UPDATE!!!! Only three weeks later and I have an update to #3 below. I have tried Mint and have found it is not recommended for business accounting. It does not do invoices. I am so excited about starting up my Quickbooks app again and continuing our long relationship! Mint is made by Intuit, which is the company that also makes Quickbooks, Quicken and Turbotax. This is from the Mint help section:
Mint is a personal finance tool, we don’t (and likely won’t) offer this feature. You may want to check out Quickbooks products.
Last night I heard some enlightening words spoken by Ian Munc, CPA at the WIMP meetup on how to use technology to manage the money side of my business. This is NOT a recapitulation of what Ian said but what I heard. (Just so you know.)
#1 I’m ENTITLED TO AN EIN NUMBER FROM THE GOVERNMENT! WOOHOO!
I thought you had to be a LLC, B Company, S Corporation or Ltd or whatever to have an EIN. For you freelancers that don’t know, an EIN is an Employer’s Identification Number. This is a number that is used by business entities on their tax forms. Now that I am entitled to one, I can use it instead of spreading my SSN all over the place on those W-9s you fill out for Fiverr , Odesk, Paypal, Square, Thumbtack, etc., etc. Also when I have to issue 1099s to contractors I don’t have to compromise my security by passing out my SSN, I can use my EIN.
#2 I shouldn’t mingle business with pleasure. If you have a personal Paypal account, you need to make a separate business Paypal account. This makes downloading your Paypal transactions into your bookkeeping software easier.
#3 I have to break up with Quickbooks. I can’t even tell you how long we have been together. Before you were Quickbooks you were Quicken. Ian says I don’t need you any more. I’m simpler than you. A new application called Mint is free, on the cloud, does the posting for me, from my other online accounts, makes professional invoices and will do just fine for a sole proprietor freelancer.
#4 I no longer need a balance sheet. Not that I spent much time looking at my balance sheet. I was posting a lot of ins and outs into my capital account and that’s about it. I didn’t even realize our relationship was over as soon as it started. Ian says it is okay just to pay attention to your Income and Expense accounts.
#5 I immediately need some human lunch dates. As much as I love spending lunch over my computer or phone, dining with inanimate objects is not tax-deductible. There must be WIMPs or other humans I can talk business with. I will be shamelessly asking you our to lunch and asking for my own bill and last but not least, paying with my business card.
#6 I can buy $200,000 worth of equipment a year, if it is not more than my Income account, and deduct it completely and honestly from said income on my taxes without having to fill out those damn depreciation forms for a zillion years.
#7 My home office no longer has to be confined to the closet in the basement (the only place I could find that wasn’t being used for some other purpose in our house). I can do my work from the living room, the kitchen or even the pool and there is a simple multiplier — like for automobile expense — I can multiply times the square footage I deem my home office to be.
#8 I don’t have to hire a bookkeeper. Matter of fact, because the cloud has made bookkeeping passé, Ian doesn’t even offer it as a service. My bank statements, and my Paypal account can be all downloaded into my cloud bookkeeping app and I can upload my money to my creditors with the bill paying function.
#9 I need to break up with Eudora and Earthlink because Gmail Inbox is so sexy and knows you so well it categorizes your mail for you. Damn! Is there a way I can send my mail going back to 1999 to my new Gmail Inbox account?
#10 In the afternoon, when I’m needing a break it will be easy to read all my subscription emails because I can use the app Unroll to further organize my subscription emails.
#11 I’ve got a #11! If you happen to have a side business, like I do, perhaps in Holistic Healing, you can lump your income and expenses with your freelancing account. All your business income and expense gets summed up and put on the same line on your tax return so no need to tell the IRS which type of business did what. This was invaluable advice to me, because now I can deduct my flower essence bottles and I was glad Tina asked the question, because I didn’t want to ask my $700 an hour accountant that very same question! (There is a good reason for the name FREE-Lancing, unfortunately some of my clients think so too.)
I want to repeat the warning I stated in the beginning. In no way is this Ian Munc’s advice or my advice for running your business. Especially since I have linked this post to the IRS! Remember to pay your taxes every time and on time!