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#045. Why You Need Quickbooks to Stay Profitable & Organized

February 3, 2021



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How I Use the Quickbooks Self-Employed App to Stay Profitable & Organized

It may only be February but tax season is quickly approaching, my friends! Being unprepared financially for filing taxes, keeping track of expenses and just generally measuring the profitability of your business will leave you with SO much money on the table (not to mention SO much risk if you get audited!).

I know this might seem like the LAMEST start to an episode EVER to be talking about taxes. If you’re feeling that way right now . . . then honestly, this episode was actually made with you specifically in mind. I recorded this episode to help you AVOID the stress and yes, boredom, associated with keeping track of your finances and filing your taxes. Today I’m talking about a little application called QUICKBOOKS.

Most of us have heard of it. You might currently use it, or you might be thinking about using it, or you’ve been procrastinating on finally diving in, or maybe you just have totally avoided it altogether . . . but the bottom line is that it is an incredibly powerful tool that operates in a super-simple way!

And no, Quickbooks did not pay me to record this episode today! I feel like I need to say that right away! I was inspired to record an episode all about how I use Quickbooks Self-Employed to stay profitable and organized when I recently heard about several different photographers struggling with organizing their bank accounts and paying attention to their profitability. Also, because we’re at the beginning of the year, now is when a lot of you are thinking about investing in new business applications . . . but if you’re like me, you sometimes get cold feet. I’m here for you!

This week’s episode is going to go through, in detail, exactly how I use Quickbooks self-employed and why, if you aren’t already, you should totally be using it, too!

Ok, if you’ve been listening to this podcast for a while you know that I love numbers and spreadsheets. I’m totally aware that it’s weird and unusual, especially for someone in the creative and artistic world, but it’s the truth. I literally will go to my spreadsheets when I’m feeling stressed out in order to calm down! 

So, one of my obsessions is Quickbooks self-employed. It’s funny, because Quickbooks actually takes a lot of the “fun” work that I’m talking about out of the equation – it does it all for you. I remember when I first started using it I was like, “hey wait . . . I don’t get to do any of this manually anymore?!” Quickbooks self-employed was created to help busy small business owners cut out an entire step of financial planning and tax preparation. It’s like having your own digital finance secretary who does all that tedious record-keeping and spreadsheet creation for you so that you can just hand it off to your accountant or upload to Turbotax at the end of the year.

Because, really . . . who has time to manually keep track of their expenses and income?

Not me! 

So Quickbooks became an extreme shortcut for me when it came to all things financial. Today, I’m going to break down a couple different elements of working with Quickbooks so that you can either jump right in as a new user OR get the most out of your account if you already use it (because I have heard so many small business owners talk about how they “use” Quickbooks but they are missing out on the very best features without realizing it!).

But before we dive into those features, let’s talk about the Quickbooks program as a whole. Something you need to know right off the bat is that there is a DIFFERENCE between Quickbooks Self-Employed and regular Quickbooks. Chances are, if you’re a small business owner with no full time employees, you want to use Quickbooks self-employed. It’s cheaper, it’s more user-friendly, and it has some cool features that the regular Quickbooks actually doesn’t have.

Quickbooks self-employed was primarily developed for businesses who consider themselves independent contractors, but don’t let that fool you in to thinking it’s not for you if you don’t consider yourself an independent contractor. This program allows you to track all of your income and expenses from different accounts and credit cards, categorize those transactions for tax purposes, track other important expenses like mileage, run reports, display gross and net income, and much more. It even helps you divide your personal and business expenses if you’re still using your personal bank account for your business (which, by the way, I don’t recommend, but we all have to start somewhere!).

Unless you’re a business with payroll’d employees, I’d highly recommend using Quickbooks Self-Employed!

So now, let’s talk about all the different features that you can use. Today I’m going to share about the following features that, if you use them, will make your business more organized and profitable in the long run (not to mention avoiding fines and fees if you ever get audited!).

#1. Tracking & Categorizing Deductible Expenses

#2. Keeping track of income and profit

#3. Preparing for filing your taxes with ease

First, let’s talk about tracking and categorizing deductible expenses.

