[inaudible]
everyone.
Welcome back to my channel, the best place for new coaches, content creators and entrepreneurs.
Now in today's video you'll notice that I'm in a whole different setting and that's because
this video is super special.
You all know that I've had a year long journey since starting my business.
And through this journey I've learned a lot of lessons and I've made a lot of mistakes
specifically around business finances, managing my money and taxes.
Luckily for you guys, I really wanted to make sure that I give you guys the best information
possible.
So in today's video I've actually invited my own bookkeeping company, bench accounting
to help you guys walk through your first tax season as a new entrepreneur.
So I want to introduce you guys to Sebastian.
Hey guys, I'm Sebastian.
I work here at bench and welcome to our Vancouver headquarters.
Hey Sebastian.
So today Sebastian and I are going to walk you through step by step how to prepare for
your very first tax season as a new entrepreneur, including how much to save for taxes, how
to even start your taxes, how to do bookkeeping and everything like that.
So let's get started.
Yeah, absolutely.
So the first that we have for you today is to actually start bookkeeping.
Wait, hold up.
So I know when I first started my business in fashion, I actually had no idea what bookkeeping
was.
So do you mind just taking some time to explain to everyone that's watching?
What exactly is bookkeeping?
Great question.
And a very common one for many of our clients.
Very simply, bookkeeping is the day to day recording and categorization of the financial
transactions in your business.
It serves as the groundwork for making good business decisions, filing taxes, and a number
of other functions.
So it's really essential that you have it in place.
So for example, when you do your bookkeeping, you're going to be able to not miss out on
deductions, right?
Your account will be able to look at your books at the end of the year and make sure
that you're capitalizing on all of the claims that you can to make sure that you're not
overpaying on your taxes.
Not only this, when you have solid bookkeeping for your company, you're able to clearly see
what exactly is going on in your business.
Meaning that you can catch errors really quickly, see exactly what's coming in, what's coming
out, what your profit margins are like, so that you can make better financial decisions
for your business.
So now that you know you just start bookkeeping, our second big tip is to get a bookkeeping
system.
Wait, hold on.
Another question for you Sebastian.
So again, when I first started I was so overwhelmed with the different types of options that I
could choose as an entrepreneur.
So I would love to know what is the difference between doing a DIY system, like using wave
apps, which I used to use QuickBooks and everything like that versus using a service like bench
accounting,
right?
So the first thing that we do want you to know is that your best bet for us picking
a specific system is going to be consulting a professional who is in your specific area
and is familiar with the financial reporting laws and requirements in that area.
I definitely get to get that consultation.
But at a high level, the DIY can be a good solution for when you're starting out.
It's just kind of a side hustle and you're seeing if there's any traction on the business.
But even in that case, you've really got to make sure that you're on top of it.
A lot of our clients run into trouble with that, where they'll say, this is too small.
I don't want to front the expense right now.
And they'll try to record the transactions, but by the time they hit tax time, they fallen
off, they'd properly categorize things and tax season ends up being a bit of a mess.
So it can be done.
But we've seen very mixed results with it
guys.
What Sebastian just said is so, so true.
So let me tell you my experience with the DIY route.
So when I was first starting my business, I was a solopreneur, super burnt out, and
I didn't have a lot of money to be honest.
And so I went with a free DIY service.
Now, the problem is is that it required me to really be on top of all of my tracking's,
my expenses, my revenue and everything like that.
But since I was starting up my business, I didn't really have a lot of time to stay on
top of everything.
And so what ended up happening is every month my financials were not correct, very inaccurate.
And so I didn't have a solid picture of exactly how my business was doing.
And so what really ended up happening is I thought I had more money in the bank that
I actually did and that led me to make really bad financial investments and decisions simply
because I didn't have good bookkeeping because I wasn't consistent in being organized through
the DIY route.
But I think you've highlighted one of the really big issues with the DIY route.
There can be big knock on cost to it later.
Like I mentioned before, you can run into problems down the line if you're not making
that investment in a good system upfront.
