
Ask HN: Freelancers of HN, how do you automate cash management? - ljoshua
All freelancers, contractors, and otherwise non-W2 employees on Hacker News, what have you found to be the best tools&#x2F;solutions for automating things like tax estimations and payments, savings deposits, contributions to IRAs, etc.? Does anybody even out monthly income by making regular, set-rate payments to themselves from their business account, or do you typically just take big payments and deposit it all at once, feast or famine style?<p>I’ve been both an employee with great benefits (past), as well as an independent consultant for several years (current), so I understand both sides of the coin well, but I’m looking to take my independent income stream to the next level so that I can reap the benefits of what regular employment would normally provide (think: smarter savings, investing, and payments).<p>Seems like a lot of this could be set on autopilot and result in more wise cash management and better end results. Would love to hear other people’s success stories.
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jermaustin1
For me, my money is mostly automated through taking payments via ACH and
Credit Cards, that are deposited directly into my business checking... well,
except one client that insists on sending me a check every time, but even this
is roughly automated (a check scanner on my desk at home).

I've used Quick Books Online and Gusto for years, now, and I don't really have
to think about it.

I am an S-Corp, so I have to pay myself a W2 with a reasonable salary. So I
deposit all of the business income at once into my business checking account,
and Gusto (for a pretty hefty fee) direct deposits my paycheck weekly into my
personal accounts.

QBO only takes a few minutes each week (or month if I'm lazy) to go in an
categorize expenses and income, then at the end of every "tax quarter", I look
at my profit for previous period, and cut a check for 20%.

Then at the end of the year, my CPA goes over everything and does all of the
year end stuff that I don't understand, and moves registers around and
categorizes stuff that I did wrong throughout the year.

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BjoernKW
I've adopted profit-first accounting
([https://profitfirstbook.com/](https://profitfirstbook.com/)), which
basically boils down to: For any revenue you generate set aside a fixed
percentage of that revenue for both taxes and profit.

It's a habit rather than an automated process, though. There's no banking
software that I know of that allows you to automatically initiate a new bank
transfer for any incoming funds.

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jermaustin1
There is a service call Track
([https://www.track.tax/](https://www.track.tax/)) that kind of does this
specifically for self-employment taxes.

It wouldn't be TOO dificult to implement a similar service for yourself that
did a bank transfer of X% using plaid+stripe. Problem is that it would cost
0.8% (max $5) per transfer.

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jakobegger
Usually, if you are a contractor or small business with less than 5 people, an
Excel spread sheet should be sufficient to get a rough idea of how much money
you need to set aside for expenses & taxes. From that, I knew that I had to
set aside roughly 50% of my revenue (in the beginning).

The details are best left to your accountant / tax advisor, who will book
everything correctly once a month / quarter / year, depending on the details
of what kind of business you run.

Now that my income is pretty stable, I just "pay" myself a monthly salary
(since I am a "sole proprietor", there isn't really a legal difference between
me and my company, so this just means moving money from my business account to
my personal account).

At the end of the year, I see how much money is left over and I put it in a
savings account.

I've tried all kids of automation, but I found that just creating a manual
excel spreadsheet is the easiest, and the most flexible.

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hrirnrnf
Excel Spreadsheet

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fakeElonMusk
Similar to a few other comments, I use Intuit payroll (Gusto might be better
in terms of UI and support) and pay myself as an employee through S-Corp.
Every US freelance should structure things this way IMO, so that you can take
advantage of 401k contribution and company match. You can match up to 50k
roughly and that match is a business expense, so you get the money plus a
deduction. As you said, this is reaping the benefits of regular employment,
with the additional benefit of being able to crank up the company match in
years where you make more (or can pay yourself less).

In terms of cash management, I do quarterly transfers to Vanguard which is the
401k admin. Then 1-2 times per year I pay myself a close approximation of my
final S-Corp distribution (plus regular monthly payroll).

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jermaustin1
Why did you chose to go with a 401k instead of a SEP-IRA?

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fakeElonMusk
I could have done a SEP but AFAIK the only difference is supposed to be less
expenses vs. a 401k, but my 401k plan admin has very low fees. Also not sure
if the SEP allows for a pre-tax benefit for the employee.

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ishjoh
Something I learned about on HN a while back was a Self-Employed 401k offered
by most large providers ([https://www.fidelity.com/retirement-ira/small-
business/self-...](https://www.fidelity.com/retirement-ira/small-
business/self-employed-401k/overview))

It's great as I can contribute 18k of personal funds and a max of 36k of
business profits (or max of 25% of profits, whichever is less). For the
fidelity plan I have there are no annual or associated fees. I put all my
money into index funds and those are the only fees I pay. It's really been
excellent for me.

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remyp
I do this 100% manually with the help of a CPA. It's far too important to
trust some app to handle for me.

~~~
jryan49
Agreed. A lot more time and money will be wasted trying to automate this. A
CPA is not that expensive.

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source99
I pay for zenefits. I have my own company and I pay myself a salary and
zenefits takes care of all taxes and government forms. It’s not that cheap (I
think $400 for the year) but I never have to think or worry about forms or
taxes until I file my full taxes at the end of the year with my accountant.

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IpV8
Excel Spreadsheets

