Accounting For Online Teachers: A Conversation With Digital Nomad Accounting

For this edition of the Teacher Indie Interview Series, we spoke with Cliff Highman from Digital Nomad Accounting about best accounting practices for online teachers and location independent entrepreneurs.

The digital nomad life is, on the surface, a rather carefree and indulgent existence. Hunkered down in cafes and coworking spots in the morning, pushing through the day’s work to make time in the afternoon to explore a new city or dive into a new adventure.

Don’t let the promo videos fool you, however. Remote work is still hard work. Beyond the smiling faces and wide-open scenery depicted on social media, it quickly becomes clear to new digital nomads that this ‘freedom lifestyle’ requires a fair amount of organization. Even if you’re on the other side of the world, bills don’t just evaporate and taxes don’t disappear.

Today, we’re aiming to help online teachers and digital nomads get their accounting in order. Taxes and bookkeeping are often some of the most confusing parts of this lifestyle, especially for beginners. Our friend Cliff Highman with Digital Nomad Accounting walks us through the basics of getting your accounting set up correctly, and making sure everything is on-point when it comes time to submit to the IRS.

Cliff offers personalized accounting services for digital nomads via Skype – perfect for those of us not able to stumble through a high-rise office building for an in-person meeting. I encourage you to check out his website and see if his services may be of use to your online teaching or other location independent business.

Here we go! 

Teacher Indie: How did you first start with the digital nomad lifestyle and form Digital Nomad Accounting?

My wife Melody and I met over a love for traveling and a consistent need for new vistas. Recounting the excitement generated by memories of places we’ve been and the experiences we had there, we knew that one day we’d need to hit the road for several months at a time.

I believe it was the summer of 2014 when, to offset the stress and tedium of my daily 2-hour commute to my corporate finance job, I searched iTunes for travel podcasts. Jason Moore’s “Zero To Travel” show quickly became my favorite. His excellent interviewing style really brought out guests’ valuable styles and methods for long-term travel and also revealed the excitement they had for culture, languages, new places and the simple wonder that our world holds. Guests would discuss how they planned, funded and accomplished their journeys and I’d get stoked just thinking, “Hey, we could do that!”

I remember one of his earlier podcasts featured a couple who are legally blind. They took 18 months to tandem-cycle from the southern tip of South America to Alaska. Not only did listening make me try to envision what it would be like to navigate a bicycle for 16,000 miles with seriously impaired vision but it also began to melt away the validity of almost any objection I could come up with.

Over the next year or so, we took a few trips to kind of test what it would be like to travel lightly, with most everything we’d need in a carry-on-sized backpack and to work from the road being almost entirely dependent on decent wi-fi. One of these trips was 2-weeks circumnavigating Greece’s Peloponnese. The Greek people were incredibly warm, friendly and generous. I have a fascination with ancient civilizations so spending time at bucket-list sites like Sparta, Ancient Olympia, Monemvasia and the island of Hydra made for a perfect holiday and it started getting some “what-if” thoughts.

In addition, we’d done the trip quite cost-effectively through solid planning along with a bit of geo-arbitrage by traveling to a location where the dollar was strong and costs were low. A key moment came at the far southern tip of the Mani Peninsula. The Mani is a ruggedly beautiful part of Greece known for its history of tenacious residents and a strong sense of autonomy. I found it freeing to think that, if one set sail going south from the Mani, your next step on land would be the sands of North Africa. Over a lunch of grilled octopus and ouzo, with a sense of liberation in mind, my wife and I came to an agreement that two weeks just isn’t enough. We needed to start making plans to travel for extended periods. Life is short and the world is big.

Anyone who has worked in the American corporate world knows that vacations of one week or two weeks’ duration are pretty standard and sometimes it’s tough to get approved to take even that much time. The boss’s attitude can often be that the reason you have a life is so you can have a job rather than the other way around. A few years ago, upon hearing that a coworker was taking three weeks off to visit her family in Croatia, my boss at the time said “Three weeks? Well, she must not value her job very much.” I just had to bite my tongue.

