The traditional workforce is changing. Today there are over 60 million freelancers in the US. COVID-19 further accelerated this shift as many full-time employees were laid-off or actively started looking for side hustles to support themselves. Anyone who is currently in this stressful situation and is trying to manage their finances knows how challenging it is all year long. It’s a constant guessing game trying to plan and withhold the right amounts so you don’t come up short during tax season.
Enter Oona Rokyta. A former freelancer, Rokyta co-founded Lance Bank in 2018 based on the familiar pain points freelancers and side hustlers experience when managing their finances. Rokyta shared that when she “was a freelancer, I dug into my finances with an accountant, Quickbooks and other tools but found there was nothing really guiding my approach or telling me how I should organize my finances.”
Rokyta realized it was time for a new model. Created as the first smart business banking account for the self-employed, Lance’s unique business bank account and success model automatically allocates a custom personal salary, tax withholding, business expenses, and savings amounts from incoming deposits for individual businesses. With basic bookkeeping, entry level accounting and tax payments done, freelancers get what they need to grow compliant and successful businesses.
The backstory is worth noting. Lance was built by a team of former freelancers based on the insight that the current marketplace is still struggling to help solopreneurs manage everyday cash flow and income documentation across multiple income streams. The solution evolved into the creation of a bank account to automatically identify deductibles and manage tax withholdings, set aside savings, and pay a monthly salary – all responsive to a freelancer’s typically volatile monthly income.
Participating in the $2.8MM funding round were Barclays, BDMI, Great Oaks Capital, Imagination Capital, Techstars, DFJ Frontier, along with other fintech and creative industry angel investors with the funds intended for further product development and marketing.
To refine the idea and the product, the team had to do a significant amount of research over the past year including speaking with thousands of self-employed individuals. They discovered that even the most savvy solopreneurs were paying monthly surcharges for standard business banking accounts and sometimes multiple accounting software solutions. Despite their efforts to educate themselves and organize their finances, these business owners and freelancers were still having to spend too many resources on solutions and still weren’t able to surface their 2019 income or easily fill out Schedule C forms for tax filings and loan offerings.
Rokyta explained how it was “time to recreate banking solutions that are mindful of different people’s financial goals. Lance’s approach brings banking and accounting together in one business account because that’s what solopreneurs need today. They’re already juggling multiple income streams and evolving passion projects. What they need is a financial partner that works alongside their growing ambitions.”
The key differentiator in the Lance Bank product is unlike traditional and other neobanking solutions that still only offer a passive bank account that freelancers have to then manage with accounting software, Lance takes a more active approach.
Rokyta noted “with over 30MM freelancers making middle-class incomes or above and still trying to patch together bank accounts with turbotax and spreadsheets, most of them don’t feel any more organized.”
With its business banking account, Lance addresses this issue by capturing both W2 and 1099 payments and then allocates them at pre-determined and custom settings to subaccounts: one sub account temporarily holds a personal salary before it’s sent out to the account holder’s personal checking account, another holds tax withholdings, and yet another holds back a small amount for savings or profit which is critical to year end planing.
The result is account holders get the benefit of an allocated business expense balance that interacts with their automated tax withholdings. All of these subaccounts, automatic allocation and responsiveness are included in the basic account at no charge. Lance also developed a pro version which account holders can opt into on a per month subscription that then pays the IRS quarterly taxes from the withholdings, pre-populates an anytime Schedule C form and more. Lance estimates this approach can annually save freelancers 100 hours per year and $7,500 in fees and deductibles.
Finally, besides crafting a new smart banking account solution, Rokyta has five important financial tips freelancers should heed if they want to get ahead and also improve their financial outlook. Take a moment to see if you are currently following any of these best practices.
– Allocate a salary for yourself and put the rest in savings. This is great advice and worth following throughout your career.
– Separate your account(s): have a business account and a personal account. It’s a practical twist on the old adage, don’t mix business with pleasure.
– Try to find the one tool that gives you the most financial structure as opposed to using multiple financial tools that don’t necessarily correspond with each other.
– Try to find a bank clerk and an accountant that understands the world of a freelancer and how you make money. It’s not easy but they are out there and are ready to help.
– Monitor your expenses closely and make sure to recognize and categorize deductibles. The average freelancer misses 10% of their deductibles annually.
Rokyta ephaiszed, “None of the banking or accounting solutions out there today help with real-time cashflow. Bank accounts and accounting software only provide ledgers of expenses paid and how they should be categorized.” That’s why Rokyta believes it is so importnat to find self-driving banking solutions that keep your business and personal finances level set all year long.