Accounting For Solopreneurs: What To Do, and When

T his is a guest column written by Deb Howard Greenleaf, a solopreneur who provides virtual accounting and bookkeeping services to small businesses and other solo professionals nationwide.

Visit www.greenleafaccounting.com/blog for more bookkeeping and tax tips from Deb, or follow her on Twitter: @dhgreenleaf.

You may be a solopreneur whose business is up and running. You’ve closed on some sales and spent some money. At some point, though, you need to tend to bookkeeping chores.

Or you may be an established solopreneur who has a nagging discomfort about your books. You’re wondering if your bookkeeping practices are adequate.

New and established solopreneurs share the same fundamental concern: What tasks do I need to perform and when? Here are some guidelines:

On a weekly basis, you should:
• Record client payments and enter a deposit
• Record new bills from vendors and pay the vendor bills that are due
• Record any invoices that weren’t recorded during the week
• Send a W-9 request to any new vendors (so you can prepare a 1099-MISC for them at year-end, if necessary)

On a monthly basis, you should :
• Reconcile your bank statement when it arrives
• Reconcile any credit card statements or loan statements that you receive
• File sales tax returns, if necessary
• Run an accounts receivable aging report and send statements, if necessary, to encourage clients to pay
• Run an accounts payable aging report to make sure you’re not late on any bill payments
• Run a monthly profit-and-loss report and compare it against your budget, if you have one

On a quarterly basis, you should:
• Pay your estimated quarterly tax payments, if necessary, to the IRS and your state
• Run a quarterly profit-and-loss report and a balance sheet.

On an annual basis, you should:
• Report your vendor payments, as necessary, on Forms 1099 and 1096 by January 31
• Make an appointment with your friendly, neighborhood tax preparer to file taxes by the March 15 (corporations) or April 15 (partnerships and sole proprietorships) deadlines

How To Use the Reports

Now that you have all these monthly and quarterly profit-and-loss reports, how do you read them? First of all, it’s very helpful if you can compare them against last year’s or last month’s numbers. Then:

• Are sales increasing or decreasing? Can you explain why? Maybe your most recent marketing effort was a big hit? You need to understand why your sales go up and down in order to plan to grow them!

• How much of your sales revenue is left after paying your monthly expenses? This is your “net income” or “net profit” for the month. For your business to remain healthy and thriving, this number needs to be positive most of the time. If you’re operating as a sole proprietor and not taking a salary, this number has to be high enough to cover your monthly draws.

• Divide your net profit by your total sales. This is your net profit margin. Has it gone down? If so, are there any costs you can trim? Ideally, there will be some costs that stay the same even as you grow your sales. For this reason, you should expect a slightly higher net profit margin as your total sales increase.

Tackling these tasks in a routine fashion throughout the year will save you hours of needless headaches at tax time. More importantly, these numbers will help guide your decision-making throughout the year as you grow your solopreneur business.

Share Your Thoughts

If you have an opinion on Deb’s article or on accounting for solopreneurs, please comment below.