A common concern for new Virtual Assistants is managing finances. It is important to track money coming in and out of your VA business or side hustle. Tips include separating personal and business accounts, using affordable accounting software or spreadsheets, and considering the services of an accountant. Beyond tax compliance, it’s also important to understand budgeting and investment decisions, especially when starting out.
01:15 The Importance of Financial Management in Business
02:25 Understanding Business Income and Expenses
03:14 Setting Up a Business Bank Account
03:48 Choosing the Right Accounting Software
05:25 The Role of an Accountant in Your Business
06:30 The Importance of Budgeting in Business
07:29 Conclusion and Contact Information
I want to dive into a topic that often looms large at the beginning of each year: money and taxes, especially for moms venturing into the world of Virtual Assisting. I’ve heard from many mamas that the financial aspect can seem daunting, but fear not – let’s break it down together.
The Importance of Tracking Finances
1. Financial Clarity for Your Business
Starting with the basics, tracking your income and expenses provides a clear view of your business’s financial landscape. It ensures you’re making informed decisions, avoiding losses, and maintaining a healthy bottom line.
2. Budgeting for Success
Creating a realistic budget for your VA business is crucial. Track all incoming and outgoing money, and subtract expenses from income to determine your profit. This roadmap helps you allocate resources efficiently.
3. Compliance with Tax Laws
Tracking numbers isn’t just about financial clarity; it’s also about ensuring compliance with tax laws. Come tax time, having accurate records makes the process smoother, helping you avoid stress and potential issues with the IRS.
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Tips for Easy Financial Tracking
1. Dedicated Business Account
Open a dedicated business bank account to separate personal and business finances. This ensures a clear distinction and simplifies tracking.
2. Explore Accounting Software
Consider using accounting software like Xero, QuickBooks, or Wave. These tools streamline the process, offering efficient ways to track income and expenses. However, if you’re just starting, a simple spreadsheet can work wonders.
3. Professional Assistance
While day-to-day bookkeeping can be managed personally, hiring an accountant for tax-related tasks can alleviate stress. Professionals can ensure accurate reporting, helping you make the most of deductions.
Budgeting for Success
Knowing your budget allows you to make informed decisions about spending. Forecasting your financial needs helps plan for software purchases, coaching programs, and other business essentials.
Tracking your finances doesn’t have to be a scary, complex ordeal. Whether you’re using advanced accounting software or a basic spreadsheet, the key is consistency and accuracy. If you’ve found value in this episode, share your thoughts with me on Instagram (@melyssamunday or @mamasmakingmore), or send a voice memo – I love hearing from you!
[00:00:00] Melyssa: Hey, Hey. Hello. It has been a little while since I have recorded a podcast and I have missed you. I took some much needed time off. I had my second back surgery in the span of eight months and was not fully expecting to have to do that. My second surgery ended up being a lot more difficult than I expected. The recovery was a lot harder. And so it was really nice to be able to take a step back and just really focus on my recovery and getting myself healthy, again, working on just resting and relaxing. And of course at the tail end of that, I’m still actually recovering. I have a little bit more time before I start physical therapy, even. But then the holidays rolled around and I ended up getting sick with monster cold, which was super duper fun.
[00:00:48] Melyssa: But here we are now I am so excited to be back podcasting. While I wasn’t podcasting, I was posting some blog posts and it really just isn’t the same. I do enjoy doing the blogs as [00:01:00] well. But I just like the combination of having a blog and a podcast kind of married together. So I really missed this part of it and I’m happy to be back and I want to jump right into it.
[00:01:11] Melyssa: It is currently January 2024 as I’m recording this. And something that comes up every year at the beginning of the year is money and taxes. I’ve often heard that one of the roadblocks for mamas who want to start their VA businesses are worried that the money part of it is too hard. They don’t want to have to have complicated taxes and they’re just worried that they won’t know what they’re supposed to be doing, and they don’t want to get in trouble with the IRS and they just worry that it will be a really difficult thing.
[00:01:42] Melyssa: So I want to kind of break it down for you and make it not be such a scary, big, bad thing. I wanted to talk first about one of the really important reasons to track your finances and to track the money that’s coming into your business and the money that’s going out of your business. And that’s really to have a [00:02:00] financial clarity of what’s going on in your business and to make sure that you are making money. There are going to be times there could be lean years. There could be times when you are spending money to make money. And that is all okay. But year after year, you don’t want to be operating at a loss. And so you do need to track those numbers. We want to be tracking all of the numbers that are coming in. All of the money that’s coming into your business, which would all be the income. So anytime someone is paying you for your service for our product, for anything that you have, that you are selling in your business, you want to have a way to track that money coming in.
