Finance Tracking

The time when you get your first clients is exciting. You’re full of vim and vigor… until the logistics of keeping track of everything sets in. That’s usually around the time when you need to send out bills, but there are a lot of reasons you need to keep your financial data detailed, accurate, and current.

You need to:

1. be profitable, aka: keep the business capitalized and growing, and pay yourself.
2. maintain cash flow through your accounts.
3. pay your bills.
4. avoid fees and service interruptions.
5. give clients timely, accurate invoices (as a courtesy and so you get paid.)
6. give the taxman his cut.
7. avoid the stress of uncertainty.

So let’s take a look at the data you should be recording.

First, there are expenses that you should distinguish both for tax purposes and to see where your money is going, such as:

1. hardware for your business
2. hardware for clients
3. software for your business
4. software for clients
5. insurance
6. office supplies
7. postage
8. advertising
9. equipment
10. bank fees
11. taxes
12. business licenses

With those purchases you should include some information, otherwise your accountant will have to pester you and you’ll need to sift through receipts. Include, as applicable:

1. a somewhat detailed description, but in layman’s terms
2. cost
3. whether tax was paid
4. date of purchase
5. vendor
6. means of payment
7. applicable install charge

Speaking of expenses, you should also make a table of all automatically recurring payments, which could include when something:

1. charges a credit card (and which card)
2. issues a check (and from which account)
3. pays a credit card
4. makes a transfer

In short, the timing and amount of any automatic movement of money should be recorded so you can verify the monthly transactions in your accounts.

Second, you should account for all payments received, noting:

1. deposit dates
2. date on the check
3. the client
4. the total
5. the client’s bill number
6. the check number
7. whether the payment was late
8. how much of the payment to you was tax

Third, keep track of your totals, namely:

1. general business expenses
2. gross/net income
3. gross/net income per client
4. gross/net expenses per client
5. any income beyond your usual subscription amount
6. everything that automatically bills to your credit card
7. inventory
8. mileage

Fourth, the obvious, keep track of what you do for clients. This of course includes the date and duration of your work, but also consider a detailed description for you and a shorter, layman’s description that will appear on the invoice.

Fifth, keep track of your taxes. Namely this means keeping track of:

1. If/how much sales tax you pay when you purchase items.
2. How much sales tax you need to charge clients on hardware and services.
3. How much of your profits you need to set aside to pay taxes like income tax, payroll taxes, etc.

Seriously: keep track of these numbers. You don’t want to be rummaging through receipts before tax deadlines and you don’t want to hear that you owe thousands because you didn’t make your tax estimates and didn’t save up for Uncle Sam.

So now that we talked about what you should be recording, we can talk about how and where.

You probably won’t find one app that keeps track of all this in a way that’s easy for you to enter and to view. You’ll probably end up with one app or service and one supplementary spreadsheet.

So I’ll come out and say it: I don’t like QuickBooks. I really don’t like QuickBooks. Do you want to know a secret? No one in the tech business likes QuickBooks. No one likes the company that owns it, Intuit, either. No one likes to use it. No one likes to upgrade it or reinstall it. Few people even use most of its features. So if you use it, good luck.

Thankfully today there are a lot of alternatives like Xero and FreshBooks, and it’s not hard to find comparisons of cloud, app, and desktop accounting software. And most companies are generous with demos. Since you don’t have an ancient company file that you need to keep in QuickBooks, the alternatives are worth exploring.

For my part, I made my own spreadsheets in Excel to keep track of my finances because:

1. I prefer to enter data in a spreadsheet rather than in proprietary forms.
2. I like generating custom charts and tables.
3. Excel data can be exported into custom Word templates.
4. I already have Excel, so it’s not an additional fee.
5. I can easily share it.

Three Final Tips:

Tip #1: Your averages and calculations are not a substitute for reviewing original bills.

Tip #2: Periodically review statements, accounts, bills, etc. and update your books.

Tip #3: If you can’t keep your books, get someone to do it for you. It costs a fortune for an account to sift through your disastrous bookkeeping and determine what’s going on.