So our advice is always full-stop, outsource it, we'd love for you to do it with bench.
We created bench as a online bookkeeping solution.
We connect you with real bookkeepers here at our Vancouver headquarters.
We don't send the books off to some distant location.
We'll make sure that you're on top of your financial reports every month or that we stay
on top of your financial reports every month so that you have a good pulse on what's going
on in your business and also so that you're prepared for tax time.
So just whatever solution you use, just make sure you're getting an outsource.
It's usually not worth going to the IRI route.
We've been a great solution for thousands of entrepreneurs and our clients do love us.
Vanessa is one of those clients.
Yes, absolutely.
So since moving to bench accounting, I've had a very crystal clear picture of where
exactly my money is going month to month, which has been so helpful for me as an entrepreneur.
Now when I say I know exactly what is going on in my business, I really mean it.
This is a sneak peek of what it's like to work with bench accounting.
Not only will they compile your revenue and your expenses, but you also get a really good
pulse on your profit, which is really important.
Now only this, one of my favorite features is just being able to see at a bird's eye
level what my top 10 expenses are in my business.
This allows me to make better decisions in my business, not only this is something that
I also really appreciate is being able to message my bookkeeper on the go any time.
This allows me to clarify things I don't understand and also answer any questions that they have
as well.
Next up, another really convenient feature is the ability to upload documents to my bookkeepers
and have them categorize it for me.
Now if I'm on the go, I can also email them using a special email that they have for me,
so when I do email them documents, it will automatically be uploaded into our portal.
As you can see, this was only a very small sneak peek of the things that bench accounting
offers.
So if you want to learn more and you want to try it out yourself, definitely make sure
you check out the link in my comment section and in my description box below to not only
start a free trial but also get 20% off your first six months using bench accounting with
my link exclusively.
Now with that out of the way, let's dive right back into the video.
So now that you've chosen a bookkeeping, the next important step is to talk to the professional.
And that's because while a bookkeeping system is great, it's only half the equation,
right?
So another question for you, Sebastian, is a lot of new entrepreneurs specifically don't
actually know the difference between a bookkeeper and a certified public accountant.
So do you mind just going through what the differences between a bookkeeper and an accountant?
For sure.
So your bookkeeper or your bookkeeping system are going to be handled that recording and
categorizing it the day to day transactions in your business.
That's serves as the foundation.
What's built on top of that are the services that a CPA provides.
So that'll be consultative advice on how to structure your business tax deductions and
it'll also be tax filing services always wise to find a good CPA and enlist the help of
a CPA.
They'll be able to make sure that you're not overpaying on your taxes, help save you money
and make sure your business is structured properly.
Right.
What Sebastian said is totally right.
You definitely want to enlist an accountant and once you've done that, the next thing
that you want to do is to keep things organized.
Oh my goodness guys, you have no idea how important this step is, especially if you
want to have a seamless process towards your first tax season as a new entrepreneur.
So in preparation for tax season, there are some things that you should definitely, definitely
be on top of.
And the first, and one of the biggest ones is to keep your personal and business account
separated.
This is one of the biggest pitfalls that we see for some of our clients fall into.
And it can really cost you a lot of time when you're getting ready for tax season and trying
to get everything categorized correctly.
So please take it from me.
You want one credit card for personal, one credit or debit card for business.
Keep your transactions separate, keep your subscriptions for business and personal, separate
it will make your life so much easier.
So why exactly is it important to keep these things separate?
Two big reasons.
The first being liability, if there's no clear separation between business and personal expenses,
you might end up being held personally liable for expenses on the business and that could
really amount to a lot of money at your center.
Not only this, the second reason why keeping business and personal separate is important
is to avoid headaches.
And I can firsthand testified to this.
I was really bad with keeping things separate.
And so by the end of the year when I actually had to give everything to my bookkeepers,
give everything to my accountants, it was such a freaking mess.
Sebastian, you have no idea.
