As a freelancer, I know I should be keeping close track of my income, let alone my expenses, but for some reason I’d yet to really grasp that until very recently. Until January I’d only really been freelancing part-time, so whatever income I was making was small enough so that my tax forms weren’t too difficult come every January. Indeed, since I learned of the magic that is TurboTax Home & Business, taxes have never been much of a problem. In fact — shhh, don’t tell anyone — I actually rather enjoy doing my taxes.
I know, sick, huh? But when you’ve been getting consistently large refunds every year, you kinda enjoy seeing the amount tick upwards on the top right hand corner of your computer screen as you merrily click your way through the software. (And yes, I realize that large refunds are a sign that I haven’t been paying attention when I fill out those W-2s and am basically giving the government a big, fat loan for free, but honestly, I’d rather do that than owe taxes on April 15th. It’s just not fun.)
Starting January of this year, though, I started freelancing full-time. As in, the only paychecks coming in with my name on it are those directly stemming from my own marketing efforts and querying rather than from punching a clock at some office every morning. If I slack off one week, I can count on having a pretty pitiful payday, if at all. Plus, now I have more personal expenses than I usually would had I been content to be, well, normal, i.e., I need business cards, travel time to appointments and interviews, stationery, a new printer, some more office equipment, etc., all of which come out of my pocket, not from some generous corporate benefactor (i.e., the supply and requisitions department).
In other words, I needed to get serious about what’s going in and out of my pocket and bank account, otherwise I could end up in a big, fat mess by the time the next tax season rolls around, and have to pay more than I need to.
Until recently I was using OpenOffice‘s Calc software (the open source equivalent of Microsoft Excel) and a manila folder to throw all my receipts and check stubs in. Not the most elegant of systems, but it does its job. The only problem was that still didn’t really help me get a good grasp of where I stood, and since I’m not the most expert user of spreadsheets in the world, inputting the data and getting good, reliable numbers could be time-consuming at best.
Enter Bootstrap. I can’t remember who first told me about this, but I’d like to send them a million virtual kisses for the recommendation. In a nutshell, Bootstrap is a small business accounting program that allows you to input your income and expenses into this Web-based interface, and voila! It calculates not only your profit but also your estimated taxes for that tax year. Right now they offer only federal tax calculations, but according to the site they’re working on adding state tax functionality as well.
Here’s a quick screenshot of the program:
As you can see, you have four critical tabbed pages: Income, Expenses, Taxes, and Reports. Under the Income tab, you can input the date; relevant information (payer, article, invoice and/or check number, etc.; and the amount. Punching enter or clicking Save will update the table for you. In the top right-hand corner, the software automatically calculates your profit, based on what you enter into the Expenses table.
Again, you’ll see that all you have to do is enter the date; the nature of the expense; the category under which the expense should be filed (here, Bootstrap uses the standard Schedule C categories used by the IRS); and the amount. Click Save, and voila! It adds it to your table.
The third tab is the most fun: Taxes. Here, you can view your approximate tax owed, based on the numbers you inputted in the Income and Expenses tables. Bootstrap notifies users that they use a conservative calculation system to determine your tax liability and that you might want to double-check using the IRS worksheet, but this gives you a very good idea of how much you will owe for each quarter.
I absolutely love this software. I finally, finally know exactly how much I’ve made, minus whatever expenses I’ve incurred. I don’t have to say, “Oh, I think I’m reaching my goal for this month,” as all I have to do is fire up Bootstrap and know exactly whether or not I’ve met my goal for that month or even that quarter. And it’s super-easy, even for non-accounting folks like myself, to enter the data into the tables. Every time I get a check, I put it into the Income tab and let the software recalculate my Profit, Loss and Taxes for me. I do the same everytime I have an expense.
Plus, you can export any of these reports to Excel or OpenOffice Calc, so you can save your data on your own computer anytime. When the time comes for you to file your taxes, you have all the information you need to fill out your Schedule C form, without having to worry about digging through a year or a quarter’s worth of receipts and check stubs.
The site is still in its infancy, and the company is still tweaking it a bit to give it more features. The developers have been very helpful and responsive to my emails suggesting future add-ons (including one that would automatically calculate mileage deductions based on current IRS guidelines), so you know that they’re working on it. I highly recommend this to any small business looking for a basic accounting program. It probably is most useful for sole proprietors who file Schedule C forms with the IRS.
Again, I absolutely, positively recommend this program. If you’re wary of online accounting software, know that this only asks for basic information, including an email address and company name. It does not require that you input any other personal financial information, i.e., you are not requested to enter banking or credit card information. Indeed, there isn’t any place for that info.
At the moment use of the program is entirely free while they’re in beta testing mode. The developers write in their FAQ’s that they will probably charge for certain features in the future. Assuming that it’s a reasonable charge, I will probably continue to use this program and pay the fee. It allows me to do what I do best and make money from: write articles and market myself. I can leave the basic accounting to this program and let it do the work for me.