Today, partly through our online community,, my wife and I have made new friends – friends who pretty much aren’t concerned with your CV, the size of your home or your age. In addition to geeking out about travel, the main discussion in the group is how will you start and grow a location-independent business that will help you fulfill your goals. I’m honored to have several members of the group, some I haven’t yet met in person, as clients. They’re friends who are kicking down barriers and smashing excuses so they can run a business to help them see this incredible earth.

Because of that sunny lunch on the Mani, my wife and I chose to sell our home, quit our corporate jobs to travel and work as Location Independents. We’ve been on the road for just about a year visiting a dozen countries on four continents. Whether scuba diving Bora Bora, housesitting in London or hiking the Australian Outback, each day is new, different and not always perfect but the experience is unbelievable!

TI: What are the most common issues that digital nomads struggle with in terms of accounting and taxes?

Initially, the biggest challenge is keeping solid records so tax time is not sheer panic but is rather just a fairly-quick review and then a handoff of the year’s numbers to the tax preparer. Second, as the business becomes more established and a solid bookkeeping system is in place, financial literacy becomes important. Many business owners will start wondering about things like “Am I profitable?” “Should I be profitable yet?” “What’s a Balance Sheet?” “Are all those numbers really important and what do they mean?” “Should I agree to accept any client’s business or are some clients more worthwhile than others?” “How can I use those numbers to improve my business during the year and not just worry about them at tax time?”.

The third stage is planning for the future of the business and dealing with questions like “Where do I want this business to go and for how long?” and “How do I know if the business is achieving its goals?”             

Sometimes the terms accountant and bookkeeper can be confusing and are sometimes used synonymously. For the most part, a bookkeeper is the one who keeps the day-to-day records of a business’s finances by first establishing an efficient, accurate system to do so. In today’s world, this is almost always computer based. Then, the bookkeeper will use that system to track, categorize, record and reconcile a company’s revenue, costs, and expenses along with its asset, liability and equity accounts.

Manual journal entries are sometimes needed to record specific items. The bookkeeper will use this information to produce the firm’s financial statements on a monthly, quarterly, annual or ad-hoc basis. The bookkeeper is also responsible for keeping the system functioning so some knowledge of how banking systems work and how to best interface the required systems to the accounting software is also helpful.

As a company grows, I recommend that they engage an accountant, often, but not necessarily, a Certified Public Accountant (CPA) to work with the bookkeeper periodically to put a second set of eyes on their work and sometimes suggest or make additional entries to the books. In addition, the accountant may have thoughts on different business or tax strategies. For smaller companies, this may only need to occur at the end of the year or at tax time.

A third part of the team can be the tax preparer who prepares a company’s end of the year income tax return and may or may not do other work during the remainder of the year. Tax preparers can range from trained preparers at retail establishments like H&R Block to highly specialized tax attorneys. They may or may not be CPAs or have other professional credentials.

TI: If someone is just starting out with contract work or their own business, what are the first steps they should take?

Here are my thoughts in order of importance:

