I often get asked how do I manage multiple online businesses with so much else going on offline as well. And while there are many habits I’ve developed that contribute to effectively and efficiently managing multiple initiatives, in this article I will discuss how I handle the accounting and tax side of my business. At the end of this post I will also give you access to the spreadsheet I have developed and use to manage multiple online businesses.
Keeping clean and accurate accounting records for your business is important for several reasons. You not only need to track your progress to understand where your business is headed, but you also have to comply with certain laws such as paying income taxes. If you make a full time living online, you are responsible for remitting income tax estimated payments each quarter.
While it may be manageable to do everything yourself during the early years of your business, it becomes more difficult to handle everything as your business grows, especially if you diversify into more business mediums and create additional income streams.
While many entrepreneurs outsource the accounting and record keeping task to professional bookkeepers and CPAs (and some even have in-house accountants), others (including myself) outsource the task to virtual assistants (VA). In either case, the objective is to relieve yourself of non value added activities that do not contribute to the growth of your business.
Instead of spending time on administrative and compliance matters, you want to spend as much of your time working ON your business as possible – not working IN your business. This makes a BIG difference, especially when your business’ size and complexity requires hours of transaction recording and compilation each month.
I used to keep a spreadsheet log of income and expenditures generated by my online business when I first started. This log developed and evolved to fit my business needs as my business grew over time. What was once a simple 2 tab spreadsheet is now a multi-tab workbook that takes a few seconds to open when I need to reference it (it’s a large file).
When I found myself starting to spend some serious time accounting for my business activity each month, I contemplated several ways to relieve myself of the responsibility. Thankfully, because the way I had my “system” set up, I decided I could easily hand off the log to a virtual assistant, conduct a couple hour training session, pass-on the necessary login and password credentials to certain websites and I’d be all set.
Though there were some training opportunities initially in the process, overall the transition was just as simple as I thought. If you have a system that is quite streamlined in the first place, it is relatively easy lifting and shifting operations from one individual to another.
Tip: If you are considering outsourcing anything, make sure the process is as clean and streamlined as possible before you delegate. Otherwise, you will end up creating more difficulties than you wished.
As it stands today, I have a VA who each month populates the log with transaction activity generated by each of my websites. Each website has its own tab within the excel workbook. All tabs roll up into the master tab which shows the totals for all my businesses combined.
Each month, my VA “rolls over” the workbook, clears out the data from the previous month and saves the file as the current month’s file. I have this log saved in my Google Docs account, which my VA and I can access and update at any give point. This method also helps me with random spot checks.
At this point you are likely wondering how do I communicate transaction data to my VA. When I set up account information, there is one particular email ID I use for all accounts for that particular website or business (In some cases I have multiple websites rolling up to a single business entity). However, my login credentials are all different (this is a risk mitigation mechanism I have in place in the event someone decides to hack into my accounts and modify the login credentials).
Most payment systems today either allow direct deposit to your bank account, or to a PayPal account, both of which I control for each business. However, when a payment is sent, an email notice is also sent to the email ID on file. I have given my VA access to these email accounts. This email account also forwards all receipts / transaction data to an email account only I have access to (another control point that I have set up within the process).
This ensures my VA gets all the automated emails while not having the access to make any material changes to my accounts. This also ensures I have mirror copies of messages in the event I want to conduct spot checks or reconciliation of activity. For one off items here and there, I simply send her an email with a sentence or two explaining what it is and what to do with it.
There are always risks with any worthwhile initiative. The same goes for outsourcing your business’ accounting records. For example, you need to determine how important privacy and confidentiality is to you because no matter what agreement you have in place with your VAs, information may leak intentionally or unintentionally.
Once you start getting comfortable with your working relationship, you may get carried away occasionally and end up sharing sensitive information such as PayPal login credentials, or even your bank account information. Because my accounting VA is based out of the Philippines, I am not too concerned about unauthorized bank account activity. I have international wire alerts set up with my bank so that risk is pretty well mitigated.
In the event some account sensitive information is compromised (for example, your VA able to login to your PayPal ID), there is a remote risk of having your funds re-routed to another bank account or address. However, most changes made to such accounts prompt an automated email (once again, a control check point).
Even if outsourcing your accounting doesn’t make sense today, it may down the road. You may be able to manage accounting for your businesses on your own today, but if you are serious about growth, there will be added complexity that comes with that growth, not to mention the time demands on you as the entrepreneur running the ship.
Personally, I have designed my approach to accounting in a way where I can take over any time I want, or hand it over to someone else with minimal training required. I can get as high level or as granular as I want in how I view and monitor each of my businesses (you will how when you see the spreadsheet).
I do conduct spot checks and independent reconciliations of account balances every now and then on a random sampling basis, or pass the task on to another VA to do. However, there is a certain comfort level between my VA and I as we have been working together for a couple years now.
Finally, I want to reiterate that any worthwhile initiative will come with its unique risks. The key is to set up a control system to mitigate those risks as much as possible. In my case, I do assume a little bit of risk. But when I think about it, I am completely alright with loosing out on some income in exchange for more free time and peace of mind. Think about it, since I review the log every month, it won’t take long to spot “missing income”, so the most I have to lose out on is one month’s worth.
This is not only an extreme case, but also an unlikely situation. My VA depends on the salary I pay her to live and support her family. I also send occasional bonuses when my businesses are doing well. When I put myself in her shoes, I don’t think I’d risk losing a steady, good paying and flexible job for a quick, one time gain.
Her income definitely means more to her than some lost revenue means to me, therefore the likelihood of any such risk is low and the impact is minimal in the grand scheme of things. But like I said, the risk is well worth taking considering the rewards gained.
Come tax time, I simply compile the logs and corroborate the information with all the 1099 forms received and do a quick review. I also have clean and complete records each time I want to reference them or need them for an audit or other matters.
Every now and then, I will also, either myself or have my VA do, period to period fluctuation analysis to trend my business’ growth over a period of time to determine what’s working and what isn’t.
All that can be done in a jiffy when you have clean, complete and timely accounting information.
You can access my spreadsheet here: My AccountingTemplate
Click on each cell and notice how the tabs are interlinked by a formula. My VA inputs all the data into the individual website tabs, which all carry over to the consolidated tab and populate the respective sections. I have deleted the confidential information as well as the rest of the tabs for ease of viewing and downloading. You can add as many tabs as you want for multiple businesses and follow the same linking structure.
What do you think about this approach to managing multiple online businesses? What other risks and controls you feel I have not incorporated in my approach? How are you managing your accounting today? I’d love to hear more about your approach in the comments section below.Previous: How to Increase Your Productivity With The Pomodoro Technique