I had to comb through all my receipts, come through all of my statements to manually separate
everything and it was just a mess.
So the next time you need to take and making sure that you're keeping things tidy is to
categorize your transactions.
Sounds like a bit of a no brainer.
If you're doing this manually, then you got to make sure that you stay on top of it.
If you're with the service like bench, then we'll make sure that we're doing the bookkeeping
for you and getting everything categorized each month.
And we might reach out to confirm or ask a question or two, but those are usually pretty
rare and we can get most things categorized.
No problem.
Exactly.
And what this means is that if you do a photo shoot with a photographer, let's say the makeup
or the clothes that you buy specifically for that photo shoot, you've got to make sure
it's going under personal appearance.
Or if you made a core sale that goes under revenue or if you're buying new tech for your
YouTube channel that goes under office supplies.
And while the examples, the Vanessa's given a really common categorizations for expenses,
just make sure that you're still consulting that professional is specially, it feels expenses
might be tax deductible.
You want to make sure you're getting them right.
Not only this, every single business is different.
So that's why it's even more important that you consult a CPA.
Now, speaking of keeping things organized, the next tip is something that I majorly failed
at and that is track of your receipts.
Now, since I am definitely not the expert at this, and I personally have a lot to learn,
I'm just going to let Sebastian take this one away because he probably is the expert
on this when it comes to keeping track of your receipts.
I mean, you're, you're not alone and I certainly have trouble keeping track of my own receipts.
I think everyone does.
Uh, but what's really, really important is to make sure that you're keeping track of
those itemized expenses, especially if they're tax deductible.
If the IRS ever audits you, they're going to need to see proof of things like client
meals, et cetera, that you've claimed.
If you don't have that proof, if you don't have that written proof, then it's you know,
you will get penalized by the IRS and sometimes those fines can get pretty hefty, not something
you want to deal with.
Yes, exactly.
So learn from my mistakes guys and keep track of your invoices, your receipts, he transfers
bank statements and so much more.
We're not going to talk about all of them in this video, but make sure you check out
this list right here to see all the things that you need to keep track of in your business.
Now while it's very important to save all of these things, one pitfall that we see business
owners falling into because all saving them properly, that is also important.
So a couple of things to keep in mind.
First you want to hold onto receipts and records for three years.
That's the amount of time that the IRS has to initiate an audit.
And the second thing that you really want to be sure of is that you're recording the
amount paid, what was purchased and the date on each of those receipts.
If it's a business meal, a couple extra things to add who attended the meal and what business
related topics would discuss that.
That's really important because if the IRS does initiate an audit, they'll want to see
to prove that that business meal was actually a business meal and you can write it off
you guys.
Oh my goodness.
When I found out about the three year timeline, when the IRS can actually audit you, I absolutely
freaked out.
So now as a bonus tip to you, I'm going to show you guys exactly how I save all of my
receipts onto the cloud because it's unrealistic for me to hold on to three years worth of
receipts, right?
While shoe boxes.
Yep.
Exactly.
And so before I show you how I do it, the reason why this is important is because the
IRS is going to need supporting documents when they audit you.
So it's always smart to put all of your receipts through Evernote, Dropbox, Google drive, anything
like that.
So in a second I'm going to share my screen and show you exactly how I do it.
So I use an app called genius scan to do all of my receipts savings.
So what I do is I take a picture of all of my receipts, convert them into a PDF, and
I do that for all the receipts of the month.
Sometimes I do it for the month and sometimes I just do it on the fly individually.
Now afterwards when you hit export document, you're going to have tons of options like
Google drive, one drive, Evernote, Dropbox, everything like that or an even email.
Personally for me, I like to save things to my iCloud because I have a Mac book.
Now once I click that, I'll then click desktop receipts, receipts 2020 and then save it into
my folder.
Now on my computer, because everything is linked together, it is now saved on my computer.
So this is how I do it.
And once I have that PDF, I just drop it to bench.
