Bookkeeping might not be the first thing on your mind when you’re a freelancer. Keeping track of finances by yourself isn’t easy. However, it’s important to keep your books organized to save you trouble at the end of a tax year. Besides that, you’ll find that keeping track of your clients and payments is much easier when you’re organized and have a system in place.
If you’re trying to organize your bookkeeping, you’ve come to the right place. We’ll provide valuable bookkeeping tips for freelancers that will help keep everything in order and save you from stressing out.
When you’re a freelancer, you have to keep track of every part of your business, including bookkeeping. By establishing a system, you can navigate any problem without difficulties, procrastination, and delays.
Various useful tools, such as accounting software, help you keep your financial records organized. If you’re not sure how to start or you’re looking for professional help, you can hire an accountant to set everything up correctly.
Establishing the best system will depend on many factors:
Besides having a system, it’s important to be consistent when it comes to bookkeeping. Establish how many hours per week you need to devote to the task and stick to that schedule. Although freelancing usually allows you to have flexible hours, you need to be organized to get the most out of it.
Procrastination will only make your job harder, especially if you wait until the end of a tax year to balance your books. By doing that regularly, you’ll have a stress-free schedule, and you won’t have to worry about missing or forgotten paperwork and payments.
Establishing a clear boundary between your personal and professional affairs is one of the hardest parts of being a freelancer.
Separating personal and professional accounts is essential for the successful monitoring of expenses and payments. Knowing how much money is going in and out of your business will help you avoid confusion, plan your budget, and keep track of the amount of money you have available.
When you establish a pattern for your business, you can confidently plan expenses for the following year, expand and improve the business, maybe even hire another employee, etc.
Besides keeping track of the cash flow, personal and professional expenses can also be tricky. Establishing a boundary between the two is often confusing, and learning how to classify them will take you one step closer to running a successful, stable business.
If you’re ever audited, having a transparent business account will save you the headache of having to prove every expense was business-related.
When you’re working for someone, a certain amount of money for tax bills is taken from each of your paychecks. When you’re a freelancer, you need to do this yourself.
Put a certain amount of money aside for this purpose. A general rule is to save around 30% of your monthly income. This will prepare you for the possibility of having a higher tax bill than anticipated.
With the help of accounting software, you can get a general idea about your tax bill. However, you won’t get the right estimate if you don’t keep track of your invoices and cash flow. Keeping detailed and meticulous track of your records will prepare you for tax bills and help you run your business with less stress.
If you don’t have a clear distinction between your personal and business accounts, you could be tempted to hide a few expenses, or you might even do so by accident. If this happens, you could face penalties if you get caught hiding your expenses or not being able to justify them.
By running a transparent business and stating your expenses and income accurately, you’ll be able to plan better for the future, grow your business, and have an objective idea about your success as a freelancer.
Always make sure your clients pay on time. Although this can be difficult, waiting months to get paid for a job performed can seriously affect your business and keep you from having an accurate idea of how successful you are.
By sending invoices with specific due dates, you’re ensuring your clients are aware of the deadline. If a deadline is approaching, send reminders. The same goes when a client is overdue with their payment.
Different tools and software allow you to keep your books on your computer. However, bear in mind that technology can sometimes fail you. If your hard disk gets damaged or your computer dies, you’ll lose the valuable data you’ve been collecting and keeping track of for months or even years.
It’s essential to ensure you’ve backed up your data. It’s best to set a time every week to store the information on a cloud or make a copy on a flash drive or an external hard drive. By doing that, you’ll be prepared for every eventuality and make sure your information isn’t lost.
Besides that, you should have paper copies of all the essential documents for your business and keep them in a safe place.
If you’re new to freelancing and bookkeeping, you might be overwhelmed by the number of things you have to keep in mind. Asking for advice from experienced freelancers or people in the same line of work can help you get started. In addition, you might make new friends along the way.
You can usually find Facebook groups that can answer all your questions and provide guidelines for successful bookkeeping. In addition, you can find successful local freelancers in your area or online and ask them for advice. They might recommend the specific software or provide additional tips regarding bookkeeping.
Having support is a big part of starting your own business. Don’t be afraid to ask for help.
Proper bookkeeping allows you to compare your current and past books and establish similarities and differences. Comparing data from different periods can help you get insight into the progress and growth of your business. It makes it easier to pinpoint the potential problems and correct them in the future.
Moreover, by comparing data, you can establish how your income and expenses have changed during a specific period and help improve your business.
With so many things on their mind, freelancers often don’t think about the importance of proper bookkeeping. Having your books balanced and your records in order can be overwhelming for many. Plus, you might feel lost if you’re new to bookkeeping due to the many different laws and rules you need to follow.
If you need help, try Swyft Books. We connect you to professional bookkeepers that will help you with everything you need. Most importantly, we use a secure network, which means you don’t have to worry about data protection. Get your free trial, and don’t worry about bookkeeping anymore.