I started a little software company as a sole proprietorship and I'm generating income from an app in the Mac App Store. I have made a few business related purchases (software, web hosting, marketing, etc) but at this point I don't even know if the side business is profitable or not. I have not done a bit of bookkeeping and I think I need to start so I'm ready when tax time comes around. My business has very little cash flow, I have no employees, and no outsourcing. Can I use a personal finance software such as quicken essentials do my business bookkeeping? Professional accounting software such as Quick Books seems like overkill.
Your accounting needs are pretty simple since you aren't sending invoices, receiving payments on invoices and are the only person who needs to get paid.
Essentially all you need to track is money in and money out, some people do this in an Excel sheet or Google doc when small. When it comes down to taxes it's important to know what money spent is tax deductible. In your case pretty much anything you spend money on related to the business will be deductible.
Quickbooks is the most popular. You can get almost any accountant to help you get started with it and explain the basics to you.
My company uses Wave Accounting because it pulls in nicely from our bank accounts like Steve mentioned. We use Freshbooks for invoicing and then log our income periodically into Wave.
The sooner you start the better. I use a free online accounting program called Wave Accounting but there are many others. You connect your bank account and credit card so it will automatically download the transactions which will save you a lot of time. Then, you code each transaction to the correct account and you can generate your financial statement using their preexisting reports. I use QuickBooks everyday and it is definitely overkill at your stage of business.
I'm adding my reply a bit late, but agree generally with the advice you received: consider using Wave, Excel or any other method, but start now; think about the other expenses you've incurred (e.g. office supplies, utilities) for your business.
While it may be daunting to offer your on-line banking information to Wave, or any other Cloud-based accounting system, the security protocols mirror those of most financial institutions at a minimum. With Wave (as well as Outright), you DO have the option of importing your financial transactions.
The benefit of Wave, Outright, Xero, etc. is that the downloading and classification of banking transactions saves YOU time. Imagine running a report, to see exactly how much income you received & expenses you paid/incurred in any given timeframe. That's pretty informative & important.
I say try a week's worth of banking transactions in Wave, or Outright (another no-cost accounting Cloud-based option), as a test and get a feel for the interface.
If you've any questions about Wave, Outright, Xero or QuickBooks, feel free to ask!
Good luck & congrats on the success of your app!
Having accountants would really be distracting for a little cash flow, instead we do have multiple software that can assist the businesses by all means, from the scratch to the hook. Seems that the business is at the primary stage of growth, certainly there isn't a necessity for Invoicing and such applications to be embedded to your bookkeeping, I think so. If its so, then you can try with Handdy Jobook.
Handdy marks its simplicity in handling the books of the businesses, though you're to different places and is of no cost. You can check with it (if required), but seems to help a lot.
The earlier you can get your finances organized, the better. It is a good idea to try to maintain organized finances all throughout the year as well, not just right before tax season. This will help to ensure that you are reporting the most accurate and current financial data on your tax return.
I think that a great option for you would be to use a QuickBooks Online product. Since you are just starting out you could easily get away with using Simple Start. You can sign up for a 30 day free trial and it is very easy to sign up. Some perks of QBO is the anywhere, anytime access you have. You can also very easily sync your business bank accounts and credit card accounts with your online banking and QBO, which is an invaluable feature and significantly reduces that amount of data entry that you would have to do. Some limitations include: you can only have one user, there is no ability to track/enter accounts payable (bills/expenses that you want to track now, but pay at a future date), and there is no way to integrate payroll with Simple Start (but, it doesn't sound like you need this).
Another option is QBO Essentials, which is generally recommended for businesses that are up and running. I would suggest this if you need to have more than one user having access to your QBO and if you have more than one business bank account/credit card account.
Some things to think about:
How many business bank accounts do you have?
Do you have a need for accounts payable tracking?
Do you have a need for payroll?
Subject to location, you have quite a few more expenses than you list. My company, which runs from my home (in Australia), claims the cost my MacBook, Apple subscription program, a percentage of utility costs, coffee, milk, insurance, etc.
On top of that, it employs two people (myself and my wife) so has to issue pay slips, superannuation, workcare, etc. At the end of the year, we pay our accountant to do our tax returns.
Excluding salaries, this still adds up to thousands of dollars that we claim against our income stream.
It might be worth getting something like Quickbooks and getting all this stuff set up correctly from day one. We currently run a Y2K version of Quickbooks since it does the job adequately and we can manually edit the tax tables ourselves. I have never upgraded since QB is very expensive and the new version seems to be subscription based.
Using some software might help, but I think it is better if you get professional counselling before you set up your accounting, so you can do it properly. As you may already know, not doing it may lead to paying more taxes than you would legally be forced to, or fines because you declared less than you should have.
After that set up, I think you can do it most by yourself. I would just do another consultation before preparing the annual income tax return to make sure you are doing it properly.
We've done that since 2005, and so far it's been OK.
You don't mention your location - which will effect the answer.
Personally - the quickest and simplest solution is to go talk to an accountant. Almost all accountants will do a quick free consultation initially. They'll probably tell you enough to know whether you need to spend any serious time or money keeping track of things.