Accounting done right is critical to the success of any business, whether you’re an online seller on Etsy, a freelancer who provides a service like graphic design, or an eBay seller operating out of your garage. Unfortunately, accounting software can be tedious, time-consuming and often confusing. However, not keeping your books organized can create serious trouble.
If you think the headache that comes with accounting is bad, consider the fallout of not keeping good records.
End-of-year taxes are harder. A disorganized heap of receipts when tax time rolls around will cost you endless frustration and countless hours.
An IRS audit is more likely. An audit is when your business is investigated by the Federal government and can be triggered by bad bookkeeping. If you can’t provide accurate records during an audit (even if you’ve done nothing wrong) you could face hefty fines and even lose your business.
Business can suffer. Accounting reveals how your business is doing and gives you information to make smart decisions. Without a picture of where you stand, keeping your business profitable and on track becomes a guessing game.
Loans require good records. If you apply for a loan, banks will review your accounting records when making decisions.
It’s time to get organized. Stuffing receipts in a box or folder and then forgetting about it is not accounting. Instead decide on an accounting method that works and follow basic bookkeeping tips.
Pencil, paper and spreadsheets are the most time consuming and don’t offer any significant advantage. Hiring an accountant, bookkeeper or other tax professional to do everything is ideal but usually too expensive for most self-employed people or small businesses. (However, it is smart to have a tax pro review your books every quarter.) The best option for most is an accounting software solution.
Powerful desktop accounting software like Intuit’s Quicken or QuickBooks does everything and more. Be prepared though—the learning curve is steep, and the majority of self-employed people don’t need half the features these programs offer. This option is a good choice for businesses with complex accounting needs or for those who don’t mind taking the time to learn full-featured software.
The easiest solution for small businesses and self-employed people like freelancers and online sellers are online accounting products. These are web-based applications that offer a simplified set of features commonly used by small businesses.