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The one part of business that intimidates me the most is the finances. I am not math oriented and therefore am totally intimidated by this aspect of my business. As of the moment I still don't have a separate business account (checking) however I use my Paypal exclusively for business expenses and withdraw my "salary" from there each month.

 

I have always wanted to get to a point where I could have a "set salary" and have set money for expenses as well as set money to set aside for "investing" into my business.

 

How do you ladies do this?

 

Also, I use Freshbooks for invoicing and Outright works with Freshbooks to pull in my Paypal. This is my total bookkeeping system right now. Is this enough? Will I be in hot water come tax time. Every year thus for (this is year #3 in business for me) I have had no trouble but my expenses were high obviously so not much profit was made.

 

I'd love any advice you can give. Thanks,

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Guest aplusadmin

HI Alyssa,

 

I'm not familiar with either software. I use Quicken and have used it since 2004 and love it!

 

If you are not sure about your taxes being right etc. Maybe look in your area for an accountant that specializes in working with small businesses. Contact that company/person and see if they have an hour to sit down and talk to you. I used an accountant until 2007...I now use Turbo Tax and LOVE it!

 

Leona

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HI Alyssa,

 

I'm not familiar with either software. I use Quicken and have used it since 2004 and love it!

 

If you are not sure about your taxes being right etc. Maybe look in your area for an accountant that specializes in working with small businesses. Contact that company/person and see if they have an hour to sit down and talk to you. I used an accountant until 2007...I now use Turbo Tax and LOVE it!

 

Leona

 

 

Thanks Leona I actually use TurboTax myself have for YEARS even before starting my own business. THe business version really walks you step by step so I think I'm safe. What do you think?

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The one part of business that intimidates me the most is the finances. I am not math oriented and therefore am totally intimidated by this aspect of my business. As of the moment I still don't have a separate business account (checking) however I use my Paypal exclusively for business expenses and withdraw my "salary" from there each month.

 

I have always wanted to get to a point where I could have a "set salary" and have set money for expenses as well as set money to set aside for "investing" into my business.

 

How do you ladies do this?

 

Also, I use Freshbooks for invoicing and Outright works with Freshbooks to pull in my Paypal. This is my total bookkeeping system right now. Is this enough? Will I be in hot water come tax time. Every year thus for (this is year #3 in business for me) I have had no trouble but my expenses were high obviously so not much profit was made.

 

I'd love any advice you can give. Thanks,

 

Hi, Alyssa! You've asked a lot of questions!!

 

First of all, you should have no trouble at tax time. You need to be able to figure out and document each of the numbers on your tax return. By printing off a year-end summary from FreshBooks, you should be able to document your income. By printing off a year-end summary from PayPal, you should be able to pull together the totals for your expenses. The first thing I tell any new entrepreneur is to march off and get themselves a business checking account so they can keep their "business funds" separate from their "personal funds," which is super important for many reasons that I won't go into right now. But it sounds like you're using PayPal almost like your business checking account. If that's the case you should be fine.

 

One more comment about taxes: I mentioned that you should be fine for pulling your numbers together at year-end. You should also be aware that you should be able to document each one of those expenses with a receipt or vendor statement in the event of an audit. The approach the IRS would take would be to say, "Prove how you got that total for Office Expenses." You would then need to produce a receipt for each expense, showing date purchased, amount of the purchase and what it bought. A credit card statement or PayPal statement is not adequate because it shows the date and amount, but not necessarily the item/service that was purchased (book of stamps, ream of paper, whatever). Digital receipts are fine, btw. Just make sure you have all those receipts!

 

Lastly, you asked about budgeting (whether you realize it or not!). This is a core component of any business plan and I would encourage you to put one together. There's a handy-dandy spreadsheet for determining your rate that's available on this board. It would also help you figure out where to start with your budget. Start with your existing month-to-month expenses that are the same every month. These are your fixed expenses. Then add in your estimate for your monthly income, based upon the last six months. Lastly add in any variable expenses ... those that go up when you have a lot of work and go down when you only have a little work, like maybe postage or long-distance charges. Subtract the fixed expenses and variable expenses from your income and you have your profit or loss. Then work hard at seeing how you can whittle down those expenses, increase your revenues or both. To be honest, in the business we're in, you shouldn't have a lot in the way of expenses... maybe that's a topic for another post!