A quick and basic lesson in taxes (full disclosure and disclaimer: I am not an accountant or tax professional, so any serious questions or decision-making when it comes to taxes should definitely be directed to a professional!). Any and every purchase that you make throughout the year for your business should be kept track of and a receipt from that purchase should be saved. So something as large as a new camera body or office space down to a $2 parking garage receipt. I’m guessing most of you either already know this or are doing it. It’s important because every year, the government is going to look at how much money you made that wasn’t taxed (so, if you weren’t employed by someone withholding taxes for you, this includes any other money that hits your bank account, whether personal or business). That lump sum of money gets taxed at a set rate. However, if you made purchases for your business, you can deduct those purchases from that lump sum of money you made. So, for example, if the tax rate 10%, and you made $10,000 last year . . . BUT you spent $2000 on qualifying tax-deductible purchases, you will only be taxed on $8000. Meaning rather than having to give the government 10% of $10,000, which is $1000, you will only have to give them 10% of $8000, which is $800. You saved $200 right there, just by keeping track of expenses. Now that is WAY oversimplifying a lot of things – like tax rates, deductible purchases and just general filing of taxes, but the concept remains the same. Again, I think some of you probably already understand this concept, but it is the foundation of understanding why the expense-tracking side of Quickbooks is so important (and so cool!).

The government has a very clear-cut set of rules it uses to categorize which expenses “count” as deductible for your business and which do not. And guess what . . . this can be freaking confusing. On your taxes, you will need to specify how much you spent on each of these categories that they have set up. Not only that, but you need a copy of the receipt to prove that you purchased it in case the government audits you. An audit is essentially a honesty check which ensures that people don’t lie about their deductions or other tax information to get out of paying the government money. You need to be able to prove you actually paid for those specific items for your business if you get audited, hence why you must save all receipts from business purchases.

So bottom line – you want to deduct as much as possible to have the lowest tax bill possible, but you also need to do it correctly because if you get audited and they find that you reported something incorrectly or without a receipt, you could get a big hefty fine.

WOW, OK, I hope you’re not overwhelmed yet because I know I am! But I have amazing news . . . Quickbooks makes all of this incredibly easy!

So here’s how it works: you can use Quickbooks to automatically track every purchase you make using your debit and credit cards. You simply connect your bank account and credit cards straight to Quickbooks (which is incredibly simple) and then any and all purchases you make pop up in a neat and organized transactions list. Now, if you’re currently using Quickbooks, you likely are already using this feature. This is the main feature that small business owners want out of Quickbooks. However, there are a few other elements to tracking expenses in Quickbooks that really make everything easy and seamless when it comes time to file your taxes. 

First, categories. Quickbooks has created a bunch of expense categories that correspond with  the categories that the government uses for allowing for tax deductions. Quickbooks’ categories are a little bit more specific that the government’s (so that you yourself can see how much you’re spending on different elements of your business) BUT if you work with an accountant, you will simply send your Quickbooks report off to her in one click, or if you’re like me and do your own taxes using TurboTax, Quickbooks actually connects directly to Turbotax (they are owned by the same software company) and automatically condenses categories for all your expenses in the correct IRS tax categories within TurboTax. It literally just takes one click of a button! SO awesome!

The second thing I love about the way Quickbooks Self-Employed tracks expenses is that it allows me to upload my receipts directly to each purchase. So any and all of my purchases made online? Almost all of those receipts are emailed to me! I can just save a quick screenshot of each one and upload it to each purchase. Now, I think that is just about as simple as it gets, but to let you in a little bit more on how I keep track of digital receipts…anytime I receive a receipt via email, I click and drag it into a folder I’ve created called “receipts.” And I make a new receipts folder every year so I can keep track of each individual year’s receipts. It is so simple to just click and drag my receipts right into that folder and then I don’t have to think about them at all. Then, on the first day of the month (when I’m also filing my monthly sales tax with the state of Virginia and balancing my budget), I also upload all those digital receipts. Doing it each month isn’t necessary, but it does save me a ton of time at the end of the year. It’s really nice to not have to upload all those receipts from the entire year all at once!

