Which Bookkeeping Software Should You Use? | Incite Tax

Hello, my name is Kyle Nayy. I work with Insight Tax in the bookkeeping department, and today we are gonna go over some basics for business owners that are interested in doing their own bookkeeping. So if you're watching this and you are a business owner and you are wanting to do this yourself and not have to pay someone like us— we're great at it, but you you want to save the money and you want to do your own bookkeeping, then this video is for you. So a few things that we're going to cover in this video. The first thing, we're going to go over what bookkeeping is and a high-level overview of the financial statements and kind of what the accounts are that fall into those financial statements and why those are important. And then the second thing, there's a lot of different tools available for you as business owners to do your own bookkeeping. And we're going to go over some of those tools. But one tool that we're going to focus on in this video is Excel and how to do your own bookkeeping within Excel, just because most business owners already have access to Excel and it's pretty easy to do it if you don't have a lot of stuff going on in your own books. Okay. The last thing we're going to look at after kind of going over the basics of how to do bookkeeping in Excel, we're going to look at a template that Insight has created for business owners to do their own bookkeeping within Excel. Okay, so let's hop into what is bookkeeping and why it's important. So I really like this quote from Dee Hock. He's the founder of Visa. Making good judgments when one has complete data, facts, and knowledge is not leadership, it's bookkeeping. So lots of people, especially business owners, then you're busy, you have lots of things on your priority list and bookkeeping and taking care of the transactions and categories and stuff like that, that's not your priority. But one of the things that we tell all of our clients is that it's bookkeeping. If you stay on top of it, it's so much more than just a historical record. It is something that you can use to make good decisions for your business. So if you know how much you're spending on different categories and how many loans you have versus how much cash you have, all of those types of things fall into the world of bookkeeping and having that information at your fingertips in an accurate, easy-to-read fashion will make it so that you can run your business better. And so that's something that, as, as hard as it is to swallow, um, you really want to think of bookkeeping as a way to make better decisions and have better information for your business rather than this low-priority thing that you'd never want to touch. Okay, um, so now hopping into the financial statements. So bookkeeping is a lot about categorizing transactions into different accounts. And these, the accounts are right here. You can see here. And the reason for this is at the end of the day, in order to file tax returns, in order to get loans, in order to see how the business is doing, then we have a couple different financial statements that are very common that come up in all different, in all sorts of scenarios. So the first one is the balance sheet. So the balance sheet comes down to what is known as the accounting equation, which is this: total assets equals liabilities plus equity. So it's called the balance sheet because the total amount of assets that you have on the books balances against the liabilities and equity that you have. So now you might be asking, okay, well, what do all of these different things mean? Maybe you're familiar with the words in general, but let's dive into the details and some examples here. So an asset is something that you own that provides value for the— for your business. So some easy examples here: cash, inventory, equipment, land, vehicles, buildings. All of those things are assets that you own and have in, in your business. Okay, so that's one side of the balance sheet. And then you have your liabilities. So liability, anything that you owe to someone else. So the 2 most common ones, you have credit cards, loans, or notes. So you can think of mortgages, auto loans, those types of things. Okay. And then we get to this equity section. The equity section is really interesting and kind of hard to understand. But what it really boils down to is a few different main categories. So we have owner's contributions and owner's distributions. So any money that business owners are putting in or taking out of the business, that's part of equity. And then if you have other— if you're a bigger business, if there's a public entity, Then stock and the money that is used to purchase stock, those types of things, that's also part of equity. And then we have something called retained earnings. I didn't put retained earnings here on the list because it's just mostly confusing to people. But retained earnings really boils down to net income, how much the company has made in the past and is currently making. And the net income is income minus expenses. So all of that flows into this equity section. And all of these things show up on the balance sheet. So a balance sheet is a snapshot of, okay, what things do I own and what things do I owe? And then how much have owners contributed to the business and how much money have we made? Okay? So that's the balance sheet. The more common and easy to understand financial statement that business owners will use probably more regularly with regards to tax returns and such, and wanting to see how much money they're making, is this income statement. And the income statement is easier to explain because it's basically your income or revenue minus all of your expenses, and that gets you to your net income. Okay? So those are the 2 main financial statements. Okay? So something that we want to draw your attention to is, as a business owner, you're going to— this matters to you a