 

Sorry for the super long post!

 

Deb (the numbercrunching geek who is WAY too interested in topics like this!)

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The one part of business that intimidates me the most is the finances. I am not math oriented and therefore am totally intimidated by this aspect of my business. As of the moment I still don't have a separate business account (checking) however I use my Paypal exclusively for business expenses and withdraw my "salary" from there each month.

 

I have always wanted to get to a point where I could have a "set salary" and have set money for expenses as well as set money to set aside for "investing" into my business.

 

How do you ladies do this?

 

Also, I use Freshbooks for invoicing and Outright works with Freshbooks to pull in my Paypal. This is my total bookkeeping system right now. Is this enough? Will I be in hot water come tax time. Every year thus for (this is year #3 in business for me) I have had no trouble but my expenses were high obviously so not much profit was made.

 

I'd love any advice you can give. Thanks,

 

Hi, Alyssa! You've asked a lot of questions!!

 

First of all, you should have no trouble at tax time. You need to be able to figure out and document each of the numbers on your tax return. By printing off a year-end summary from FreshBooks, you should be able to document your income. By printing off a year-end summary from PayPal, you should be able to pull together the totals for your expenses. The first thing I tell any new entrepreneur is to march off and get themselves a business checking account so they can keep their "business funds" separate from their "personal funds," which is super important for many reasons that I won't go into right now. But it sounds like you're using PayPal almost like your business checking account. If that's the case you should be fine.

 

One more comment about taxes: I mentioned that you should be fine for pulling your numbers together at year-end. You should also be aware that you should be able to document each one of those expenses with a receipt or vendor statement in the event of an audit. The approach the IRS would take would be to say, "Prove how you got that total for Office Expenses." You would then need to produce a receipt for each expense, showing date purchased, amount of the purchase and what it bought. A credit card statement or PayPal statement is not adequate because it shows the date and amount, but not necessarily the item/service that was purchased (book of stamps, ream of paper, whatever). Digital receipts are fine, btw. Just make sure you have all those receipts!

 

Lastly, you asked about budgeting (whether you realize it or not!). This is a core component of any business plan and I would encourage you to put one together. There's a handy-dandy spreadsheet for determining your rate that's available on this board. It would also help you figure out where to start with your budget. Start with your existing month-to-month expenses that are the same every month. These are your fixed expenses. Then add in your estimate for your monthly income, based upon the last six months. Lastly add in any variable expenses ... those that go up when you have a lot of work and go down when you only have a little work, like maybe postage or long-distance charges. Subtract the fixed expenses and variable expenses from your income and you have your profit or loss. Then work hard at seeing how you can whittle down those expenses, increase your revenues or both. To be honest, in the business we're in, you shouldn't have a lot in the way of expenses... maybe that's a topic for another post!

 

Sorry for the super long post!

 

Deb (the numbercrunching geek who is WAY too interested in topics like this!)

 

Deb,

 

I obviously need to just give you a call because I have SOOO Many questions. Do I count my salary as an "expense". How do I go back and get all my "online receipts" from this past year. You're right my expenses are low, hosting for my website, a little training, my Freshbooks account and my shopping cart are about it.

 

Could we set up a time to talk?

 

Thanks,

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I obviously need to just give you a call because I have SOOO Many questions. Do I count my salary as an "expense". How do I go back and get all my "online receipts" from this past year. You're right my expenses are low, hosting for my website, a little training, my Freshbooks account and my shopping cart are about it.

Alyssa:

 

If you are running your business as a sole proprietorship, then your owner's draws are not an expense. The only time that your pay is a business expense is if you operate your business as a corporation ("s" or "C") and pay yourself through payroll, including employee withholdings and employer taxes. If you're just taking owner's draws from your sole proprietorship, then it is not technically "salary" and it is not a business expense.

