As i’ve said previously, the Google Apps suite is a tremendous toolkit for small business owners and freelance artists.
In this post I’d like to focus specifically on using Google Spreadsheets for bookkeeping.
*Disclaimer : This is how I choose to do my bookkeeping. This is not the only way, or the best way, simply the way I choose to do it. It’s worked well for me over the last 4-5 years.
I use 3 basic tables in my financial spreadsheet.
- Revenue (money in)
- Expenses (money out)
- Calculation (Income & Taxes)
As I mention in the video, you should categorize your expenses as you go. When I work with my accountant at the end of the year this helps speed the process, as deductions must be categorized in the final filing.
Here are the basic categories I use :
Contractors – Hiring other contractors for a project or service.
Software – Paying for the applications that help you run your business is an expense item
Services – All of those wonderful web based services that help us run our businesses like Dropbox, Google Apps and Wistia.
Equipment & Training – Camera gear, cintiq’s, books, workshops, computers, etc..
Office & Utilities – You can write off your workspace if you are paying for one. You can write off a home office as well (a portion of your rent or mortgage).
Travel – If you have to travel for your business, this can written off as well. Mileage can be written off, but make sure you know the updated rate from the IRS.
Again, this is how I’ve settled into doing this with my accountant. Talk to your accountant about categorized expenses.
Determining your Tax Rate
I use a 30% rate for my calculation sheet, but this is not an exact number.
In the United States we have a progressive tax rate system that is based on your final income (after expenses), your marital status, number of dependents and a host of other specific factors.
I use 30% in this video as an example, but depending on how much you earn this might be very different.
See this breakdown of US Tax rates from 2014 as a guide.
This is an example of bare bones bookkeeping. My time is split over many things during a year and tracking my finances can’t take too much of my time.
This has been an effective approach for me.
I do hire an accountant to perform the final file for the IRS, but giving her this data greatly speeds up the process.
The cost of an accountant is worth it. Last year I paid her $350 to do the final file and it was worth every penny.
I’ve been able to pay all my taxes without stressing about it, because I can always see in an instant how much should be set aside at any point in the quarter.
Let me know if you have any questions about this method in particular.