  1. Absolutely make sure you set up separate accounts for your business! DO NOT MIX YOUR PERSONAL FINANCES WITH YOUR BUSINESS’S FINANCES! You will make your own life easier and your bookkeeper/accountant/tax preparer will all love you for this and they will likely charge you less if they don’t have to unwind a Gordian Knot of transactions to organize your business’s books.
    • Does that mean separate checking account? YES! Most banks will give you a free or low-cost checking account for an initial period or indefinitely if you keep a relatively small minimum balance.
    • Does that mean separate credit card? YES! Many credit cards waive the annual fee for the first year. I also recommend a business-oriented credit card like the Chase Ink card. Cards like this will allow you to download more transactions and older statements just in case that’s ever needed (like when you hire a bookkeeper He-He!) Such cards also often award more frequent flier miles with some purchases such as cell phones, office supplies etcetera.
    • Does that mean separate PayPal or Stripe or whatever? Don’t MAKE me answer this! LOL!
  2. Begin a solid record keeping system for all your business transactions:
    • When your business is new and you don’t have a lot of transactions, don’t worry about starting with a program like Xero, FreshBooks or QuickBooks. While these are all excellent pieces of software, they’ll likely just frustrate you and they’re overkill when you’re getting started unless you’re a bookkeeper or accountant. Your time is probably best spent building the business, not learning software and accountant jargon. There’s plenty of time for that later. On the odd chance you actually stayed awake in that Accounting 101 class and you retained a good bit of the knowledge, jump in with one of these programs. Otherwise, start with a Google Sheet or MS Excel spreadsheet and track:
      • Business Revenue (the money your clients paid you for a service or money customers paid you for your physical products)
      • Business Expenses (the money your business spent to run itself such as money spent on supplies, mobile phone bills or business travel)
  3. Money You Contribute To The Business (this would include start-up capital like if you put $1,000 into your business checking account to start the business or any time the business needed cash)
  4. Money You Take Out Of The Business (this is when you “pay yourself” by transferring money from the business account to your personal account or if you take cash out of the business at an ATM)
  5. Then, consistently track every $ coming in and every dollar going out. Just put a quick note in the spreadsheet column next to the transaction. If, in the first month, you label your T-Mobile payment as “phone bill”, make sure you always call it “phone bill”. If you call it “phone bill” one month, “mobile” the next month and “cell phone” in another month, you’ll go crazy trying to tell your tax preparer how much you spent on communications for the year.
    • Don’t get too micro in your labeling. For example, if you buy a USB stick and a portable keyboard, don’t worry about tracking your “USB Expense” and your “Keyboard Expense”. You’re looking for broader categories. In this example, call if all “Office Expense”. The object is to be consistent and to have a MANAGEABLE system.
    • In the beginning, your business probably won’t have very many transactions so you can either key them into your spreadsheet file manually or, if you’re savvy, download a csv file from your bank each month and put the notes next to each transaction.
  6. Try to setup your business banking at a bank that allows “Authorized Business Users”. Some banks may use a different name but this type of access will allow you to give limited account access to employees, bookkeepers, accountants or others as you grow. In most cases, this access can be set to give these people the ability to view the accounts but not to spend any of the money.
  7. If you plan to travel, especially internationally, setup your business banking with a major bank such as Chase, Wells Fargo or the Royal Bank of Scotland. All things being equal, I love to give my business to hometown credit unions and small local banks but they often don’t have the systems to efficiently facilitate business even if they say they do; especially across international borders. In addition, they also may not have the capability to setup Authorized Business Users as mentioned in the step above. Even some larger banks like Bank of America may block internet access to your accounts if they see you are logging in from a foreign country. I don’t just mean countries with ties to terrorism, I’m talking countries like Australia. Whether the bank has branches in foreign countries and access to ATMs overseas is also a question to ask if you may have a need for these.
  8. Religiously use a VPN (Virtual Private Network) whenever you’re online and not just when you’re doing financial work. With identity theft and cyber crime an ongoing issue, you need all the defense you can get. A VPN encrypts all traffic you send over networks including wi-fi so that others cannot read it. Whether you’re using the wi-fi in a Starbucks, an airport or even a cable internet connection in a hotel room, there are little sub-humans out there working to read what you’re doing online to see how they can benefit from it. This can include intercepting your account numbers, logins and passwords when they’re sent to your bank or it can be someone near your Air BNB logging your keystrokes or putting spyware on your computer.
    • Some VPNs are free but can be limited and difficult to use. Others can be $10/month for robust protection and an easy to use interface. Discounts may apply if you prepay 6 months at a time. Don’t make the mistake of thinking that you don’t have any information on your computer that’s valuable or that you’re safe because you use a Mac. My personal favorite VPN is called Vypr.
  9. Use a password vault. LastPass and others are free for the basic edition and will store all your passwords in a hyper-secure way. Once you’re up and running in the location independent world, you’ll likely have logins to dozens if not hundreds of sites and services. Don’t make the mistake of making all your passwords the same or similar or easy to guess. LastPass can generate super-strong random passwords and then remember them for you. You can log on from any computer as needed or in case your computer is lost or stolen. Whatever you do, don’t keep your passwords on a list stored on your computer where it’s easily hacked or lost if your computer crashes or is lost.
  10. Backup all your business files to the cloud. Dropbox, Google Drive and Microsoft’s OneDrive are all good. It would be terrible if your computer were lost, stolen or receives a Tempranillo dousing on that trip to Barcelona causing your entire business to go POOF – or should that be ZZZTT?
Many nomads aren’t sure when to start using an accountant, or at what income level the expense is justified for them. Particularly those that may still have W-2 income of some sort, or aren’t making very much yet. What are your thoughts on that?

