget in our personal finances, so it only made sense to budget in my business as well. We have a google spreadsheet that we use to track every expense, sinking funds (savings accounts) and income stream.
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Taxes
I've been using Turbo Tax for my personal and business taxes since I started my first job at 15 years old. It's easy to use, inexpensive and gives us free access to Quickbooks when we file our self-employed taxes.
If you're having a pro help you, then you can give your accountant access to your Quickbooks account to make the whole thing super easy and streamlined. We also use Quickbooks for our personal expenses, so keeping track of our tax breaks and receipts is a breeze. Everything imports directly into Turbo Tax and you can also pay your quarterly taxes right in the dashboard so that you never miss a deadline or a tax write off.
If it's your first year doing taxes with your business, pay the extra to get a tax pro to double-check everything before you hit submit. They can even walk you through specific pieces so that you'll be more confident filing your own stuff the following year.
Taxes can be overwhelming and complicated, so don't be afraid to ask for help with them!
