As you get started with your side hustle you will need to determine how you will complete the bookkeeping for the business. Before we even get into how to do it, bookkeeping is very important and you need to start the right way in the beginning. The purpose of bookkeeping is not just to be able to complete your taxes at the end of the year, although you will need to have it completed for tax purposes, rather the purpose is really to help you determine whether or not your business is profitable and sustainable.
Three Options for Bookkeeping
Now there are at least 3 different options for completing your bookkeeping for your side hustle:.
When you are just getting started with your side hustle and you have very little sales yet, you want to reduce your overhead expenses as much as possible. You really don’t need a high priced CPA to charge you monthly for bookkeeping services when you only have a few transactions per month. To get started, you just need to keep track of all of your transactions with a little table like this:
You will just list each transaction, the date, the dollar amount, a general category of the type of transaction, and a description of the transaction. Ultimately, a bookkeeper or tax accountant will be able to take this and complete your income statement for the tax year in order to complete your tax return.
In addition to keeping track of all transactions, you need to also keep track of all of your transaction by project basis so that you can ensure that you are making money on each individual project/order. Let’s say you have a $6,000 project where you built a deck and outdoor space for a customer, you can just create a little table like this:
In this example, you spent $1,200 on materials, $2,000 for some contract labor that you hired to help you, and then we assumed that you paid yourself $2,000 for the job leaving the company with an $800 profit on the job. You need to get in the habit of tracking your expenses and sales on a project by project basis.
Once the business is consistently generating sales and gross profit each month, it might be time to graduate from Excel and move your bookkeeping to Quickbooks which ultimately is much more powerful than a simple Excel table. If you have less than 10 transactions per month and less than $1,000 per month in sales, you can probably get away with using Excel. If you have any more than that, you probably need to start using Quickbooks. There is a lot of online training for Quickbooks and if you have a lot of time on your hands, or you just enjoy learning how to do the bookkeeping, then paying $20 per month for a basic subscription to Quickbooks is probably your cheapest option next to a spreadsheet.
If you have a lot of extra time, learning how to use Quickbooks and doing your own bookkeeping can be a valuable skill to pick up, but if you have more sales than you have time to fulfill, then you should focus on selling and producing more product or providing more services and simply hire a bookkeeping service to handle your bookkeeping. Bench.co is great for side hustles. They are a mix of technology and people that make completing your bookkeeping really efficient.
Their monthly plans start as low as $139 per month. You can see why you don’t want to start by hiring a bookkeeper right off the bat because if you have less than $1,000 per month in sales you really don’t want to be paying 15% or more of your total sales just for a bookkeeper. At that level, stick with Excel, but if you are selling more than $1,000 per month and could do even more if you had more time, then just hire Bench.co.
Here is a screenshot we took of their different pricing plans to give you some idea of pricing. You can see that Bench.co will grow with you as you potentially grow your side hustle into a full-time business.
Bench.co will complete your bookkeeping and can then provide reports to your tax accountant at the end of the year, or they can file your taxes for you as well as an additional service.
What we hope you take away from this is that doing your bookkeeping is really important, but when you are still small you don’t want to spend too much on bookkeeping. You will need to think of it as a progression from Excel to an outsourced bookkeeping service.