New Small Home Based Business

I'm am in the process (and have been) of creating a small home-based business. I can't afford new business accounting software so I am hoping YNAB will work. I'm not sure how to go about setting it up though. Any thoughts? My business - at this time - is a service business (coaching). No inventory will be involved. I'm just not sure how to deal with this in YNAB.

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  • I started a second budget for my small business, to keep things separate from my personal affairs. Some of the pre-filled categories made sense, so I kept them.  I created some categories that were connected to the expenses I can claim on my (Canadian) taxes, to help me keep track of that.

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  • Hi there! You can definitely use YNAB for your small business -- we run YNAB the company on YNAB the software.

    If you have separate accounts for your business, then set those up in another budget file. Customize the categories for your business expenses (rent, insurance, continuing education.. whatever you know you'll need to spend).

    When you pay yourself, you'll then enter an outflow transaction from the business account, with the category "Paycheck" (or something like that), and enter an inflow in your personal budget file.

    Our founder, Jesse, has written a number of blog posts that would be helpful. Here are some great ones:

    Keep in mind that they were created based off of our previous version of YNAB (YNAB 4) so you won't recognize some of the screenshots. The information is all still relevant, though!

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    • Jen I'd like to setup my very simple business in YNAB too.  I don't have separate credit cards or bank accounts for the business though. Is there a way to set up a separate business budget, but not have separate credit and bank accounts?

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      • Jen
      • Budget Expert
      • Jen_c
      • 1 yr ago
      • Reported - view

      Mark Hyams If your business transactions run through the same accounts as your personal transactions, you'll keep it all in one budget file. The best way to do that is to create a Category Group for your business categories. 

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    • Jen Ok thanks!

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      • Jen
      • Budget Expert
      • Jen_c
      • 1 yr ago
      • Reported - view

      Mark Hyams Sure thing, let us know how it goes!

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    • Jen I'm having a hard time figuring out how to treat income. I'm responsible for paying Gross Receipts Tax (in New Mexico) twice a year, so I'm excited to have a GRT category that I can budget with. The way it works is every July, I pay GRT based on my gross income Jan-June, and the same thing happens six months later. YNAB will be great for tracking what I owe in GRT until it's due. But I'm unsure the best mechanism on how to deal with the income, because I also need to track my gross income for Schedule C purposes at the end of the year.

      Say I get a check for $86. I charged $80, and since I pass on the GRT (like sales tax) to the client, they payed the $6 GRT. Do I put all $86 into "inflow:to be budgeted" and then immediately budget $6 to GRT? Or is it better to split the transaction into $80 to "inflow: to be budgeted" and $6 to the GRT category in my business categories? Or is it better to have an "income" category in my business categories, split $80 into "income" and $6 in GRT, and then move the $80 into "inflow:to be budgeted"? If I do the last one, I get a negative amount for the "budgeted" income. Does that matter?

      On top of all that, I need to be able to track the whole $86 as gross income for Schedule C. (I then deduct the actual GRT paid in a calendar year as "other taxes" on my 1099 business expenses.)

      Thanks for the help! Hope this all makes sense!

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      • Jen
      • Budget Expert
      • Jen_c
      • 1 yr ago
      • Reported - view

      Mark Hyams thanks for the clear details!

      Here are two ways to track all of your income, and the GRT as well:

      1. Always enter it as Inflow: To be Budgeted, and you'll be able to run reports on it.

      Then, budget the GRT to the GRT category immediately -- the disadvantage here is that it's not as automatic as putting it straight into the category by splitting the inflow transaction. You'll need to be careful to budget the correct amount, and avoid moving money out of the GRT category.

      2. Do that last thing you mentioned, have an "income" category in my business categories, split $80 into "income" and $6 in GRT, and then move the $80 into "inflow:to be budgeted." A negative budgeted amount is no big deal -- it just tells you that you budgeted less there. Here's a quick video on how and why it happens. In your case, it's not because of Available rolling over, but because of the amount budgeted directly to the category. This is ninja-level budgeting, for sure.

       The disadvantage here is that your Income vs. Expense reports won't work because you won't be running income through the default Inflow: To be Budgeted category. You'll have to run a Spending Trends report on just the Income category group, if you create it like this:

      Let me know how it goes!

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  • Thanks so much for the information. I am going to build on this and create my budget.