So now you might be wondering about paper receipts – how do you get those into the system? Do you have to scan them and upload them?! That sounds like a lot of work! Great news – Quickbooks self-employed has an app, and that app allows you to take a picture of your receipt and upload it straight to that individual purchase.  It even helps make sure the photo is clear and straight so that the receipt is recorded accurately. I love this feature so much – it makes my life so easy because I never have to worry about losing receipts!

The last feature I want to mention about tracking deductible expenses is tracking your mileage. Did you know that you can deduct an expense for driving your personal car for your business? It’s true, and it’s amazing! Each year, I drive several thousand miles for my business. In my first full time year, I drove over 10,000 miles (side note: would not recommend). In the last four years, I’ve deducted nearly $13,000 in mileage. That has saved me so much money in taxes, and yet so many people either totally forget or don’t know that you can do this!

So first, a quick note – as a small business owner filing taxes, you have the option to either deduct specific expenses related to driving (like maintenance and gas) or you can take a standard mileage deduction. A good accountant or the use of Turbotax will actually tell you which option will save you more money, so you can always ask these sources! But. They have to know how many miles you drove in order to give you the best advice!

So here’s where Quickbooks comes in. Quickbooks self-employed has a GPS-enabled tracking feature which allows you to track every single mile you’ve driven all year. You simply open up the app and go to this section, and you’ll be able to swipe left or right to tell it which miles were personal and which were business. Now, this is one I definitely recommend doing once a month or even once every other week because it’s way easier to remember which miles were personal vs. business a few weeks later verses several months later. But it really is that easy, and it’s literally one of my favorite features in Quickbooks! 

If you already know all about mileage tracking, you may already be using an app to track miles. I love that Quickbooks has the mileage-tracking feature because it cuts out one more expense or account that I need to have in order to run my business. So, in short – it saves me money! If you have Quickbooks self-employed and are not using the mileage-tracking feature, get on it! 

There are a bunch of other useful features within Quickbooks that you can use to keep track of expenses, see reports on your spending, and more. However, the most useful elements for saving money on taxes and filing everything easily and correctly are those that I just mentioned. If you are someone who budgets your business closely and likes to see some of those more intricate details of your business spending, there are so many more features that you will love. And, as always, I love to hear from you, so if you have questions about your Quickbooks account, send them my way!

So next let’s talk about your profit. This is way more exciting and fun that your expenses, don’t you think? You can use Quickbooks in a lot of different ways to measure and track your profit on a monthly, quarterly, annual or custom-time-frame basis. You can also use this feature to correctly report your earnings to the government on your taxes (which you definitely need to be doing, if you aren’t already!). 

There are a few specific features that I really love about the Quickbooks system when it comes to tracking profit. The first is categorizing and reporting income specifically for tax purposes. As I mentioned a second ago, you must report all of your earned income each year on your taxes, regardless of whether or not you earned it from a formal business that you have created or even if you’ve just been collecting checks, cash or Venmo payments and putting them in your personal bank account. If you don’t have an application that keeps track of all this income, it can get really messy and confusing at the end of each year (particularly if you haven’t yet set up a business bank account). Quickbooks makes this incredibly easy. When you open up the transactions tab in your Quickbooks account, you will see all of your transactions – both withdrawals (which are purchases) and deposits (which is payments or income from clients). The purchases are labeled in black and the income is labeled in green. Visually, it is pretty nice to see a bunch of green umbers in your account . . . I’m not going to lie. But even more importantly, you are able to sort these little green line items as “income,” “transfers” or any other number of categorizations. You may be wondering why you would need to do so, and I’ll tell you!

Think about all the transactions in your bank account. Chances are, not all of those positive deposits were payments from customers – in other words, not all of those are considered income. You may have made a return and got some money back, or you may have been reimbursed for something, or you might even have cashed out a credit card reward for some cash. And if you are still working with a personal bank account, there are a million other reasons that aren’t business income-related that you might see a positive transaction in your bank account. When it comes time to file taxes, it becomes impossibly time consuming and difficult to parse out and calculate which of those positive balances was income and which were not, and that’s only if you’re organized and have your bank statements readily available. Quickbooks makes this super easy! It’s a one-click system of deciding whether or not each transaction was income or not. You can even make notes an upload receipts or deposit slips to remember what is what. Again, I login and update my Quickbooks account on a monthly basis and it takes me maybe 2 minutes to sort all my deposit transactions as “income” or “not income.” When it comes time to file my taxes, I literally only need to click a button to see what my annual gross income was! (And side note – “gross income” is the total amount of income you receive in a given time period without any expenses or taxes deducted, if you were wondering). 

