5 Things your Bookkeeper Wants You to Know

As a bookkeeper and CFO, I'm here to support you and my clients in any way I can. I recently talked about it on the HELLO CEO podcast with Alora Rachelle. She asked some great questions that you may also be wondering, and then at the end I give 5 tips for creatives concerning money. Let's dive in! 

Why do you need a bookkeeper?

Accounting software like Quickbooks or Xero are set up for general businesses. With bookkeeping, I'll have people send me their Quickbooks login and they think they've got everything in there right... but it's not. What happens then is your tax preparer has a bunch of clean-up to do, and you'll be charged a bunch of money. So just because you're doing your own books (which is amazing, by the way. If you're doing your own books - keep it up!) doesn't mean it's all in the software correctly for you to send to your CPA.

The other thing your bookkeeper does (at least I do, each bookkeeper is different) is send you monthly reports to give you peace around your finances. You KNOW your finances are being managed properly so the IRS doesn't come knocking at your door, and you won't miss out on any deductions or things you could be missing if you're doing it yourself. Working with a professional bookkeeper gives you extra insight and knowledge that you wouldn't have without one.

If you're doing bookkeeping on your own and you use QuickBooks or Xero, I do offer bookkeeping intensives where I can go through it with you and make sure you have everything set up the way you need it! Reach out for more info. 

What kind of business set-up should you have?

The way you set up your business really depends on each individual situation. Some business might be best fit for an LLC, C-corp or S-corp. I definitely recommend at least starting with an LLC to separate business and personal (and protects your personal assets). Another thing to note is that LLCs and sole-proprietorships are actually taxed the same (a schedule C on your personal tax return). As an LLC, you can apply for S Corp election if it's a good fit for your business.

I go a bit more into detail on S Corps vs LLCs in this blog post and talk about how to pay yourself depending on your tax structure in this post. 

What to do next once you start your business?

Number one thing, whether you have an LLC or not, is to KEEP TRACK of your income and expenses. When you're just starting out, use a simple spreadsheet. You can make your own, Google search one, or I also have a spreadsheet you can purchase (complete with visual reporting, self-calculated P&L, and a goal/tax savings tracker).

Once you're an LLC (and honestly even before...) you'll want to get your EIN and a separate business bank account. Then you can use your spreadsheet or accounting software to keep up with your bookkeeping (especially during your busy season). 

What do bookkeepers do?

My goal as a bookkeeper is to make sure my clients have PEACE and a good understanding around their finances. I like to keep things simple so it's easy to understand and digest your financial info. Bookkeepers categorize transactions, separate out income streams (different packages, courses, passive income, etc), separate out expenses, all while I'm keeping the tax side of things in mind. I'm watching for double charges, subscription overcharges, and things like that that can hurt your finances.

Then we pull your Profit & Loss and Balance Sheet for the month (don't know what those are? I always explain them to my new clients so you're clear on what they mean. I also have a post about it here). I also send my clients an email with a simple breakdown of all your numbers - sales, highest income category, expenses, profit, etc. I also do a YTD breakdown and help you calculate tax savings. My clients also get Voxer support, which is amazing because any time they have a bookkeeping, tax, or accounting question, they can send it over to me and I can respond quickly and not leave them hanging. 

What are Tax Deductions?

According to the IRS, tax deductions are basically anything that helps you create profit in your business. Tax deductions lower the amount of money you pay to the IRS. I have a FREE guide to Business Deductions, and of course work with your bookkeeper and/or CPA to rule out any questions you have. Clothing deductions can be tricky, if it doesn't have a work logo it's not deductible. But let's say you're a photographer and you have a client closet or props for photoshoots. Those usually are deductible, so again just check in with your CPA. 

BONUS: 5 Tips for Creatives Concerning Money

First things first, Keep a separate business bank account (you've heard me say it before and I'll say it again). Second, pay quarterly taxes and don't fall behind on them. I have a blog post about estimated taxes here. You don't want to miss and end up with a huge lump sum of taxes you have to pay at the end of the year. Third, have some type of system to keep up with your bookkeeping (or hire it out 😉) . Fourth, don't forget to keep an eye out for SALES TAX. There's tons of different rules depending on your state, your client's state, and your industry. A good resource here is Avalara. Fifth, get a tax preparer (they can help with questions about sales tax and filing your taxes at the end of the year). Bonus tip, have a business checking and a tax savings account (I also have a biz savings, more on that here).

 As I always say, money and finances doesn't have to be overwhelming. Don't let it stress you out too much. But if it does get to a point that it's unmanageable, know that there are people out there that can help support you and take away the stress of it. A lot of my creative clients actually end up looking forward to their reports coming in!