Now if you don't have MacBook, let's say, or an Apple, what you can also do is you can
actually email these receipts you.
So for me, when I do this, I end up emailing it to bench that special email that they have
for me.
And after I've done that, they'll actually send me a notification that they received
it and that the documents were saved to our bench portal.
So this is my little hack on how I make sure that I stay on top of saving receipts.
Now back to the video.
So now at this point in the video, we've given you some solid tips on how to get organized
for tax season.
So let's shift gears and talk about setting aside money for taxes.
Yes, this is so, so important in a really big pitfall that a lot of new entrepreneurs
fall into is that we're very revenue focused.
But then when tax season comes, we're like, wait, what?
The IRS is taking all of my money away.
And so don't worry guys, it's not all of your money, but you do need to set aside that money
and figure out how much you're going to owe in taxes so you can be prepared and be more
proactive than reactive.
Right?
And one thing that a lot of entrepreneurs and small business owners have trouble with
is figuring out how much money to set aside that they're going to pay the IRS.
So really simple heuristic to make sure that you're setting aside roughly the right amount
is to assume that you're going to pay approximately 30% of your income to the IRS.
The 30% rule is just a really useful rule of thumb.
And we would even say that you should take it so far as setting aside money well in advance
and even creating a separate account.
Yes, exactly.
And the thing is that you guys need to know is that dipping into your savings or realizing
that you actually don't have the money to pay your taxes at the end of the year is a
huge no, no.
So thankfully for you guys, now that Sebastian has explained the 30% rule, you guys can actually
plan in advance and there are three ways that you can do this.
Number one, her payment number two monthly and number three yearly.
So those are the three ways that you can actually start setting aside money for your taxes today.
Sebastian, do you want to walk over the three methods?
Absolutely.
So the first big one is prepayment invoicing is a core of your business and this is a great
way to do it.
Every time one of your clients base, you take 30% of that money and set it aside for taxes.
So the second option is to use the monthly method.
Now this is really useful if you have a digital product business like Vanessa selling online
courses, you'll be seeing more transactions every month.
So at the end of the month, set aside 30% of that income and make sure that it's there
for tax time.
The final option, we don't really recommend it.
That's setting aside money yearly.
So just set aside the money 30% right at the end of the year.
That really only works if your business is receiving revenue really infrequently.
Even in that instance that might be for a business that has revenue from say a couple
large contract payments per year, probably still best to use the per payment method or
the monthly if possible.
Those new methods are really put in some good habits.
Make sure you're setting aside the right amount of money for tax time.
All right guys, so so far in this video, Sebastian and I walked you guys through a lot of tips
and tricks to help you prepare for your very first tax season as an entrepreneur.
And trust me when I say this, a lot of this information I wish I had when I first started
my business because that would have definitely created a lot less headaches than I experienced
in my first year.
So I mean this a lot when I say thank you Sebastian and bench accounting for agreeing
to partner with me on this video because I definitely wanted to make sure that we had
experts in this video really teaching you guys how to manage your taxes and how to prepare
for your taxes as a new entrepreneur.
Now if you guys are ready to take your business to the next level, make sure you check out
the link in my description box or the comment section below to not only get a free trial
off edge accounting but also your first six months to get 20% off.
Anyways, thank you so much against fashion for agreeing to be a part of this.
Hey, no problem.
It's really great to be here and help your viewers and all the people watch and get on
track with their business finances.
I know it can be a really, really stressful time, especially around tax season for small
businesses and entrepreneurs.
And so if you need a bookkeeping solution, we really do hope that you'll check out advantage
even if you need to get your taxes file.
We have a new tax filing product called bench tax.
We can help with that too.
So a contract is out and we look forward to hearing from you.
Thanks against Bashin.
So anyways guys, I hope you guys enjoy today's video.
I hope that you took a lot of key takeaways away to make your first tax season super seamless.
As always, guys, I appreciate you.
I hope you guys have a great day, a great week, and a great life, and we'll see you
in the next one.
Bye guys.