I also like using Quickbooks for income to see what my monthly gross income is. Within my business, I have a budget I set for myself and also a goal monthly gross income. It’s really important as business owners to set those goals for ourselves. This allows us to plan for our future – it allows us to make an estimate of how much more we will be able to pay ourselves each year and also how much we have to spend to put back into our business. And, if you’re like me – a very competitive person who loves to work – a goal allows me the freedom to say “no” when the goal is met and know I’ve reached the intended finish line. When I log into Quickbooks, I instantly see a dashboard of my income and expenses for the year. With one click, I can isolate that to the current month, or the last two months, or any timeframe that I want! I can also see, at a glance, my bank account balance and net profit, which is my income minus my expenses. Very cool and very helpful. It makes financial goals very simple and easy to track, and I highly recommend using this feature to track your own income!

So, like I said before, there are a lot of cool things you can do in Quickbooks to really dig in to the nitty gritty of your income and profit, and I’d love to hear your questions and feedback about your own experience with Quickbooks, so send them my way by shooting me an email info@hannahbjorndal.com or DM me on instagram @HannahBjorndal. Yes, I do respond to all of my messages, and I’d love to hear from you!

Ok, the last thing I want to share about Quickbooks is the way it makes tax preparation a breeze. Let me ask you a question: How did filing your taxes go last year? Did you enjoy the process? Did you, at any point, shed a tear of frustration or even fear? If you’re answer is yes, I enjoyed it so much and there were only tears of joy, good for you! You probably don’t need to hear what I’m about to say!

If, however, you find yourself frustrated, confused, worried or overwhelmed by taxes (even when you work with an accountant!), I’ve got news for you – using Quickbooks is going to make your life so much easier. 

As I mentioned earlier, Quickbooks was made to make filing taxes easy. It’s a system that literally integrates with Turbotax. If you work with an accountant, this is an entire portal to directly invite your accountant to join your Quickbooks account so she can collect all that neatly-organized information from you. If you are diligent with your account – meaning you do those simple steps that I shared with you throughout this podcast on a monthly or quarterly basis, filing your taxes is going to be a breeze. This is the thing I love more than anything else about Quickbooks!

Now, Evan and I file our own taxes using Turbotax, which is honestly pretty complicated considering we own a home, and we own a short-term rental property, and I own a business and file quarterly taxes, and I have 2 employees, and both of our incomes are variable and change each year. Honestly, you might hear that and think “why the heck are they not working with an accountant?” But Quickbooks has made it possible for us to do this on our own along with the use of Turbotax. Doing your own taxes is certainly not for everyone. Actually, it’s not for most people. Quickbooks is a solution for small business owners at all levels of financial literacy, and it was especially made for those who struggle to keep track of all those important finances.

So, in conclusion, I can’t say enough good things about Quickbooks. It has saved me hours and hours and hours of time (and this is coming from someone who was very organized with her business finances before diving in to Quickbooks!). If you’re ready to save yourself a ton of time and all that stress surrounding tax season, it’s time to take a dive into your Quickbooks account and start using it to it’s full potential!

Like I said at the beginning of this episode, I am not a tax professional or accountant, I am simply sharing my own experience using an application that has been a life-saver for me! If you do have serious questions about taxes, particularly within your own state, definitely talk to an accountant to get specific answers to your questions!

If you are new to the Quickbooks family, I do have something special for you – go to HannahBjorndal.com/quickbooks and you can get – I think it’s 50% off for your first 6 months, which is a steal, so use that code if you’re new!

I am so glad you joined me today! I made this podc  ast episode with you in mind, so I really hope you learned something that you can take and immediately apply to your own business. I love answering questions and taking the conversation outside of this podcast, so please send me an email (info@hannahbjorndal.com) or DM on instagram (@HannahBjorndal). You can also join our exclusive Facebook community by going to HannahBjorndal.com/Facebook – I’d love to see you there!

I post new episodes every Wednesday, so com eon back next week, and if you haven’t already, please leave a review!

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