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  • Jen's given some great advice! I've run my business for almost a year solely on YNAB. If you find that you need invoicing options or payment processing options, check out Waveapps. It's free and minimal cost to processing payments (better than PayPal). As a bookkeeper, I think it's robust enough for someone to get started with, but it doesn't measure up to the likes of Quickbooks Online or Xero when your business grows to that point! No matter what software you end up using, YNAB will always have a place in your business 'cause YBNABT (Your Business Needs A Budget Too!) :-) 

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      • akkoch
      • akkoch
      • 1 yr ago
      • Reported - view

      Rebekah Zobel Jones  Thanks for the information. I am just beginning and have set up my  wordpress site to run cards through stripe. I'm not certain at this point which is better. I have a service based business so invoicing isn't necessarily a problem. I will probably be back as I continue to build my business.

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    • akkoch I've heard good things about Stripe! It integrates with a lot of options, so that's good for when you grow. Keep us posted on how it's all working out!

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  • Rebekah Zobel Jones I will definitely do that. I'm still integrating it with my website.

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  • I actually use a second budget in YNAB to budget for my business.  It isn't really an at home business but it is based from home (mobile pet grooming).  I had to get creative with my categories and I still edit them because my business is now expanding to the point that I will be hiring my first employee soon.  It is definitely doable and just as handy for business budgeting and YNAB.

    Reply Like 3
    • Slate Gray Python (e5183818ddf9) Congrats on being ready to hire your first employee! :-) YNAB is so helpful for ensuring money is set aside for payroll, including the taxes. Will you be doing payroll yourself, or do you have a provider? Let me know if you need a referral!

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  • I, too, am getting ready to start my own business. My concern is that I've already spent money from my personal budget for the schooling, and will need to pay for a couple of association fees and my license fee out of my personal budget (obviously I have no income yet). My question is, how do I transfer or show that in my business budget? Do I just set those payments up in my business budget and show the deficit?

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    • Turquoise Memory (20e8230556a4)  Check with a tax adviser on this since from my understanding the schooling would not be a business expense/tax deduction. This isn't ALWAYS true, but is most of the time. For the others, what I did is paid from personal funds and kept good records. I treated it as owner's contribution to my business, so didn't even add them to my biz budget in YNAB since I'm not planning on paying myself back for them. If you DO want to reimburse yourself for those expenses, you can create an "Owner Loan Repayment" category and set a goal for the total amount you want to repay to yourself. Then, as your business income grows, you can fill that category so you can pay yourself back. There are other ways to do it, but that is the simplest way, and will help keep everything straight. Just be sure to keep your receipts and make good notes! :-)

      Reply Like 1
    • Rebekah Zobel Jones Thank you! I could possibly just mark those expenses that I'm spending from my personal budget towards my business as "professional development," and maybe just use them for tax purposes (with the exception of schooling, if it's not tax deductible, as you say). And not spend out of my business expense account until I actually have money in there. 

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  • Just thought I'd pipe in with a free tool small businesses can use for invoicing......just google "Wave Accounting". It's supposed to do your books and all that too, but I never got the handle of that side of it. But I do use it to send invoices. They are pretty slick. Good luck!

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    • Ryan Oakley  Wave is a great app and works well! I look at it as a step up from using YNAB as your ONLY bookkeeping software, without going all the way to Quickbooks Online or Xero. It doesn't have all the features of the latter two, but does do more business-like reports than YNAB does. YNAB is an excellent piece of the puzzle and I'd be lost without it, lol, but it's not the entire puzzle! :-)

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    • Kate
    • Joyful Technical Writer 🌴
    • sweet_sunshine
    • 1 yr ago
    • Reported - view

    I'd like to start a small contracting business where I live because as a Technical Writer there is a lot of work available in Hawaii because not a lot of people know about or have degrees in Technical Communication.

    My plan is to use YNAB to collect all my receipts so at the beginning I know how much of my personal money is going into my small business. I don't want to go into debt to make this business idea a reality but I also have no one to talk to about creating a contracting company so small that it only includes me!

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      • Ryan Oakley
      • Side-Hustler
      • oakley
      • 1 yr ago
      • 1
      • Reported - view

      Kate Great! You don't need much to get started. My suggestion would be to start a new checking account and maybe get a new credit card that would be JUST for business purposes. Try to get a client BEFORE spending any money on websites, marketing, etc. Good luck!

      Reply Like 1
  • SO, I haven't actually made any money yet, but I have had business expenses. I've set up a separate business budget, but I'm a little confused. For now, I've set up a master category called "Business" in my regular budget. When I start making money, do I need to put what I've already done in there as well? I have a client, but it could be a few months before I see any money.

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