Bookkeeping

This series addresses the logistics of starting, maintaining, and succeeding at owning a spiritual practice whether you are a psychic or a healer.

Having earned a CPA and practiced in many capacities as a CPA over twenty years, I can say that this is a matter of utmost importance and should not be dismissed or forgotten about since the IRS plays for keeps. Not only is bookkeeping important for tax purposes, but it can be important for loans, financial aid for your children, as well as simply a tool for measuring your financial success.

Every business owner needs to maintain records of all income and expenses. Synonyms for income include the words revenue, earnings, and inflow. For expenses, synonyms include the words expenditure, disbursements, and costs. The burden of proof is on you so be sure to get organized or have someone help you with that task. A partitioned folder with an elastic may work to organize paperwork for the entire year or you may need a set of twelve or even twenty-four (a folder for income and expenses for each month) if you find yourself that busy. It is easier to keep up with this task preferably on a monthly basis rather than scrambling at the end of the year. Do not leave the task of organization to your accountant because that could cost you.

What do you need to save?

On the expense side, every item you hope to take as an expense on your taxes must be kept. This list includes: all receipts, credit card statements, bank statements, PayPal statements (and the like), as well as any invoices. Work orders do NOT serve as proof, but an invoice DOES serve as proof so be sure to obtain one. If you have expenses that were paid with cash, be sure to acquire a receipt. Clearly, the world is going paperless, so be sure to save those statements electronically so they may be retrieved. Be certain to either print or send your electronic receipts to the same file on your computer (clearly identified) or a zip drive as backup. It’s a fabulous idea to have electronic backup in a fireproof safe. Consider a second hard drive for backup purposes that is kept off the premises in a secured location.

On the revenue side, accumulate any proof of income. This includes all online receipts such as PayPay, Skrill, Google Pay, Payoneer, Venmo, and Stripe or the like), and deposits made to the bank. If deposits include cash or check, take time to itemize (list) each customer/client name, the service or product type, and the dollar amount with a total that agrees to the deposit slip, and in turn, to the bank statement. Keep copies of the checks and staple to the deposit slip copy. There should be no discrepancies. If you are paid in cash, purchase a receipting book and provide a receipt to your customer. This is proof for both parties.

Further organize your income and expenses by creating categories for the types of income and expenses. There are many ways to do this but make it simple. For instance, you may categorize your income based on the type of service, such as: 60-minute massage, 30-minute reading, or 20-minute Reiki treatment. The service types help the practitioner to understand where the strongest revenue streams lie, but your accountant will not necessarily need to see the breakdown. Expenses should be similar with the same language used by the IRS. Suggestions include rent, utilities, advertising, and professional services to name just a few.

How do you track income and expenses beyond the paper backup? My suggestion depends on the complexity of your business. A simple Excel spreadsheet may work just fine! Consider using an IRS Schedule C to determine categories. However, if your business is more complex or the volume is heavy, look at purchasing accounting software such as QuickBooks, Xero, Sage, or FreshBooks. Monthly information is helpful so the practitioner knows when the business cycles up or down.

It is likely your accountant is not going to want the details behind each category of income and expense but instead, will prefer a summary of income and expenses that is in line with IRS Form Schedule C.

Keep in mind that online financial services and accounting programs change like the wind, so be sure to do your research on what alternative is best for you. The other advice is to see what your booking software allows otherwise it is useless.

This advice is generalized and is meant for a small sole practitioner. Incorporation is beyond the scope of this post.

You can follow my blog or book my services on cindysummer.com, subscribe CindySummerYouTube, like Facebook, and follow on Instagram.

Thanks for reading!

Photo by Karolina Grabowska on Pexels.com

Published by Cindy Summer

I am a psychic both called and trained. My mission is to empower you with words or energy that brings healing and hope direct from Holy Spirit.

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