The top concern for many freelancers is the quest to get paid for their work. However, there are so many more details relating to what to do with the money once they get paid. How do you keep track of payments, taxes, record keeping, invoices, expenses, and more?
It is not easy to manage the accounting for your business. Luckily there are tools at your disposal for tracking outstanding invoices, bookkeeping services, and how to get paid faster from clients who owe you money.
When a freelancer consistently keeps accurate logs of their business activities, they can better understand their money, business, and cash flow. All while helping you and your accountant be more ready for tax season and a potential audit.
If you find it challenging to keep up with your finances, it can be beneficial to hire a bookkeeper, an accountant, or both. Together they will work to balance financials, accurately aid in tax payments, provide financial reports to guide your business in the right direction, and give you more time to focus on satisfying your clients.
Above all else, when you are a new freelancer, you need to get paid. To get paid faster, it helps to send out an invoice. Luckily there are many tools you can use to send invoices. Many accounting software’s have invoicing built into them.
Whether you are using LessAccounting, Freshbooks, or any other invoice software, it just needs to look professional, easy to use for you and the client, and let you see if you get paid by your client.
To keep assets from getting mixed up, you should keep separate business and personal bank accounts. Different accounts will allow you to separate what personal expenses are versus business expenses. Separating your bank accounts will allow you to differentiate, making life a lot easier for you, your accountant, and others.
Keeping separate accounts also gives you a better look at how much money you have at any given time—providing ease for creating costs for your services and budgeting. Clarity makes life as a freelancer much easier when future financial problems are avoided by helping you decide what business expenses are necessary for your business.
To make it as a freelancer, you will need to keep up with your business finances.
The financial situation of your business is about much more than just hiring an accountant for tax season. Understanding your small business finances allows you to anticipate future struggles and grow your business. Taking a little time each day to keep track of your books and organize your documents will help you ensure every invoice and expense like your credit card bill is taken care of.
For many freelancers, bookkeeping is a daunting task. Creating a system that is easy to follow is a helpful way to ensure your accounting stays organized.
To make it easier to keep your accounting organized with accounting software. The software will help you input your financial information anywhere at any time. By aiding you in bookkeeping, invoicing, cash flow management, and keeping up on outstanding invoices, the software will help you maintain accurate financial records.
Many freelancers will find it more convenient to hire a professional bookkeeper. Hiring a bookkeeper will allow you to focus more on your client’s work, give you the time to acquire new clients, and focus on growing your freelancing business. It is essential to establish a method for bookkeeping that works well for your freelance business. Without a strategy that works for your business, you will not follow the system, making the technique pointless.
When you are getting ready to file your taxes, you will understand how vital it is to track your business transactions as a freelancer. Some examples of information and write-offs to keep track of:
Saving cash on the side for your annual tax payments should be a part of your plan.
Many freelancers have worked a 9-5 job where their employer deducts a portion of their earnings each paycheck to cover income taxes. As a freelancer, you must prepare yourself and your business for the possibility of a higher tax bill than you anticipated.
It is a general rule for most freelancers to set aside 30-35 percent of their income. A good accounting software can also help freelancers estimate their tax bills. The software will provide information on:
Accounting and bookkeeping for freelancers may sound intimidating, but the use of accounting software can make all the difference.
The main benefits of using accounting software are getting paid quicker, having clear financial records to turn in when applying for a loan, giving you an idea of your tax bill, and preparing your business for a potential audit.
Software programs for accounting and bookkeeping for freelancers will help you identify and follow up with outstanding invoices. The software provides invoicing tools to create and send custom invoices. The software will also allow you to set invoice alerts for your clients and you.
A critical aspect of using bookkeeping software is accuracy. Many freelancers can get by using basic bookkeeping tools like an Excel Spreadsheet. However, once you start bringing thousands of dollars a month, it can become harder to track the accounting records without software.
Not separating your personal accounts from your business accounts might get you paid directly to your personal bank account. Getting paid directly to your personal account can be too tempting to sweep that payment under the rug.
The immediate benefits of not paying your taxes properly can be caught during an audit. Getting caught brushing expenses under the rug can result in paying penalties or even serve jail time.
On a less scary note, keeping a transparent business will allow you to have a clear idea of your income and expenses. Clarity will help freelancers to strategize and see where their growth will come from.
Creating a budget is one thing; following it is another. Sticking to a budget helps you understand and manage your cash flow to make sure your tax records are in one place.
Another great way to monitor and track your spending habits is through the use of accounting software. Accounting software can also help you set up growth and savings goals. The software allows your organization to plan and grow for the long haul.
Freelancers have a lot of independence, which puts a lot of weight on their shoulders when making decisions.
Financial reports can make business decisions a lot easier to make, as the reports provide a more detailed look into where the business is at and where it is trending. You can compare different time-periods when preparing a budget that can anticipate problems you may not have discovered without the numbers to guide you.
Reports to help you analyze data:
Reconciling bank transactions should be top of mind for every new leader, but it is overlooked by too many. Reconciling your bank transactions will help you keep your books organized and matching your bank accounts.
Manually reconciling your money can be a monumental task. However, with accounting software like LessAccounting, Freshbooks, or Wave, freelancers can quickly reconcile their bank accounts. All you do is sync up your accounts import data from your bank accounts, PayPal, Stripe, and credit cards to make sure your bookkeeping is accurate.
Performing bank account reconciliation will make your daily freelancing business easier as it prepares you for tax season.
Bookkeeping is an essential part of your business. It aids you in paying taxes, tracking expenses, and managing overdue payments. However, it more excitingly gives you an exact look at the state of your company.
When working for multiple clients, it can be easy to lose sight of the big picture and get engulfed in your client’s work. Bookkeeping services will provide you with a look into your cash income, expenses, cash flow, and your business’s growth. Without this insight, your decisions will be guesses in the dark. Great bookkeeping for freelancers can help you turn the lights on to more educated decision making.
Today is the day you take back the control of your business with bookkeeping that works for you.