Bookkeeping 101: Online Service Business
Next up in the Bookkeeping 101 Series: Online Service Businesses
There are several businesses that fall into this category. Basically, if you have a service based business (as in you don’t sell a physical product) and you sell online or freelance, this is for you!
Here are some examples:
Website Developer
Accountant
Virtual Assistant
And more!
When your business is virtual, keeping your bookkeeping simple and in check makes tax season run smoothly. And usually saves you serious $’s when you give your accountant your well prepared accounts and they don’t have to spend hours (always at a high hourly rate) gathering the data they need. Hey, it might be nice to have everything so well put together that you want to do your own taxes!
Here are expenses to track for online service businesses:
Computer & Software
Contractors
Website
Graphic fonts/pics
Home office and internet
Home office supplies
Payment processing fees
Meals when meeting with clients and networking (50%)
Education/training books or courses
Event tickets for marketing or education
Gifts for clients (up to $25 per client per year)
Mileage to/from any business trip
Make sure you keep receipts and build that solid audit trail - take pics of receipts and put in an online storage location or attach in an accounting tool.
Speaking of accounting tools - are you using any? Keeping track of expenses is so much easier when you have a tool like Wave or Quickbooks that is integrated with your bank account.
For this industry, it’s really important to look at how you bill. Do you bill by the hour, if so, how are you tracking that? Can it be integrated into your invoicing system for ease and simplicity? I’m all about making things as automated as possible and keeping your interaction to a minimum.
If you sell your clients a packaged service, are you billing enough for the hours you actually work and to over your business overhead expenses? How are you tracking the hours you work on each package?
Tip - Look at your profit margin expenses divide by income then multiple by 100%.
(Profit Margin / Income) x 100%
This is the amount of each dollar that is being eaten by your business before you make any profit. Are you charging enough to cover your operating expenses?
Let's chat and see if we can save you some money and make sure your systems are set up correct.
Case Study: Web & Brand Designer Brit Miller
Meet Brit of Sage & Frank. She is a talented website and brand designer - including the RDT brand and this website!
Brit is also one of my bookkeeping clients. She was so sweet to answer some questions about how working with me has impacted her business!
Here's what she said:
1. What was your absolute biggest challenge PRIOR to working together?
Getting everything to "just work" in my invoicing/bookkeeping system.
2. How did that challenge make you feel?
I was super frustrated. I felt like I should be able to figure it out on my own and was disappointed that I couldn't. I spent so long trying to figure everything out but was just making it worse.
3. What changed after you used my services?
It just worked! I didn't have the dark cloud over my head knowing I had to fix all this stuff. It was a huge relief and a ton of weight off my shoulders.
4. Can you share any specific results?
Rhian found a $20k mistake between my invoicing system and Quickbooks. She saves me probably 20 hours of my time during tax season and I know it will be right, instead of knowing there are mistakes.
5. What would you say to somebody on the fence about working with me?
The investment is well worth it to know that your financials are in proper working order and have a streamlined process backing them.
6. What could be improved upon in my process/services?
I'd love to know even more about what your capabilities are! You could for sure share more about what you do - people can't hire you to fix problems they don't know you have solutions for!
7. Anything else to share?
I'm so grateful for you and love working with you! (Same girl, same!)
Thank you Brit!
See more of Brit's work: