How to Track Your Business Finances Like a Ninja

Share:

How I track my business income and expenses has changed dramatically since I started my online company in 2007. What was once a painful process with uncertain results (I was always losing something) now takes just a few minutes a month. And the result is penny-perfect accounting that even my tax prepare admires.

So how do I do it? I use three simple online accounting tools: Dropbox, Freshbooks, and Outright.

Before I get into how I use those tools, however, let’s talk about the problems small businesses have when it comes to accounting and finance. Before I perfected my current system, I encountered a number of irritating issues:

  • Saving Receipts: Between paper receipts and email receipts, trying to keep them all well organized was virtually impossible. I’d end up relying on credit card statements and checking account records to tally up my expenses at tax time. Not only was this a nightmare of an experience, but the lack of a receipt could give me problems with the IRS.
  • Tracking Expenses: My expenses typically are either charged to my business credit card or my business PayPal account. At the end of each year I’d spend days going through my statements to make sure I hadn’t missed anything.
  • Sending Invoices: While I don’t have a lot of invoices to send each month, the few I do send out were always a pain to generate. And then I couldn’t remember who had paid their invoice and who still owed me money.
  • Tracking Profit and Loss: How much have you made this month? This year? If you’re not sure, there’s a problem. I use to struggle with tracking my profitability. Now I can tell you my profit to the penny.

Back to Dropbox, Freshbooks, and Outright. If you’re not familiar with these tools, here’s a quick summary:

  • Dropbox: A free service that let’s you store files on the cloud. Great for sharing files with others or to backup information in case your computer crashes.
  • Freshbooks: A cloud-based invoicing tool.
  • Outright: A cloud-based accounting software.

So how do I use these tools in my business?

Saving Receipts

The vast majority of my receipts come in the form of email. In the past I’d save the email to an expense folder. That process was a real pain, and all the receipts would be gone if my computer ever crashed.

Today, I convert the email to pdf and save it in a folder called “Receipts 2012″ in Dropbox. To create a pdf, simply “print” your email or attachment to pdf. I give the receipt a descriptive name and select the Dropbox folder as the location. Total time to save a receipt is about 15 seconds.

If you have a lot of paper receipts, I highly recommend the Fujitsu ScanSnap S1500 scanner. This is a thing of beauty. And you’ll use it for far more than receipts. It makes converting all paper to pdf a snap. There’s also a version of the scanner for those that run on a Mac (which is all the cool people).

If you want to take this to the next level, you can create sub-folders by expense category. And at tax time, you can give your accountant access to your Dropbox expense folder if necessary. Imagine not having to lug a ton of paper over to your tax accountant.

Tracking Expenses

Saving receipts is one thing, but keeping track of expenses in an accounting package is another. This is where Outright.com displays its awesomeness. The vast majority of my expenses are charged to a credit card or my PayPal account. Wouldn’t it be great if accounting software could automatically see these expenses and enter them for us? Welcome to Outright.

With Outright, you can link credit card accounts, PayPal accounts and some checking accounts. Whenever an expense hits my credit card or PayPal account, Outright automatically grabs that expense and records it.

For example, this month I haven’t physically entered any expenses into Outright. Yet there are several expenses recorded directly from my credit card or PayPal account:

Outright Expense Tracking

Total time to track expenses: 0 minutes.

Sending and Tracking Invoices

I once used Quickbooks to generate invoices. Because of the complexity of the software, however, I always found it to be extremely difficult to use. With Freshbooks, I can generate an invoice in literally about 20 seconds. I send all of my invoices by email, so the entire process from start to finish takes less than 30 seconds.

And Freshbooks gives you a dashboard that shows you how much you are owed and who is late in paying their invoice:

Freshbooks Dashboard

Tracking Income

The last piece of the puzzle is tracking income. Remember those invoices I send out using Freshbooks? Guess what happens when a client pays me and I record that payment in Freshbooks with the click of a button? That’s right; it is automatically recorded in Outright as income.

But not everything is peaches and cream. Most of my income doesn’t require an invoice. As a result it never goes through Freshbooks. And because of the security features on my business checking account, I can’t link the account to Outright. As a result, I have to manually enter some income directly into Outright. I do that at the end of each month, and it takes about 10 minutes. And that’s the only manual part of my invoicing and accounting process.

Most banks, however, can integrate with Outright. But even with the manual process I go through at the end of each month, the total time for the entire month to track my business finances is about 20 minutes.

To check out the tools I use to run my business, visit Dropbox, Freshbooks, and Outright.

Published or Updated: October 18, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Hi Rob,

    Thanks for writing this. I work with Outright and we’re always interested to see how people are using our service – especially with other services! I did want to mention that we also integrate with a receipt-management service, Shoeboxed.com, but it does sound like you have your receipt process down pat!

    Thanks again for taking the time to make this shout out. I know your process will probably help a lot of people who are struggling to keep their finances straight while having enough time to actually run their businesses!

  2. Laura says:

    I work at Outright. I just wanted to say thanks for the shout out… and it’s so inspiring for us to hear how much our tool has helped you. We love you too! – Laura

  3. Talibro says:

    Creating invoice in quickbooks is very easy. Ctrl+I and ready to go. Article is interested but biased in my opinion.

  4. Sounds like a good process. I just wrote about mine on my blog. It also includes Freshbooks, and then there is another app to follow up with people who don’t pay on time. In my business, I also have a good number of support requests, so I wrote about who I use to track those requests as well.

    A good topic that a lot of people may be interested in. I just wish I had this in place from the beginning.

  5. Ryan says:

    I also recommend the Fujitsu ScanSnap S1500M. I have one for my Mac and I love it. I could have gotten away with one version down, which costs quite a bit less and is smaller, but it doesn’t scan quite as quickly, or include the Adobe Software. But I realized I could have gotten away with it for how I use the scanner.

    My receipt process is very similar to yours – I save all digital receipts to pdf (super easy with a Mac) and store them in a folder with a date based name. yyyymmdd_expense_vendor_name_description.pdf I also OCR everything so the files are searchable if I need to find any more details (but the date and vendor name is usually all I need to find it).

    Other than that, I currently use QuickBooks, which has many of the same features you mention. The only thing I haven’t figured out how to do is link my credit card/PayPal account to automatically import expenses, but I should see if that is possible. That would save some time! I also like the idea of using the cloud, which is much more convenient than being tied to one computer. I’ll look into FreshBooks again.

    • Rob Berger says:

      Ryan, not only is the ScanSnap great for receipts, but my wife and daughter also love it. It makes scanning pictures a snap, and they can be uploaded to iPhoto with the click of a button.

      Good luck with QuickBooks. I found it just to complicated to use. Maybe I’m just not smart enough!

      • Ryan says:

        I have used it for receipts and business documents like receipts, bills, contracts, and statements, but I haven’t used it for photos. I didn’t realize it could upload directly to iPhoto, but my wife is the primary photo person in our house. I pretty much only use my Mac for business related tasks. I’ll look into that feature though. That should come in handy!

  6. Jackie Faith says:

    Hi, will this work for a bookkeeping business? If I have multiple clients that i am managing, can i do this successfully with a single account or would i need a separate account for each client?

    Thanks!!

  7. Jackie Faith says:

    Hi, will this work for a bookkeeping business? If I have multiple clients that i am managing, can i do this successfully with a single account or would i need a separate account for each client?

    Thanks!!

  8. What does OCR stand for? I’m assuming by the statement that it is a text recognizing for PDF. Maybe more complicated than that though. Cloud sounds smart too. Great article.

    • Ryan says:

      Derek, OCR is Optical Character Recognition, and yes, it makes text “readable” by software programs. It’s an awesome feature that allows your computer to index the content of the PDF, so it can be searchable using Spotlight in Macs, or the Search button on Windows. So you can easily find all the documents with a certain account number, address, date, etc. The OCR software is integrated with a lot of top tier scanners or with software that works with them. One example is the Fujitsu ScanSnap Rob reviewed.

  9. Hi there! I am very happy to read this article. This article covers all the points necessary to understand about bookkeeping and accounting software. Also, its good that you have cited about using quick book software by accountants or bookkeeping firms for account receivable invoice. We had referred many Bookkeeping firms and faced the same situation of incompatibility of system that we use before we met one of the bookkeeping firm.They gave us flexibility of using any software system.

Speak Your Mind

*