We all know that accounting is necessary for taxes, but most of us hate doing bookwork or simply don’t have the time. As a budding entrepreneur, the last thing you need to be stressed about is your business books. The side hustle accounting tips in this article will help simplify your bookkeeping so you can spend more time pushing your side business towards full-time success.
- Keep business and personal finances separate
- Save your receipts (be sure to notate food/entertainment receipts)
- Use accounting software like QuickBooks to track expenses, send invoices, take payments, and run basic reports
- Use a mileage tracking app like MileIQ
- Hire a CPA (they can save you lots of money)
Keep business and personal finances separate
The first thing you need to do if you haven’t already is to open a separate checking account for your business. Many side hustlers neglect to do this early on but if you want your business to grow – you must treat it like a real business instead of a hobby.
Many banks charge fees for small business checking accounts. However, some have fewer fees than others so be sure to check around before locking in. The other option is to open a separate personal account. The most important key is keeping your personal and business funds separate. Having said that, if you plan on accepting checks in your business name then you need to go ahead and set up a full business checking account.
It is important to run ALL of your business income through your business checking account. Even if you take cash from clients, you must first deposit it into the business account. Then you can write yourself a check to deposit into your personal account. This step alone will greatly simplify your side hustle accounting.
Save your receipts
It can be tempting to throw that paper receipt away. However, it is important to keep a record of what was spent. For example, if you make a purchase from Office Depot on your business debit card, your bank statement will show the total charge from the retailer. This is generally fine for keeping a basic record of your expenses but if you are audited you need to be able to specify what exactly was bought and prove that it was for business purposes.
Some ways to simplify this is to take a picture of the receipt and upload to your accounting software (many allow this) or to a special app like DropBox or one of the many other options available. If you want to keep the physical paper copy, you can put them in a bank bag or clear zippable bag.
Pro Tip: if you have a food/entertainment receipt write who you were with and what you were doing or what you discussed. These kinds of expenses and milage reports are some of the biggest targets for audits.
Use accounting software
This is the best way to simplify your side hustle accounting (and taxes). If you are doing more than a couple of transactions per month (transactions include, invoices, taking payments, tracking expenses, etc.) it is much simpler to use accounting software to keep up with everything. It is much easier to get into a bookkeeping rhythm when you only have a few transactions rather than waiting until you are overwhelmed with business to start tackling your accounting.
As you grow, you can use most accounting software to also track 1099’s for contractors, set up automated invoicing and recurring payments, as well as run reports that are important for financial metrics (used for many business and personal loans or even if you want to sell your business). Many accounting programs have tiered plans that start out with the basics and let you upgrade for more features later as you need them.
Best side hustle accounting software?
There are many options out there and you will have to do some research to discover which one is best for you. However, most entrepreneurs, freelancers, or other small business owners find that either QuickBooks or Freshbooks offer the services they need at a reasonable price. Both of these services have tiered plans that allow you to add features once you need it.
We have partnered with QuickBooks to offer you 50% off of your first 6 months. They have plans starting as low as $5 a month! To sign up or learn more about QuickBooks click here.
Use a mileage tracking app
You may think that this doesn’t apply to you if you work from home. The truth is that even a home-based business often has business milage that can be tracked to save money on your taxes. For example, if you go to the bank to drop off deposits, stop by the Office Depot for supplies, and go through the drop off at the post office, those miles are tax dollars you could be saving (it changes yearly but it is usually over $0.50 a mile).
We have partnered with MileIQ (a personal favorite) and QuickBooks (who offers it as part of their service) to give you either 20% off of an annual MileIQ subscription or 50% 0ff the first 6 months of QuickBooks online. To sign up or learn more about QuickBooks click here. If you want to check out MileIQ click here.
Hire a CPA
As an employee, doing your own taxes are fairly straight forward. As a business owner, it can be a bit more complicated. You are responsible for self-employment taxes, quarterly estimates, and even keeping track of sales tax (depending on the business). Hiring a good CPA can save you far more than they cost by helping you maximize your deductions and avoiding IRS penalties.
Don’t let your side hustle accounting stress you out! Focus on keeping things simple and follow a process that keeps everything organized. If you do, you will find that you spend less time on bookwork and more time on work that makes you money!
Thank you for investing your time to read this article! If you would like to explore more content like this check out our podcast and our other blog posts. For book recommendations and other entrepreneurial resources check out our business resources page here. Looking to make more money at your side hustle? Check out our post: 6 Steps To Making 6 Figures.
Disclosure: This post contains affiliate links, meaning, at no additional cost to you, if you click through an affiliate link and make a purchase, we may make a commission. Some of our affiliate links include discounts or special perks. If you have any questions feel free to contact us.