Forget deadlines — balancing your consulting business’s finances and invoicing is a significant source of headaches for many creatives. If we’re guilty of procrastinating or ignoring one thing, it’s crunching numbers and balancing the books.
Losing track of invoicing or missing important tax deadlines can seriously impact your business’s brand and bottom line. Neglecting accounting and billing action items only compounds the problem, increasing anxiety and distracting you from creating your best work.
Enter Tim King, CPA, finance whiz and founder of Slim Accounting, Inc. With over two decades’ experience working as a strategic partner, he’s helped creatives and business owners find the confidence to manage their finances and bridge the gap between money and entrepreneurship.
Set the structure: Sole Proprietorship, LLC or S corporation?
Once you’ve launched your independent business, it’s essential to determine how to classify it for tax purposes. As a general rule, Tim observes, it’s a good idea to create a limited liability corporation (LLC) immediately after starting your small business. Sole proprietorship, the simplest form of doing business, comes with minimal reporting requirements but leaves you responsible for liabilities incurred during business operations. Setting up an LLC gives you some added personal liability protection and helps you avoid commingling personal and business expenses.
If your business is thriving, congratulations! With annual profits exceeding $60,000, it often makes sense to transition from an LLC to an S corporation (S corp) to benefit from significant tax savings. With the added benefits come compliance requirements, though, so get ready to calculate a “reasonable” salary and start paying yourself as an employee.
Tune up your taxes
Learn how tax deductions, including virtual conference fees and your IABC membership, can work to your advantage. You can also save money by forecasting next year’s budget and pre-paying for related expenses. Stay ahead of the curve and set up a quarterly tax-filing schedule – You’ll avoid lost sleep and undue stress when tax season arrives. It’s also crucial to plan for your retirement and invest in your future. Your pathway might be less-defined than a W-2 worker with a 401(k) plan, but you can still set aside money that works for you in tax-advantaged ways.
Establish goals and plan ahead
Moving from a W-2-filing employee mindset to managing your own business and money takes time and adjustment. With a solid plan in place, you can map the financial year ahead. Robust tools and bookkeeping resources that support your success and keep you on track include:
- QuickBooks software featuring receipt capture. Tim is partial to the tried-and-tested platform, observing, “They’re the 800-lb. gorilla for small business accounting.”
- Expensify – An easy-to-use employee expense reporting platform.
- Gusto – Payroll software that integrates seamlessly with QuickBooks.
- Harvest – A simple and accessible timesheet and billing platform.
- A trusted advisor in the accounting and bookkeeping world to save time and reduce your dollar-related anxiety!
Some final financial words of wisdom? Tim suggests doing additional research and approaching “freemium” accounting software programs that often only offer limited functionality with caution.
Focusing on our creative flow and nurturing client relationships will always come first for freelance consultants, copywriters, solopreneurs and designers. But building a plan and calendar of achievable tax and income-related goals are also vital parts of any independent communicator’s long-term success.
Learn more about Slim Accounting here.
Iolanthe Denman is a writer and content strategist based in San Francisco with a passion for crisp, tight copy, T-shirts with a backstory and hot sauce on everything. She manages volunteer recruitment and outreach on SF IABC’s executive board.