I’ve been using LessAccounting for about 3 months with my dental staffing agency. It really helps me track their 1099 wages again my business expenses.

I was never good with numbers in high school, so I got an accountant early on and used Blinksale

I’ve recently jumped back into freelancing and when it came time for number crunching, I picked up MacFreelance. Thus far its a really nice program. Accounting can be such a pain. Thank god for my mom and mother in law both being accountants!

I really am not good with numbers. You gave good advice and I appreciate it. It’s useful for someone like me who plans to become a freelancer but is doubtful because of certain setbacks in terms of figures and numbers alike.

Winweb.com offers free accounting software, and 24/7 tech support. Great way to keep your accounts in line!

Allan,

You blew your cred in Step 1. Just because you spent a lot of money recovering from a disaster doesn’t mean that spending money monthly with an online service for accounting is the right lesson to have learned.

The “free” accounts with those accounting services are so stunted that if you become minimally successful, you suddenly have to spend upwards of $150/year to get to the next level of features (a few more clients, more invoices, etc.). And what happens if the service goes out of business one day and leaves you without ANY access to the data they were keeping for you? Just as bad as not having a good backup service yourself.

Better to just bite the bullet and just buy an accounting package and work with your accountant to configure it for your business. The cost of the software is usually a one-time fee of $100-$200… instead of paying monthly for the rest of your business life. And the package can last you — as it has me — 10 years or more without ever needing an upgrade or update. Most of the yearly updates for accounting software are a waste of money anyway. It’s not like accounting principles change year-to-year.

And spend some money on a backup service or off-site backup scheme to protect your data in the case of a disaster (theft, fire, flood, pissed-off significant other….). I’ve done dumb things as well with my data, but a good backup service helps me recover from it in a matter of minutes.

@Andy, if you purchase a desktop accounting package, be sure to the printed books required to learn the software. Then be sure to spend at least an hour a month troubleshooting the issues you’re going to have. When you upgrade your computer or when a newer version comes out spend that extra $100 to update the software. My time is far to valuable to learn deal with bloated desktop software. I want my accounting system to get out of my way and let me get back to making money.

On a side note, I backup my current computer to two (of the many) servers we own. Alot of people would rather pay a few dollars a month for a web-based SaaS instead of worrying about backups. E.G. What if you work remotely for a month and you can’t drag your external hd with you? Then you pay for another online service.

@Andy, sounds like our opinions just differ, I would pin you as more old school and I am new school. I don’t want to setup a vpn and have to worry about backups. I don’t want a learning curve, bump or manual to learn easy accounting. I think true accounting should be done by an accountant and freelancers really don’t have much reason to learn accounting. I am about easy of use, not setting up vpns and maintaining backup servers for my accounting. Sounds like your skill set is programming which might lead you to being more tech savvy than most freelancers.

@Andy, after I lost my data I tried Quickbooks for Mac, then I paid for Blinksale for several months, then we built LessAccounting.com. You and I, our business styles are very different, I spend money to make money I pay for a server admin, good developers and good tools to work with. Do I waste money? I don’t feel I do. I utilize free tools like google documents etc. When I called you old school you seem like a programmer that is very cheap (like you mention) and you do everything yourself (I can see that by the design on FLtech.com). Many people don’t share my opinion, thats totally cool. But many of people don’t have your mentally about doing everything themselves. My article was merely expressing my experiences with accounting not directly assaulting your solution.

Side Note: we do offer free design reviews if you would like to take me up on that offer. http://b.lesseverything.com/2007/12/3/don-t-call-a-bland-design-simple

There is NO CORPORATE VEIL if you don’t form a corporation or LLC. You should still keep a separate business account to make it easier to keep track of your finances, but if you’re a freelancer filing a Schedule C, you can still lose all your personal assets because of a business dispute. A separate bank account is not legal protection.

Using web-based accounting apps always makes me nervous, but I also understand the importance of having reliable backups (from first-hand experience). Excellent post!

Placing your trust in an accounting software package or a professional that uses such a package isn’t without it’s problems either. The Mac version of QB laid waste to plenty of folks in both camps over the holiday. If you hop over to the forums over at Intuit, you can see the carnage. I helped a relative that does freelance book keeping by setting up a backup and while that relative is very accounting savvy, not so much on the tech side. They were keeping a few clients on the desktop and when QB wiped it out, we had a good backup, but a quick look at those forums reveals that backup is not the rule it should be. Truth be told, I imposed that backup a while back and saved some serious butt in the process.

A lesson that I learned hard way is:

“A good accountant will make you money to cover his/her costs, a great accountant will MAKE YOU MONEY!”

Another one was:

“The taxman cannot even send a letter without messing it up”

I learned this by finding out that HMRC (the UK equivalent of the IRS) had taken me to court and then posted me a letter to say they’d lost. So would I please re-file five years of returns. By Tuesday. That was not a fun weekend.

Wow…. I’ve read this blog for a while and I don’t think I’ve ever seen it publish something this irresponsible before.

Not only is there no “corporate veil” just because you set up a separate bank account, it’s also completely fine (even in a corporate situation) to make business purchases with your personal credit cards or other monetary equivalents.

