Keeping Good Records

[just me and my opinion]

I didn't start out thinking in terms as an "independent contractor"...however, over time (2yrs) that is what is evolving. I finally got out of working for salons (and generally for other people) and am now developing more personal clientele and contracting services in a few different professional settings. It wasn't something I planned, I just moved in directions that felt in alignment. This in turn has opened one door, then another, and another.. and has been developing over the course of several months now.So now here I find myself working for myself. On the one hand - I love it - the freedom I have with scheduling and working with my own cultivated clients, with all the hard labor investing back into in my own home-base. On the other hand (business-wise) ...yikes! I feel very underqualified.One of my biggest challenges with this is keeping good records. I am literally "paper-challenged" and easily fall behind and get overwhelmed. Presently, I just stuff all my spenditure reciepts in an envelope and write services rendered (usually just checks) for clients in a receipt book. Cash transactions often get lost in the shuffle. Keeping Soap notes has also become an issue - where to begin when you have already fallen grossly behind?As far as finances go I am looking into an accountant to help sort out the mess, as well as declaring myself as an independant business.. He mentioned 2 options for filing as a business. One was as a "LLC" (limited liability company-and sole proprietor) this files your name with the state, offers a certificate of formation, gives more liability protection/ coverage, (AMTA not enough?) and a Federal ID#. It will cost about $375 for a one time set-up and this also includes the filing for taxes fee. The other option he mentioned was a "Sole Proprietor- Schedule C." This costs nothing to set up but legitimizes one's business with the state. He also mentioned something about filing a "company name" (which I don't have as yet) and that fell somewhere under the LLC. I still would have to pay around $250 to hire him to do my taxes. He also suggested at some time to open a business account and use that strictly for any of the business transactions. But at present...every dime goes into paying bills. I am single w/ 2 teenage daughters, so I am winging all this by myself. I feel like things are going to snowball if I don't get a handle on this soon. Having worked for others...they always handle all that stuff...now it's on me. The massage part I can handle quite effectively...it's the business part and keeping things organized that has me concerned.Perhaps I should look into one of those office computer programs...although I am hardly computer savy...which is what has kept me in the dreaded paper trap.Any expertise, experience, and/or insights would be most welcomed.

 

[Baby Gurl]

Keeping Good Records

Hi Tracey,I am a Tracy too. I am also just learning the business end of this. Actually, my husbands's accountant told me to keep track of everything coming in and receipts for everything going out. Mine are also stuffed in an envelope. The only thing I do different from you is that I have a ledger where after every appointment I write the date, type of service, and amount received. I'm going to let the accountant figure it out.

 

[jacko brightside]

I love simplicity...and at this seforum.xxxe of the game would prefer it. I can always add on as needed down the road. I just want to make sure I am doing things legally. And there are SO many questions that keep bubbling up to the surface..So if I understand correctly, all I need do is file taxes using the Schedule C form. Using my own name for now is quite alright, as I do not feel the need for a company name as of yet. I am contracting more services "out" as opposed to having a personal place of business.. so that is welcomed information. Some questions:*Do I  need to declare my status as a "personal business"...and/or "independent contractor?"  *Are the massage insurances (mine is AMTA) sufficient in and of themselves?*Is a ledger sheet all that is needed for the accountant?*What about expenses...do you record them as well on the ledger? (I just keep receipts in an envelope) Do you pay quartlerly income taxes or do it all at the end of the year ?What is an average fee to hire an accountant for just this business alone?It is now October...should I get one now?

 

[KatieVee]

Keeping Good Records

BJB...thank-you for the wealth of info. I greatly appreciate the valuable insight..It sounds like there is an advaneforum.xxxe to "incorporating" in terms of liability - if one files as a sole proprietor there is more personally at stake - like loosing one's personal assests should a claim exceed one's insurance. I live in NJ...perhaps it would be wise to contact some of the area schools and get some feedaback for acquiring a reliable accountant who has experience working for therapists in the field.Continuing my education is a dream once things stabalize...not a practicality at this time..$$ etc. Soon time come I hope.Thank-you for the Soap note suggestion..I felt at a loss as to how to re-trace someone's history and truly got stuck as to how to get back on track.Breaking things down monthly on a ledger makes practical sense. I like the idea of including the envelopes for money-in and money-out etc.It is SO nice to have the support of this site

 

[Bubblegum14]

I too am considering the pro's & con's of incorporating & had an interesting discussion with my insurance agent that carries my small biz coverage.  The gist of our conversation was that by being adequately insured via my small biz policy, my professional liability thru ABMP & my umbrella policy that is a part of our homeowner's insurance, that I should be OK as far as protecting my personal assets if a law suit should arise.  BTW officers of a Corp are not shielded if if injury is caused by gross negligence - in other words, you are never 100% safe, even if you are an Inc.  From what I have researched, the only benefits to incorporating are... 1)  potential tax benefits - which I am not sure if the added cost of tax prep & paperwork to incorporate really leave me with much benefit when all is said and done (BTW I have a meeting scheduled with my accountant to prove this out & will be happy to post when I get this info)2)  personal protection from business debt - If the business goes under & the business owes vendors $$$, you & the business are separate entities.  Seeing how I have no business debt, this is not really a 'benefit' to me.3)  Legal protection of personal assetsBeware that incorporating requires MUCH more paperwork & if this paperwork is not completed i.e. minutes from your annual Board of Directors Meeting (which can consist of ME, MYSELF & I) and you are audited, the IRS will deem that you were not running your biz as an Inc. & will deem you a Sole Proprietor ANYWAY.I'm not saying to not Inc, but you really need to do your homework.  While there are benefits to incorporating, make sure that the benefits actually BENEFIT YOU & YOUR SITUATION.If you are looking to Keep It Simple, Sole proprietorship is definately the easiest way to go as far as business structures are concerned.If you are looking for some advice, this is what I would recommend.1)  Make sure your insurance is up to date at a bare minimum you need your-Liability Insurance (ABMP, AMTA & there are others out there too) which covers you if you injur a clientSmall Business Coverage - this is your 'slip & fall' protection & your 'if my practice burns down my equip will be covered' protection.  Talk with an insurance rep.2)  OPEN A SEPARATE CHECKING ACCT FOR YOUR BUSINESS EXPENSES AND BUSINESS INCOME.  This will make your life soooooooo much easier, you HAVE to separate your business and personal expenses, you will be THANKFUL come tax time!All your points are good points to look into and you must seek out professionals (accountants & insurance reps) to help you decide what is best for your unique situation.  The two items above, however, will benefit you, no matter what you end up choosing, and is a good place to start IMO.One final tip - chech out the website http://www.nolo.comGreat info that is easy to understand & they have soem great books too - I recommend to read, read, read!Good Luck

 

[Life is lonely]

As stated above, get a separate checking account for your business. Write checks for your expenses and note what they are (sheets, business cards, music, etc.) You can save some money on accountant fees if you also write this in your ledger.  Office Depot has accounting notebooks with explanations as to what kind of expenses go into what categories. Office expense, Business Supplies expense, etc. I estimate the amount of taxes I will owe, divide by four and pay quarterly.  Your accountant can help figure how much. (Yes, get one now. He/She can help you set up your books.)  Quarterly taxes are due Jan 15, Apr 15, June 15 and Sept 15, not exactly quarterly. I don't "do my taxes" four times/year, just send in my check. IRS seems to prefer it this way. Accountant fee (which is deductable the following year) is about $200 at the time I pick up my taxes (you shouldn't have to come up with anything now.)IMO, AMTA is enough for your business. If you rent space, you may want renter's insurance.Seems like you want to be a Sole Proprietor. IC is included in this. Just note where your income is coming from. For tax purposes it will all go under Sole Proprietor.As for "every dime goes ...", just keep some money in your acct. so you won't bounce checks or incur bank fees (pretend $200=$0). Pay yourself and keep track of these withdrawals (owner's equity). I withdraw the same amount each time so I can tell at a glance how much I "got paid" and how business is doing.Good luck and smarts. Feel free to PM me if you have  any other questions.