great deal because you pay taxes on your income as a business, whether it flows through to you or whether the business is set up as its own entity that gets taxed directly. So the way that that works, though, is that you get taxed on the business's net income. So all the income minus the expenses, that net income, this is the amount that matters on, on the tax return to determine how much taxes you are going to owe. And so again, all of it comes down to getting this number accurate so that you're paying the right amount of taxes. We don't want you paying too much. We don't want you paying too little. It's important to make sure that you're paying the right amount. And again, that all comes down to having your books in order so that you can have the right, all of your income and all of your expenses accounted for to have the right net income. So something that helps with this, just as you're getting into how to keep things organized and get all of this information set up, is for your business, it is really helpful. And we strongly recommend that you set up a separate bank account for each business that you have. So have a different bank account and also have a different credit card account so that whenever you're spending money or receiving money for that business, it's so easy to keep it if it's all with its own business account. So lots of times business owners love to commingle their personal expenses with their business expenses all on their personal credit card. Man, that gets really hard for you to identify all of the transactions that you should be including in your business. But again, if you have your own bank account at the end of the year, if you're doing all of your— if you're categorizing all of your transactions in order to file your tax return, then if all you had to do is pull, hey, this is the bank account and this is the credit card account for the business, these are all the transactions. And then you just know very easily these are all business transactions. So we highly recommend that. Makes it easier for everyone. So if you don't have your own business Uh, bank, uh, checking account or credit card account, pause this video and go do that now. Okay, so now let's talk about some of the different tools, um, that are at your disposal to do books. Now there are so many different softwares out there available for you to do your own bookkeeping. These are just 3 of the bigger options that are available to you, so I'll just go over them briefly. So we have QuickBooks Online, QBO, Wave, and then we have Excel. So this top row kind of shows the pricing for each of these. QuickBooks Online has a bunch of different packages. Most of the time, if you're going to do QuickBooks Online, you can get away with using this $30 package. You're going to be able to categorize things, you're going to get reporting, you're going to be able to have you as a user, and then you can have an accountant user. Basically all of the stuff that most business owners need, you can get with that $30 a month package. Now, the nice thing about both QuickBooks Online and Wave is that they both have an automatic transaction download, meaning you can log into your bank account within those softwares. So let's say I have a Chase account, then I could use my Chase credentials, log in, and then from there on, all of my Chase transactions will automatically import directly into QuickBooks Online or Wave. So it saves you a lot of time rather than having to go track down transaction reports from Chase. They're just going to be in there ready for you to categorize. So that is something that's really nice about both of these. With QBO, you get a little more advanced reporting and there's more integrations with external softwares. So there's like 400+ programs that you can integrate into QBO and feed into it. So if you're a business that is scaling fast or using a bunch of different softwares that you want to feed in, maybe you have a software that you use to track sales or something like that, or products, then there's a high chance that there's some sort of integration that can automatically go from that software into QuickBooks Online. But the reality is many business owners, if you're doing your own books, you're going to fall into an area where if you want an actual accounting software, Wave, you can have a free account. You get the automatic transaction download. You get reporting that is sufficient for almost all of your needs. And there's only integration with Google and PayPal. But, you know, most people don't need the integration unless you're an accounting firm like us. It's not going to matter. So if you're looking at between these 2, Lots of times Wave is going to be a good choice for you to just do your own thing because it's free. There are options to add services with Wave that cost more, like payroll and such. But similar with QBO, then there are a bunch of different add-on services that are not included in this startup fee. If you're going to be scaling or having an external bookkeeper or stuff like that, QBO can be, it's more well-known. But Wave is a great option that's free if you want to do an actual accounting software. Now we put Excel in here because again, we have a lot of business owners that already have access to Excel. They're familiar with it. You don't have to worry about different, like learning how to use a software necessarily. So the good thing about Excel is, is the familiarity and lots of people do their personal budgets in Excel and stuff like that. So we wanted, we wanted to have this video in here to talk about Excel just because again, lots of people have voiced interest in how do I do it in Excel? Can I just do this really fast? Not worry about having to connect a bank account to Wave or anything like that? And the answer is yes. It's a lot more manual, but this is— this video is going to be for you if you want to continue to learn how to, how to do it in Excel.