As an employee, you have everything done for you like deductions and some taxes take at source. As a self employed person, it’s like you’re going to need to do these yourself now. Here are some tips that I had to learn and has helped me save hundreds of dollars by doing them.
1. Getting Behind on Book-keeping
Book-keeping is such a pain for me. I was always good at math so you would think that it would predipose me to also being good at book-keeping, but it’s not the case. If you’re like me, you would you find your person or fiscal year-end to be an extremely painful exercise.
Not making excuses here but my bank also doesn’t make it easy. For some reason, my bank doesn’t allow for an easy way to download my banking transactions through a .CSV file. Well it does, but only for the past three months. I tend to skip doing these tasks every quarter so I end up having to do them through copy and paste on my PDF formatted statements.
- Set yourself a reminder every quarter to download your banking transaction and start organization it in whatever software you use, Quickbooks, Freshbooks or And Co.
2. Note All Your Deductions
I have a box where I keep my physical receipts. In most taxing jurisdictions you have to keep your records for a certain amount of time (mine is 6 years) so I need the physical box.
What I’ve also been doing is using a app to take a picture and PDF it to me right away. So, as soon as I get a receipt I use my phone to scan it in, it PDF’s it and I can add notes to it as well to remember the reasons why it can be considered an expense.
I’ve used this Lens iOS app from Microsoft, but there are ones for Freshbooks too and this app called ‘And Co’ (don’t ask me why that’s the name) that helps you track your self employed expenses better.
Once again, not letting it fester will go a long way to not having this big pile of work to do at year-end. With a mobile phone, you can do it anytime now and as close to getting receipt or issuing your invoice as soon as possible.
- Use a app on your phone, or use your camera phone to take a picture of the receipts right after you make payment.
3. Interviewing Accountants
You likely want an accountant who has experienced with those we are self employed.
Ask your network of friends and family who uses an accountant and get up to 7 accountants to do a ‘meet-n-greet’. During the interview ask them if they have experience with self-employed workers and for how long. Tell them a bit of your situation and see if they are already giving some advice to you just on the call.
I had one accountant referred to me and even before I was a paying client, she gave me some advice to take home that I could use for my personal taxes. I didn’t end up going with her because she doesn’t have foreign tax experience (which I need), but she left a great impression on me that I recommend her my friends who have her as an accountant today.
How I arrived at my accountant was through a referral from an accelerator network I joined. The accounting firm that I was referred didn’t have the experience I needed for my business, but she knew another firm down the hall from her office that did. That’s how I have my accountant today!
- Ask your friends and family — those in your network for which accountants they use. Do a Google search on them and interview 5-7 accountants to see if they are helpful on the phone and if they meet your specific self employed needs.
4. Fees, Fees, Fees.
These are sneaky little things that come up. Your payments and invoicing processor will take a cut of every transaction that you have and the bank will take a cut of every transaction you debit or credit from you checking accounts. Transactions can either be fixed or a percentage of the transaction.
I find these fees to add up to a lot over time. I recently found out that my bank charges me a monthly fee for transaction I use for the month. I was non too happy about this and I’m actively looking for another bank that is just happy to hold my money for me without unnecessary fees.
While I know it’s the cost of doing business, for a newly self employed worker, it’s not like we are making goobs of money yet so these fees add up to a lot.
I find Stripe and PayPal to both be reasonable when it comes to take a fee for payments processing.
As for banks there are many out there who are online banks only and therefore don’t have the high overhead of branches. They are offer self-employed workers better prices or even no fees for processing transactions.
- Do a Google search to see what community banks can offer you as non-fee banking. Most banks have special rates and conditions for self-employed workers so do ask about that. I know the hassle of making the switch can be annoying, but in the long run, not paying monthly fees of ($10 to $100) can add up quickly for a small business owner like yourself.