 

[Pumpkin]

Yes. I am thinking "Sole Proprietor" is what best fits the situation at present. If, down the road services expand to such an extent where I'm dealing with alot more people, I can then consider incorporating to gain better coverage pertaining to bigger business issues. Yes - thank-you - AMTA is there for a reason and is hopefully serving the needs of the situation sufficiently.(though I guess it also wouldn't hurt to give them a call and make sure) The one accountant I first spoke with led me to believe that "incorporating" was just the safest and best route to consider as it offered more options...BUT...it is indeed very wise and prudent to weigh all the factors that best fit one's personal  situation -- "knowing" is half the battle. I do not think this particular accountant has experience working with therapists in this field...so his suggestions though relevent might be more than what I need at this time.

potential tax benefits - which I am not sure if the added cost of tax prep & paperwork to incorporate really leave me with much benefit when all is said and done (BTW I have a meeting scheduled with my accountant to prove this out & will be happy to post when I get this info)

Yes. I would appreciate you posting what you learn from this meeting.

OPEN A SEPARATE CHECKING ACCT FOR YOUR BUSINESS EXPENSES AND BUSINESS INCOME.  This will make your life soooooooo much easier, you HAVE to separate your business and personal expenses, you will be THANKFUL come tax time!

and...

As for "every dime goes ...", just keep some money in your acct. so you won't bounce checks or incur bank fees (pretend $200=$0). Pay yourself and keep track of these withdrawals (owner's equity). I withdraw the same amount each time so I can tell at a glance how much I "got paid" and how business is doing.

This point still has me puzzled, as the sole income from the massage business is what is paying the bills - all of them - and personal home expenses, car, etc.. all fall into the same category. There just is not enough to separate what limited funds there are into 2 different categories at this time. (though I can see how that would be a good thing when there is enough to do so) But still the question remains - How does one pay "themselves" when the only income coming in is paying all the bills? I don't see myself (yet) as a separate form of "equity." My business and everything connected are seemingly one in the same.

One final tip - chech out the website http://www.nolo.com  -Great info that is easy to understand

Have you personally used these books/programs by "Quicken?" If so, did you find them easy to navigate and more importantly - easy to apply in setting up your business and grasping the fundamental basics of business concepts?

You can save some money on accountant fees if you also write this in your ledger

How do you save more money with an accountant by doing this? Do they charge an hourly rate.. and by giving them ledger sheets this saves them some time...thus reducing the fee? -  Thank-you All for continuing to share your insights, your experience/expertise in these matters is most helpful  ))))

 

[Underground lightning]

Hi Tracey!

This point still has me puzzled, as the sole income from the massage business is what is paying the bills - all of them - and personal home expenses, car, etc.. all fall into the same category. There just is not enough to separate what limited funds there are into 2 different categories at this time. (though I can see how that would be a good thing when there is enough to do so) But still the question remains - How does one pay "themselves" when the only income coming in is paying all the bills? I don't see myself (yet) as a separate form of "equity." My business and everything connected are seemingly one in the same.

It is very important to separate your business and personal expenses so that you are not paying too much in taxes.  Let me try to give you an example...Fees that you recieve from clients are considered income that you must report and pay taxes on.If, for example, you had a family member generously donate, let's say, $2000.00 cash to you as a gift, and you just plunked everything into one account & you were audited and did not have clear records of where your income was coming from (you mentioned in your previous post that cash 'gets lost in the shuffle') the IRS may decide that that $2000 was actually FEES paid to you by clients and you would then have to pay taxes on that money.  Again, this is just an example.Expenses run the same way....  If you are claiming expenses at the end of the year (and you should claim AS MANY AS YOU CAN) and they are not well documented, the IRS could decide that they are not legit business expenses, thus INCREASING the taxes that you owe.Technically, you CAN use one checking account for all - business & personal - it just makes keeping these records (what income you need to pay taxes on & what expenses are legit business deductions) more difficult to separate & sift thru at years end (especially if you are not really good at keeping your paperwork straight).If you are not at a point where you feel that you can separate your finances into two separate accounts, try to make this a goal of yours - i.e. "in x months, I will be able to open another checking account"  One perk as a sole proprietor is that you can open just a plain old checking account (doesn't have to be a biz account that usually costs more in monthly fees) and if you do online banking, link your accounts so that you can easily transfer $$ from you 'personal' to 'biz' acct's.You also asked about Quicken - I actually use Quickbooks for my accounting/bookkeeping & LOVE it.  Quicken is a more basic version but would probably serve you quite well (and is less $$$) if you consider yourself comfortable with computers.  Quicken would let you track your income/expenses easily once it is set up.  