 

To go back and reconstruct receipts for your business expenses, the simplest way is to go back to the vendors. You should be able to print off an account statement for your Web hosting expenses and other expenses from your recurring, monthly expenses like your FreshBooks account. For training, go back to the training provider and ask for a receipt. Don't be shy! They took your money and should be able to provide some kind of payment receipt in return!

 

Deb

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I obviously need to just give you a call because I have SOOO Many questions. Do I count my salary as an "expense". How do I go back and get all my "online receipts" from this past year. You're right my expenses are low, hosting for my website, a little training, my Freshbooks account and my shopping cart are about it.

Alyssa:

 

If you are running your business as a sole proprietorship, then your owner's draws are not an expense. The only time that your pay is a business expense is if you operate your business as a corporation ("s" or "C") and pay yourself through payroll, including employee withholdings and employer taxes. If you're just taking owner's draws from your sole proprietorship, then it is not technically "salary" and it is not a business expense.

 

To go back and reconstruct receipts for your business expenses, the simplest way is to go back to the vendors. You should be able to print off an account statement for your Web hosting expenses and other expenses from your recurring, monthly expenses like your FreshBooks account. For training, go back to the training provider and ask for a receipt. Don't be shy! They took your money and should be able to provide some kind of payment receipt in return!

 

Deb

 

I actually operate as an LLC. I am now worried that I am doing this ALL wrong. Maybe I should dissolve the LLC. I really don't understand it all.

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I actually operate as an LLC. I am now worried that I am doing this ALL wrong. Maybe I should dissolve the LLC. I really don't understand it all.

 

An LLC is a state-recognized entity that gives you legal protection, but it is actually ignored by the IRS for Federal tax purposes. By default, if one person sets up an LLC, it will be taxed as a sole proprietorship. If two or more people set up an LLC, it will be taxed as a partnership. Any LLC (single-member or multi-member) can file a form with the IRS to elect to be taxed as an S-Corporation or C-Corporation instead. If you didn't file this form, then you can assume that the LLC is being as the default entity.

 

The simple thing to remember is that an LLC is like a chameleon ... it is always "taxed as" something else.

 

Hope that helps!

Deb

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I actually operate as an LLC. I am now worried that I am doing this ALL wrong. Maybe I should dissolve the LLC. I really don't understand it all.

 

An LLC is a state-recognized entity that gives you legal protection, but it is actually ignored by the IRS for Federal tax purposes. By default, if one person sets up an LLC, it will be taxed as a sole proprietorship. If two or more people set up an LLC, it will be taxed as a partnership. Any LLC (single-member or multi-member) can file a form with the IRS to elect to be taxed as an S-Corporation or C-Corporation instead. If you didn't file this form, then you can assume that the LLC is being as the default entity.

 

The simple thing to remember is that an LLC is like a chameleon ... it is always "taxed as" something else.

 

Hope that helps!

Deb

 

Mine is a single member, Me, so I'm assuming I just act like a sole-proprietor huH?

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Lastly, you asked about budgeting (whether you realize it or not!). This is a core component of any business plan and I would encourage you to put one together. There's a handy-dandy spreadsheet for determining your rate that's available on this board. It would also help you figure out where to start with your budget. Start with your existing month-to-month expenses that are the same every month. These are your fixed expenses. Then add in your estimate for your monthly income, based upon the last six months. Lastly add in any variable expenses ... those that go up when you have a lot of work and go down when you only have a little work, like maybe postage or long-distance charges. Subtract the fixed expenses and variable expenses from your income and you have your profit or loss. Then work hard at seeing how you can whittle down those expenses, increase your revenues or both. To be honest, in the business we're in, you shouldn't have a lot in the way of expenses... maybe that's a topic for another pos

 

Ok meant to ask about this....where is that Handy DANDY spreadsheet?

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