That’s an excellent question! Ideally, it’s best to bring a bookkeeper in from the start. This way you know the accounts are setup and consistent from Day One. For the most part, once the system is up and running, you will be free to spend the time you saved on constructive pursuits like building your business or having more hours of leisure time during the month. You will likely still communicate with you bookkeeper during the month to answer questions. For budget or other reasons, some entrepreneurs may be hesitant to do this. In that case, there are a few indicators of when it’s time to engage a financial professional. If the business person experiences any combination of them, it’s time to consider bringing in help:

  1. You don’t like doing bookkeeping or accounting work.
  2. The work is beyond your comfort level or level of expertise.
  3. The time you spend doing your own finances would be more valuable to the business if it was spent gaining more customers or more sales or in strategically guiding the business.
  4. Your business has grown large enough that there are more transactions to track than your system/time/patience can handle.
  5. There just aren’t enough hours in the day.                                                                                                       
How important is building a P&L sheet, Balance Sheet, and Statement of Cash for solopreneurs whose income all funnels into one business checking account?

The Income Statement, also called a “Profit & Loss” or “P&L” along with the Balance Sheet are the two critical reports for any US-based business. Normally only larger businesses and businesspeople who are well-versed in financial management will find the Statement of Cash Flows useful. These financial statements are vital to business reporting whether the company uses one bank account or dozens since all the bank accounts will feed into these statements. In fact, I highly recommend that most small businesses keep things simple by using only one business checking account, one business credit card and, PayPal, Stripe or savings accounts if needed.

Does someone need an accountant if they use QuickBooks or another accounting software?

The short answer is Yes. Even if the business person has experience with an accounting package, feels comfortable using it and their time isn’t better spent adding value elsewhere in the business, they’re still going to want to have a qualified professional review the work. Unless you’re starting a bookkeeping practice, I don’t recommend trying to learn accounting software in addition to all the other things involved in starting a business.

Any particular advice/thoughts for online teachers? Anything you’ve seen them go about the wrong way?

I’ve not had the privilege of working specifically with online teachers but the basics apply to all types of firms. From the teachers I know, I’ve observed that a passion for teaching is rarely combined with a passion for bookkeeping! Setting up separate accounts, having a consistent recordkeeping system and an awareness for when to bring in professional help will ensure teachers keep their financial houses in order.

Cliff Highman is a Certified Management Accountant with a Finance MBA from the Carlson School Of Management at the University of Minnesota. He founded Digital Nomad Accounting in 2014.


Cliff Highman is a Certified Management Accountant with a Finance MBA from the Carlson School Of Management at the University of Minnesota. He founded Digital Nomad Accounting in 2014.

Ray is the founder and creator of Teacher Indie. He is an award-winning entrepreneur who has created online education businesses that have appeared in publications such as Entrepreneur Magazine, Inc Magazine, Buzzfeed, The Boston Globe and many others. His goal is to help teachers from around the world get online and gain the financial independence they deserve.

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