[00:02:40] Melyssa: You also want to keep track of all of the money that you’re spending for your business. And when you go to figure out what your profits are, you’re going to subtract your expenses from your income and that’s gonna give you your profit.
[00:02:55] Melyssa: We really want to track those numbers so that we do have that financial [00:03:00] clarity. We also want to track the numbers we want to be sure that we are complying with the tax laws. We want to make sure that we can have the numbers that we need when it comes to tax time.
[00:03:13] Melyssa: There’s a couple tips I have for you. First of all, you want to have your own dedicated account for your business. Any money that’s coming in and any money that’s going out. Preferably you want that to be a business bank account. At the minimum, you want it to be a separate personal account where you do not intermingle any of your personal money in there. And I think that’s a really important to know from the very get-go and that’s really not a very big deal. It’s not a big deal to have your own account. It’s not difficult to do that.
[00:03:43] Melyssa: It’s not difficult to track the money that you have coming in and the money that’s going out of your business. There are software programs I personally use Xero it’s X, E R O is how you spell the software program. I really like it. I think it [00:04:00] is easy to use. I think it does a really good job at what it’s supposed to do. They have really good customer service. So I do recommend that. There are other options. There’s QuickBooks. I’ve used QuickBooks. I’m not a fan personally, but I know that there are a lot of entrepreneurs who use QuickBooks. And there’s also a program called a Wave. There’s actually a lot of programs out there, so you really need to investigate and see what’s best for you.
[00:04:24] Melyssa: You also do not need a dedicated software system for your accounting. Especially if you’re just starting out, if you really don’t have complicated expenses, you can just literally track it on a spreadsheet. The IRS is not going to come at you and say, you have to have some sort of software program. If you have a spreadsheet where you’re keeping track of every line item of what your spending and what you’re bringing in that really is the basic information that you’re going to need. And that’s okay. That’s a hundred percent okay to start out that way. There are people who are continuing to use that year [00:05:00] after year, because it just works for them. So it really doesn’t need to be this whole complicated situation.
[00:05:06] Melyssa: Piggybacking off of that. When it does come to tax time, whether you are a sole proprietor, whether you have officially turned into an LLC or corporation, whatever your actual business structure is. You still do need to report that income. I find that complicated. And so I do pay an accountant to run all the numbers for me.
[00:05:29] Melyssa: I do the day-to-day book keeping for myself and the accounting. I keep track of that money that’s coming in. I keep track of that money that’s going out. But at the end of the day, it is not worth the stress it would cause me to make sure that I am capturing all that information correctly for the IRS. And so for my own peace of mind, I do hire an accountant to do that for me. And so I just have to provide information to him. I give him my balance sheet of the income, the expenses. [00:06:00] We also do things like I take a percentage of my office space. I’m able to use that as part of a write-off, I’m able to use a portion of my utilities because I work from home.
[00:06:12] Melyssa: You do not have to hire a professional. You probably could still use something like a TurboTax. That is okay if that is your jam, there are people who are just all about doing it that way. It is totally fine. But like I said, my own personal preference is to go ahead and use my accountant to do that.
[00:06:30] Melyssa: Another reason why it’s really important to be tracking the money coming in and the money going out of your business is so you can budget. So you can know if you have enough money to buy a certain software program, if you have enough in your account to pay for a coach, to go through a program, to do whatever it is that you want to do. You really want to make sure that it makes sense with the amount of money that’s coming in. And again, sometimes you may want to spend more money than you [00:07:00] have coming in. In the beginning if there’s a certain skill that you want to learn and you want to hone in on, then it’s okay to spend more.
[00:07:07] Melyssa: You want to know what your budget looks like and what you are going to be able to spend your money on. And just to be able to forecast a little bit, how many clients you’re going to need, how much work you’re going to need to bring in to cover even your most basic expenses of the software that you do need to run your business.
[00:07:27] Melyssa: That’s all I have for you today. I hope you take away that it really doesn’t have to be super duper scary to track your finances and to go over the money aspect of your business. It’s something that you can break down and do pretty simply, especially when you are just starting out. So, if you enjoyed this episode, if you took anything away, if you want to share with me what your accounting system is, go ahead and shoot me a DM. I am @melyssamunday on Instagram or [00:08:00] @mamasmakingmore. I really like those voice memos too. So don’t be shy if you want to send me a voice memo. And I will catch you in the next episode.