SECTION 1
Why It Matters
In short, accounting as an independent consultant is critical because you need to know exactly how much money you’ve made to determine how much you’ll need to pay in taxes. And without accurate “books,” it’s impossible to know exactly how much you made as a consultant.
Here’s some more detail on why it matters:
1. You’ll pay taxes on profit, not revenue
Here’s a common misconception:
“If I make $300K in consulting revenue, I owe taxes on $300K.”
Wrong.
Your taxable income is your profit—that is, revenue minus expenses. And as a consultant, you likely have legitimate business expenses: software (e.g., Microsoft Office, ThinkCell), equipment (e.g., laptop), travel, and even part of your phone or internet bills.
If you don’t track these, you could end up overpaying your taxes—potentially by thousands.
2. Doing it retroactively is painful
You might think, “I’ll just clean it all up at tax time.”
Trust us….Don’t.
Trying to reconstruct 12 months of transactions from memory or old receipts is time-consuming, error-prone, and stressful.
Pro Tip: We’ve been there—and wouldn’t wish it on anyone. Do your accounting as you go. Future you will thank you.
3. You’ll likely need to pay quarterly taxes
In the U.S., businesses that generate significant income are expected to pay estimated taxes quarterly, not just once a year in April. This makes accurate, real-time bookkeeping a requirement—not a nice-to-have.
No more “cramming” at tax time. Quarterly tax deadlines mean you need to know where your finances stand all year long.
4. Good bookkeeping helps you run a better business
Clean books don’t just help with taxes—they help with decisions.
- Are you overspending on subscriptions you don’t use?
- Is your profit margin improving?
- Can you afford to hire help?
SECTION 2
Outsourcing vs. DIY’ing
There are two ways to handle accounting and bookkeeping: (1) doing it yourself, or (2) hiring an outsourced service.
Doing it yourself (DIY)
If your business is relatively simple—say, a few large projects per year—you can probably manage your own books if you’re up for it.
A resource we recommend is QuickBooks Online. This is the industry standard accounting software and used by many small businesses.
Expect to pay around $30-50 a month for a DIY bookkeeping solution.
Setting up QBO is relatively straightforward; you’ll create an account and then link your bank accounts and credit cards.
The challenging part is setting up your balance sheet and general ledger correctly. It could be worth hiring an accountant or bookkeeper to help you set this up correctly.
Pro Tip: It is extremely difficult to retroactively fix any mistakes made to your balance sheet or general ledger in the initial setup. If you plan to DIY bookkeeping, make sure you have some help or experience in setting up QBO correctly.
Once set up, it is relatively straightforward to keep your books accurate on a monthly basis.
When DIY works well:
- You have just a few transactions per month
- Your projects are large and long-term (i.e., 1–3 payments/month)
- You’re comfortable using software tools and spreadsheets
When it becomes a hassle:
- You manage many small projects with frequent payments
- You travel often and juggle lots of expense types
- You’re spending more than 3–5 hours/month on bookkeeping
Key question to ask yourself: What kind of project work are you going to do? If you plan for large, long-term projects, you’ll probably be paid 1-3X a month, and DIY bookkeeping is easy to do.
Many Catalant consultants end up doing longer-term projects with fewer payments per month. For that reason, many Catalant consultants do opt for DIY.
If you expect to do many small projects and could get paid dozens of times per month, you’ll have more transactions in your bank account to classify. In this scenario, DIY bookkeeping becomes harder and more time-consuming.
Outsourcing – Bookkeeping Service
If you’d rather focus on consulting (not categorizing expenses), a bookkeeping service can take the work—and the worry—off your plate. There are many companies that specialize in providing bookkeeping services for consultants.
These services are often “set it and forget it” which allows you to focus on your business while they focus on the numbers.
The increased service level does come with increased cost. Expect to pay $250-$350 a month.
These services typically:
- Handle your monthly reconciliations
- Email you profit & loss (P&L) statements
- Make tax season almost effortless
The benefits here are significant, as you have no chance of error and will receive monthly P&L’s emailed to you with no input on your side. This will also ensure you have a very easy tax time, as you can simply forward these reports to your CPA.
Key question to ask yourself: How much time does bookkeeping take you and is it worth re-investing that time? If bookkeeping is taking you <1 hour per month, then it likely makes sense to continue DIY bookkeeping. If it has grown to 3-5+ hours of your time per month, you likely can reinvest that time into billable project work by hiring a bookkeeping service.
Catalant’s Recommendation
At Catalant, we recommend Collective, a tax and accounting solution built specifically for independents with the goal of maximizing your tax savings potential.
- Built for LLCs and S-Corps
- Combines bookkeeping, tax filing, and S-corp advisory
- Offers discounted pricing for Catalant Experts
Schedule a call with them to learn more and decide if it’s right for you here.
SECTION 3
Final Thoughts
Accounting doesn’t need to be complicated. But it does need to be consistent.
Start simple:
- Use QuickBooks Online if you’re comfortable with DIY
- Outsource if you’re growing fast or want to free up time
- Review your books monthly – even if someone else is managing them
Pro Tip: Don’t wait until tax season to think about bookkeeping. Build the system now, and you’ll be ready for whatever comes your way.