I have been working for myself since 2005. Of all the roles I have to perform as a small business owner and freelancer, the role of an accountant is the most challenging of them all.
Here are 5 tips that I’ve learned along the way.
1. If you are not an accountant, get an accountant.
I am a creative business person. I thrive in a world where I get to create new ideas. Accounting is a black and white world I that makes me feel claustrophobic. Each time I know I have to dive in a categorize my expenses or figure out cashflow or even invoice clients I feel drained. I spend more time and energy motivating myself to just get started than it takes to accomplish the task at hand. I have found paying someone who thrives in the world of accounting saves me time and energy to focus on what I do best and thus becomes a great return on investment.
2. Your expenses are a story that will pay off.
When anyone recommends that I use an app to track my expenses or document all my receipts and limit all my business expenses to one account in my mind I become the two-year-old who is told that I have to eat all my broccoli before getting up from the table. I don’t want to eat the broccoli – I want to play!
In reality, I am a tax-paying adult. Upon seeing how much I will owe in taxes because I didn’t claim all my expenses my mind turns into the teenager whose entire world is going to end and I will be homeless because I did not turn in my homework on time. This is when I learned that my expenses are part of my story. I don’t track my expenses, I keep a diary of the story of my business. For example, today I drove 23 miles to have a lovely lunch with a client. We both enjoyed the stuffed mushrooms as an appetizer, he had a sandwich and I had a salad. I was hoping he would offer to pay the bill since he has a nice expense account, but he didn’t so I picked up the tab which was $42.56 plus an $8 tip.
3. Automate what you can.
I have a handful of clients that are on retainer. Each month they pay the same monthly fee for services and support. Each month my software sends them the invoice and if they do not pay within the agreed-upon time my software will send them reminders. Instead of paying multiple bills for licensing fees, association fees, and more, have one credit card that is dedicated to these expenses and pay that one bill each month. If you have a team of people you pay the same amount to each month, set up your bank to automatically send them a check each month.
4. Be prepared to pay your taxes.
Seriously, the end of the year doesn’t sneak up on you. You know it is coming and you will have to pay unless you have been paying throughout the year.
I am telling you from personal experience, don’t delay. Pay your taxes. The fines you will be charged are not worth it.
5. Have a great accountant.
It is difficult to find a good accountant and almost impossible to find a great one. I have had accountants tell me information that was completely and verifiably false. I have had an accountant get annoyed when I ask questions about why they handled certain records the way they did. I have had an accountant try to make me feel like a terrible person because his team misplaced my information.
A great accountant will be consultative and explain the ins and outs of how and why they are filing your taxes the way they are. They provide the pros and cons of business decisions you need to make such as should you be a Sole Proprietor, LLC, or S-Corp. They will be your partner in business.
I am actually pretty good with numbers. In college, I got great grades in my accounting classes. I skipped every class and just came in for the tests, but I did understand the material. I just didn’t want to spend time in the class. Not much has changed. Just because I can do my own accounting doesn’t mean I want to, but if I am going to be in business, the accounting has to be done and this is how I have figured out how to make sure it gets done. If you hate accounting too, I hope these tips will help you.