Do you know where the money from your business is coming and going? Do you have a system for tracking your doula expenses and filing your receipts? Keeping accurate financial records is important because it helps you to see where you are today in your business and helps you create and move towards your future goals. Here are some ways to help you create a basic bookkeeping system for organizing your records and tracking your business finances:
Here are some ways to help you create a basic system for organizing your records and tracking your business finances:
- Open a separate checking account for your business. Start with the bank you use for your personal accounts, as a bank representative will encourage you to do all your banking with it and may offer you a better deal if you open your small business checking account there. Also check with banks and credit unions in your area and online for fee-free small business checking accounts to avoid unnecessary expenses. To open your account, you will need to have your DBA and your social security or EIN number. Ask for your bank's requirements to open a business account prior to heading to the bank.
- Deposit all money you earn in your business into your checking account and pay your business-related bills through that account. If your expenses exceed your income and you need to use personal funds to pay your business bills, track it as a loan to your business and make a plan to pay that loan back.
- Apply for a business credit card, or get a business debit card through your bank's checking account so you can make online purchases and keep them separate from personal purchases.
- As much as possible, keep your business purchases separate from your personal purchases. Doing this along with having a dedicated business checking account will help you prove to the IRS that you have a true business rather than a hobby.
- Maintain a file or create an envelope system for your business receipts. The File-It Calendar is a wonderful tool that is easy to use.
- Create an invoicing (when you create a bill to collect money) or sales receipt (when a client has already paid you) system to help track your income. Some business owners simply create a template in a Microsoft Word or Excel. Others use software or an online service. When you create an invoice or sales receipt, print a copy to keep in with your client's records. Depending on your income tracking system, you may want to print another copy and store all your sales for the year in a folder, binder or envelope.
- Set up a way to accept credit cards. PayPal (business account) and Square have online payment solutions as well as card readers.
How should you track your income and expenses for your doula business?
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I personally like Quickbooks because:
- You can easily create invoices and sales receipts
- You can input bills that need to be paid later, which can be handy for those who buy and sell products
- You can easily run sales tax reports
- Tracking expenses is a cinch, and they can be linked to your checking account, a cash account, and credit card very easily
- You can run financial reports very easily
- Reconciling accounts is an easy task, and if your bank and credit card company have online banking services, you can download transactions and reconcile your accounts quickly and efficiently.
- If you have an accountant, you can give a copy of your file to your accountant at tax time and it will be easy for him or her to do analyze and fix your books
The downside of Quickbooks is that there is a learning curve. It's not as simple as Quicken because the program is based on double-entry accounting. However, there are great tutorials, books and training classes you can take to learn Quickbooks, and once you get the hang of it, it's fairly easy. You will also need to upgrade to a newer version every few years because Intuit, the company that makes Quickbooks, closes off support for older versions after so many years. There are several editions for Quickbooks, so you should look at the different types to see which one would work best for you. If you prefer a subscription-based program, you may like Quickbooks Online, where you can choose from three subscription options.
Quicken Home and Business
Quicken Home and Business may work well for those who use their personal accounts to pay for business expenses or to track both personal and business finances in one program. I honestly don't have much experience with the Home and Business software, though I've used Quicken for my personal finances and know the data entry format is different from Quickbooks.
A third option is to track your birth business expenses using a spreadsheet program like Excel. This can be a great option for those who don't have many expenses and sales and want to keep their bookkeeping process simple. I'd suggest creating one workbook with 12 worksheets for each month of the year. An additional worksheet can be created to create a profit and loss statement, where you would use formulas to add up the totals for each month. If you're really spreadsheet savvy, you can set up formulas to copy information between worksheets too.
Online Accounting Programs
Similar to Quickbooks online, Freshbooks requires a paid subscription for their services. There is also a free online accounting program that is popular among small business owners called Wave. Wave will automatically download transactions from PayPal or your bank. You can create invoices, run reports, and even run payroll for your doula business using Wave when it grows enough for you to hire employees. The Wave website can also recommend a local accountant for you if you need some professional help at tax time.
Customer Management Systems
More birth pros are turning to customer management systems to help manage their client workflow, from the time potential clients make an inquiry for services until the end of their work together. Most of these systems include a bookkeeping function that helps with invoicing and expense tracking. The most popular one that people have heard of is 17Hats, but there is also Tave and newcomer Dubsado. Honeybook doesn't have its own bookkeeping element but integrates with Quickbooks Online. These are not specifically for birth professionals, but they are designed for service businesses and you can customize them for your own business. As far as doula-related CMS services go, you can look into eDoula.biz, YourDoulaBiz.com and Mobile Doula.
For any CMS, if you are looking for an integrated bookkeeping solution, carefully research each one to see which one meets your needs. Some systems are only limited to client invoicing and client-related expenses, so you may have to track other income and expenses separately from these services.
Pen and Paper
And of course, another option is to use good old paper and a pen to manually track your income and expenses. You could use a double-entry accounting ledger or a simple spiral notebook.
Professional Bookkeeping Help
Depending on the complexity of your practice, it's up to you whether you hire a bookkeeper or accountant to help you with your income taxes. Many solopreneurs may do just fine using TurboTax, while others have more complicated financial situations that may warrant professional help. You may want to consider consulting one as you start your business if you are changing your business model or adding a new service or product. If you decide to use Quickbooks, it might be a good idea to get some help from an accountant or a bookkeeper who can help you get your Chart of Accounts set up. Your Chart of Accounts is a listing of all your expenses, bank and credit accounts, and types of income. Someone trained in Quickbooks can help you to properly set up this list so you start off on the right foot. Otherwise, it can be a hassle to fix your file later.
Did you find the above tips helpful? Do you think a checklist and some space to add in notes would help you develop your own bookkeeping system? You can sign up below to receive a free handout - First Steps to Create Your Own Bookkeeping System. I hope you find it helpful!
Photo credit: Dave Dugdale via Flickr