Bookkeeping for consultants

Few transactions, large consequences

A consultant’s bank statement is short. Priya, an operations consultant, has five clients in a typical year. Each month she sends four or five invoices, pays a handful of software subscriptions, and books a trip or two. Sixty transactions a month, perhaps fewer.

That is the appeal, and the danger. With so few entries, each one matters. Miss a single $18,000 payment and your tax estimate is off by thousands. Put one client trip on the personal card and you lose a deduction you would have defended easily with a receipt. The books are small enough to keep in your head, which is exactly why they end up there and nowhere else.

The cure is a small system that runs whether or not you feel like it. It does not need to be clever. It needs to be done every month.

When income counts

Most solo consultants keep books on the cash basis: income counts when it reaches your account, and expenses when you pay them (Publication 334). An invoice you send on December 15 that is paid on January 20 is next year’s income.

That timing matters more for consultants than for most people, because single payments are large. A retainer of $25,000 that lands on December 31 instead of January 2 moves a meaningful slice of tax from one year into another. You cannot shift money that already arrived. You can, however, see the calendar coming and plan your estimated payments around it.

In Righto, enter each invoice as a receivable when you send it. The open list then shows who owes you what and for how long. Many consultants work on net-30 or net-45 terms with large companies, whose accounts payable teams do not hurry. A list you look at monthly is the difference between a gentle reminder at day thirty-five and an awkward one at day ninety.

Reimbursed travel

Clients often pay your travel costs. How you record that depends on how they pay.

If you pay for the flight and hotel yourself and then bill the client for them, the usual cash-basis treatment is simple: the travel is your expense on line 24a, and the client’s repayment is income when it arrives. Both appear in your books. The client’s 1099-NEC will often include the reimbursement in the total, so recording it as income keeps your books matched to the form.

If the client books and pays for the travel directly, you have nothing to record. It never touched your accounts.

The mistake to avoid is netting: recording neither the trip nor the repayment because “it washed out.” It may wash out in total, but your gross receipts will not match the 1099, and that gap invites questions. Tag the travel and the repayment with the same client and engagement, so you can see that they match.

Travel and meals done properly

Travel is the largest expense for most consultants, and the one most likely to be looked at closely. Publication 463 sets out the rules.

Airfare, hotels, rideshares and checked bags on a business trip go on line 24a. Meals while you are away overnight, and meals with a client where you discuss the work, go on line 24b and are usually 50% deductible. Entertainment, such as concert or game tickets, is generally not deductible at all, even with a client beside you.

A trip that mixes business and pleasure is split. If you fly to Denver for three days of workshops and stay two more days to ski, the hotel and meals for the ski days are personal. The fare is deductible if the trip was mainly for business.

For each receipt, write down two things at the time: the client, and the reason. “Acme, quarterly review” takes four seconds. Reconstructing it in March takes much longer and is less convincing.

Local driving to a client’s office goes on line 9. For 2026, the standard rate is 72.5 cents a mile from January 1 to June 30 and 76 cents a mile from July 1 (IRS Announcement 2026-11). The mileage tool handles both rates. If your home office is your main place of business, a drive from home to a client’s site is usually business, not commuting.

The rest of the cost list

Professional liability insurance is a real business cost and belongs on line 15. Health insurance does not go there; it is handled elsewhere on the return, if at all.

If you bring in another consultant to help on an engagement and pay them $2,000 or more for services in 2026 by check or bank transfer, you may need to send them a Form 1099-NEC. Before 2026 the threshold was $600. Get a Form W-9 first. The Schedule C instructions cover the details.

The home office deduction requires a space used regularly and only for the business (Publication 587). The simplified method gives $5 per square foot, up to 300 square feet. The home office calculator compares it with the regular method.

One year in numbers

Here is Priya’s 2026.

Self-employment tax is 15.3% of 92.35% of net profit, so about $18,365 here. The Social Security part stops at a wage base of $184,500 for 2026, which Priya is under. Income tax comes on top. Try your own numbers in the self-employment tax calculator.

Priya also tags income by client. One client paid $52,000 for about 300 hours; another paid $31,000 for about 330. The second client is not a bad client, but the first one is worth nearly double per hour. That is the kind of fact you only learn from tagged books, and the profit margin tool helps turn it into a rate for next year.

Estimated tax on lumpy income

At this level of income, setting money aside is not optional. A missed quarter can mean a large bill and a penalty. Move a fixed share of every client payment, often 30 percent or more at higher incomes, to a separate account the day it lands. Pay from that account on the estimated tax dates.

Because consulting income arrives in large, uneven pieces, work out each payment from what you actually earned that quarter, not from a guess made in January. Publication 505 explains the safe harbors and the annualized method, which can lower early payments when the big contracts land late in the year.

Common mistakes

• Netting reimbursements. Record the trip and the repayment, so your income matches the 1099.
• Receipts without a reason. A hotel bill with no client or purpose is weak evidence.
• Deducting entertainment. Tickets are generally not deductible, even with a client.
• One card for everything. A separate business card makes travel easy to prove.
• Estimating from last year. One new client can change your tax by a quarter of your income.

A monthly routine

Consultants can do this monthly rather than weekly.

1. Import your bank and card statements. Righto reads CSV, OFX and QFX files, and PDF statements, including scanned ones read on your Mac (importing statements).
2. Let rules categorize the repeats, then add the client and reason to each travel and meal entry.
3. Mark paid invoices as received, and send reminders on anything past terms.
4. Reconcile each account to the statement.
5. In the last month of a quarter, check profit to date and size the estimate.

What to hand your preparer

Righto’s year-end package gives a cash-basis profit and loss by Schedule C line, the transaction detail and your reconciliations. Add:

• Every 1099-NEC and 1099-K you received, with a note on any payment that crossed the year
• A summary of reimbursed travel by client
• Copies of 1099-NEC forms you sent, and the W-9s
• Estimated tax payments, with dates
• Your mileage log, split before and after July 1
• Home office measurements

If you want help with the monthly part, you can connect your own AI agent to Righto at an access level you choose (agents). Every change it makes is recorded, and you can undo it.

General information, not advice for your situation. Ask a tax professional about your own return.