First off, the corporate veil only makes a difference if you’re a corporation or LLC. That said, even if you ARE a corporation or LLC and a court thinks you only set up the corporation or LLC to allow yourself a corporate veil, consider it pierced. Also, most good lawyers would be able to easily attach to your personal property if you’re the sole owner of a corporation or LLC. If you’re only forming an LLC or corp for this protection, your money and time would be much better spent getting insurance.

Second, lets say you are an LLC or a corp and you have a separate bank account. It’s much much less important where you SPEND the money from than where the money COMES IN. It’s quite easy to account for business expenses purchased with your personal money than it is to deal with money for the business coming into your personal accounts. In fact, if you’ve ever worked a “real job” you’ve probably made a purchase or two for someone else’s business with your personal money. They then reimbursed you after you filled out an expense report and submitted the receipts… see where I’m going here? Yeah… you do the EXACT SAME THING with your own business. I have a business Amex that’s in my name that I use for my business expenses as well as a few personal expenses where there is a benefit to me. I submit my receipts to my business along with an expense report and the business cuts me a check to reimburse me. It’s quite simple and it’s actually preferable to pulling money directly out of my business checking account for purchases as I’m much more careful to make sure I have the receipts so I can submit them.

I’ll have to agree with Andy on the whole deal with online accounting packages. They by and large suck and are horribly overpriced for what they are. Most freelancers don’t even need QuickBooks either. They can get along just fine with something like Billings or MacFreelance (sorry, I’m a Mac user, but I’m sure there are Windows equivalents). Both of these packages are pretty simple and far less than $100. I use QuickBooks myself, but my accountant recommended it and sold it to me for his cost because it makes our data interchange a lot easier. Avoid the Mac version of QuickBooks at all costs.

It’s disappointing that the author felt it was necessary to hawk his wares as “Step 1″ then went on to have an article with a serious factual error.

Great advice. I’ve only been freelancing for two months and my accounting is already a mess.
After reading this I headed over to lessaccoutning.com and it looks like it might just be what I need!

Thanks!

I think the best idea here is to just rely on Step 5 and find your accountant first. I know I did and he’s been an invaluable resource in getting my business set up in a way that won’t get one in hot water. Most people can do their own bookkeeping, but it’s very very very advisable to consult an accountant and a lawyer when you set up your business practices.

I’m not an accountant, or a lawyer, so my comment above is from my experience as a freelancer who’s had to deal with a lot of this stuff. Commingling funds is not a good idea, but the biggest concern (from what I’ve been told) is you need to have a strict separation on the incoming money and money that goes out needs to be documented. It makes it harder and harder for the IRS to sort things out if you’re all willy-nilly with your finances mixing business and personal with abandon, so they get a little bent out of shape and hit you with a lot more scrutiny.

The big concern the IRS has with corporations of one is that the officer (you) is being paid a reasonable salary (with attendant FICA payments, sometimes referred to as “self employment tax”). My accountant tells me that until the business is successful enough to pay market rate, 1/2 of profits is a good number that’s hard to argue with from the IRS’s side. From what I’m told this whole issue is what they’re more concerned about when it comes to commingling funds on the corporate side. They’re looking for ways you’re getting compensation “off the books”.

Not commingling your funds also helps a ton with the year-end tax close-out. It’s much easier when you’ve kept everything straight, which translates to a lower bill from your CPA… and you’re a lot less likely to miss a deduction too.

On the legal side, it’s usually not difficult for the corporate veil to be pierced in the case of a single-member LLC or a corporation with a single shareholder because it becomes obvious to the court hearing the case that the corp or LLC are only really a wrapper around the person and not a real separate entity. There’s so much more to the whole separate entity thing than just having a separate bank account and credit card. Instead of relying on limited liability to protect your personal assets, I’ve been advised it’s much better to just get business liability insurance and head off the whole thing before it becomes an issue.

I’ll say right up front that I’m an ex-partner in a firm of British Chartered Accountants who writes about innovation (not a joke) for professionals at http://www.accmanpro.com. About 8 months ago I was invited to get involved with FreeAgent Central (http://www.freeagentcentral.co.uk) an online financial management solution. That means you can look at this as a pimping post if you wish.

The idea was developed by freelancers who were fed up of having a solution imposed on them that didn’t meet their needs. the guys built something THEY could work with. Since then, the solution has been taken forward and handles all day to day financial transactions.

File export for the accountant is there but the real nugget is the ability to know in advance what your likely tax position will be. That means no nasty shocks or surprises. It also means you can get the best out of your professional relationship with the accountant.

At present the solution is only UK based but..we’re putting our toe in the water for international come the end of January. It won’t have it all but the bones will be there. We’re hoping to develop with the help of the community that grows around the service.

We’re transparent on support and feature development. We do that by using GetSatisfaction which we recommend to others as a great way to surface and find answers to problems. http://getsatisfaction.com/freeagentcentral

Like many other services, we offer a free trial period, there’s a video demo, a bunch of references (none of which were PR massaged - promise!) and plenty of other information for you to peruse.