 

[Man of Action]

Tracey,The reason keeping your records organized saves you money is because it reduces the TIME your accountant spends organizing your information to be able to prepare your taxes.One other $$ saving tip I would like to pass along is that you may want to look into finding a BOOKKEEPER as well as an accountant.   I work with a woman who is a bookkeeper, she does not/is not able to give me financial/accounting advice (it's out of her 'scope of practice' ) but she helped me set up my Quickbooks files & she keeps me organized, for about $35.00/hr (I usually meet with her 2 to 3 hours a year after her initial time getting me organized & up to speed with Quickbooks)  What this buys me is that at year end, when I go to my accountant (who charges me WAY MORE than $35/hr)  All my paperwork is ready to go, saving me time = $$$.

 

[ladyofGod]

Looks like you already got very good answers to the questions aimed at me.  Thought I'd let you know that I use Quicken instead of a paper ledger. I had help setting it up.

 

[tracie]

Berkana and BJB...both your examples made great sense and helped put things into a more do-able and comprehensive perspective. I can begin to understand the value of having 2 separate accounts so as to keep Uncle Sam from taking more than his share. Utilizing "owner draw" for personal expenses will also help keep track of my own spenditures.Pete, yes...I do have Excel on my puter...but no...am not proficient - yet willing to learn. My puter skills are on an as-need-basis with unfortunately wide gaps in-between. I would more than welcome a walk-through the Excel program to see if this is something I could use since I already have it. An aquaintance of mine also uses Excel for her business, and she seems to like it.  If I need a more expansive program... then I will def look into Quicken or Quickbook.You can reach me at:  [email protected] to explain in more detail.....thank-you for taking the time, Pete.By the way Berkana...using the services of a bookeeper to help get started is a great idea - I also appreciate having a sense of the $$ one would charge -thanks!

 

[Camona]

Keeping Good Records

Hi.

I don't know if what I have to say will vary much from everyone elses comments, but I would like to try and help as well.  I haven't had a chance to thoroughly read what everyone has posted, so you may have some repeat info.

When I first started my business, I definitely got an accountant.  He charged about $200 for filing the taxes.  At the time it seemed too expensive, but in the long run it made me feel better about what was happening with the governmental side, as accounting is not my strongpoint.  

I also remember doing the following (there may have been more):  

- filed with the county for my business name as a sole proprietor.  I went down to the "sub-station" and filled out the paperwork, paid about $25 and made sure to get extra copies.   Extra copies of that paperwork are a must!    

- got a tax ID number, but I can't say it was a necessity at the time.  I had to call a number and they actually gave me the tax ID over the phone and later mailed me the standard paperwork regarding it.

- set up the office with actual paperwork including file folders (with end tabs for the letters of the clients last name, for ease of locating), intake forms and a pegboard system (Pegboard System, Day Sheet, Patient Transaction Slip/receipt, Ledger Card).  I made sure to also keep an actual appointment book (the kind with the days and times in them) in order to be more neat and tidy.  I also set up two chart holders (one for the clients that were coming in that day and the second one for the charts that had to be completed - Example: if, I didn't complete charts from the previous day, they would be there, as would the ones I had seen on the current day -- I just put the chart in the second holder after the client was seen, and it waited to be completed).

I use a company called medical arts press for my filing and peg board supplies.  
http://www.medicalartspress.com/ShopFrame.asp


You can order a catolog from them and don't have to be a dentist, medical doc or chiro.  I like their company and they allow you to pay after the order is shipped.

- SOAP notes are a must and in a smaller massage office can be kept in a running format on a progress note sheet.

- The inital paperwork cost for the office supplies, I believe was in the neighborhood of $400.  Probably less.

- I definitely set up a special account for the business, though it was not a business checking account.  It worked fine for what I was doing at the time.

- For receipts: 12 small brown envelopes so there was a Jan./Feb., etc.  ... along the way, I would tally up a paper which was formatted like the following for each month's receipt envelope and put the cost of expenses behind whatever section I had spent $$ on  (so you'd see Association Dues -- $45.00 in Jan. but maybe not in February):

PROFESSIONAL FEES & DUES
Association Dues
Credentials
License
Professional Associations
Union Dues
Other:

CONTINUING EDUCATION
Correspondence Course Fees
Course Registration
Lab Fees
Materials & Supplies
Photocopy Expense
Reference Material
Research Expenses
Seminar Fees
Textbooks
Other:

TELEPHONE EXPENSES
FAX Transmissions
Paging Service
Pay Phone
Toll Calls
Cellular Calls
Other:

AUTO TRAVEL
Between Jobs or Job Locations (mi)
Client Meetings (mi)
Continuing Education (mi)
Job Seeking (mi)
Out of Town Business Trips (mi)
Purchasing Job Supplies & Materials (mi)
Parking Fees ($)
Tolls ($)
Other:

MISCELLANEOUS EXPENSES
Liability Insurance - Business
Subscriptions
Resume
Other:

SUPPLIES & EXPENSES
Briefcase
Business Meals
Business Cards
Clerical Service
Computer Software
Computer Supplies
Customer Lists
Entertainment
Equipment Repair
FAX Supplies
Gifts
Greeting Cards
Legal & Professional Services
Office Expenses
Poseforum.xxxe
Shipping
Stationary
Technical Publications
Other:

EQUIPMENT PURCHASES
Answering Machine
Calculator
Copy Machine
FAX Machine
Pager
Recorder
Telephone
Other:

TRAVEL OUT OF TOWN
Airfare
Car Rental
Parking
Taxi
Train
Bus & Subway
Lodging (do not combine with meals)
Meals (do not combine with lodging)
Porter, Bell Captain
Laundry
Bridge & Highway Tolls
Telephone Calls (including home)
Other:

When all of that was done, I'd make up one for the final end of the year, so that all 12 months information was accumulated onto one page.  I would actually tally up the expenses per item and per section and a final total for the whole year.  It was a bit of an overkill, but I wanted to make sure the accountant had all the info and would not have to call me after I dropped everything off.  I also color coded a lot of that stuff.  The less work for him, meant the smaller cost for me.  

OK, so that was the way I started out.

~*~

Later I purchased Quicken.

~*~

I now have Massage Office Pro for my SOAP's and I have purchased Quick Books Pro (required by my accountant).  My current accountant fees are about $800/year (I changed accountants). I have also incorporated as an LLC -- incorporation fees were $1500.  If you can get incorporated for about $375, make sure you have a good lawyer and then go for it, is what I say.  After incorporating you will have to get a  business checking account.

Our things are a bit more expensive because our business is two-fold, but it still gives you an idea of what is out there.

Hope this helps some.  

 

[kimmywimmy]

Hi آ 8)A few other thoughts, and additions to what I was saying, thinking and doing Regarding the SOAP notes and you setting setting up your business:Something to consider, as mentioned before about not stressing over the old SOAP's. آ Start EVERYTHING fresh. آ Actually take brand new intake forms on everyone, as well as providing the HIPPA info. آ We have to do HIPPA now anyway, so if you are required, now is a perfect time to implement. آ Just tell your clients you are re-formatting your "office" and the "laws have changed". آ You won't get many objections that way.Then, everyone gets a fresh folder, and the SOAP's start there.Regarding the peg board system: آ This system actually keeps track of income in, and allows for you to keep a ledger card on each individual client, as well as providing a receipt. آ It is made with carbonized receipts, which transfers onto the ledger card, which in turn transfers onto the day sheet, so everything is written in one transaction for all of your records - and your client takes the receipt home. آ It is a simple system in my opinion, and with a small office you can put one months work of work on one day sheet.The receipts can be printed any way you want them, you just have to pay about a $25 set up fee and M.A.P. (Medical Arts Press) can do things like, make a line for anything you may sell (candles / pillows / supports, etc.)  along with your services.  We have the services on ours.  So one line may say myofascial release with the proper code (if that helps).  Coding on a receipt is important in my opinion, in case the client was referred to you, they can use the receipt easier to get re-imbursed by their insurance company.  But, that is a personal preference and would all depend on how your own place is set up.Last, regarding the seperate accounts and feeding yourself hand to mouth, so to say: آ I did that for a VERY long time. آ What the other people said is true. آ At the end of the day, put all of your income into your "business account". آ Try to take out what you need as a draw and shift it into your personal checking account. آ You may have to do this 2x/week, 1x/week, once per 2 weeks, or once per month - depending on your situation. آ I did it sporadically at first and it really helps to get yourself on a schedule. آ As well, you can pull out $50 for each draw, $100 for each, or whatever works for your pocketbook. آ Make sure and write yourself a check when possible while doing this. آ It makes it much easier to tally at the end of the year.Happy massage! آ