Accounting 101 for Freelancers

Making the decision to go freelance will be one of the most empowering and exciting decisions of your entire life, but it is not without its obstacles. When you make the decision to go freelance, that’s it, it is just you, by your lonesome.

This means that you are essentially your very own business owner, so you have to ensure you have the skills, knowledge, and dedication required to run and manage your business.If you aren’t working, you aren’t earning, and there is no sick pay, no holiday pay, and no days in lieu for public holidays.

You set the hours you work, you take on the jobs you want to take on, and it is down to you to ensure you do the best job possible and that you meet your targets and objectives. One aspect of freelancing that is not all that appealing to many people is the accounting side of things.

You have to manage your ingoings and outgoings, you have to keep track on what you’ve learned and what you’ve spent, you have to chase up invoices, you have to balance your books, and you have to do your accounts every financial year.

Whilst testing, especially as you begin to expand and take on much more work, there are things you can do to help keep your books in order. Here are a few handy tips for freelancers looking to manage their accounts.

Keep track of all of your expenses as you go

You would think that this would be the most obvious tip of all, but you would be amazed by just how many freelancers fail to keep on top of their expenses. In order to make it much easier to submit your books at the end of the financial year, make sure you keep track of all of your expenses as you go.

This basically means that you can keep your personal spending separate from your business spending, so you know exactly how much is being put into your business. A lot of freelancers fail to do this and simply try to estimate roughly what their expenses for that fiscal year were.

The easiest way to keep tabs on things is to open up a checking account which is separate from your other accounts, which you then utilize for every business transaction that you make. In terms of keeping things simple to understand, this is an incredibly effective strategy.

Always document your receipts

How many times have you gone to the store for small, yet essential items for your business, only to throw the receipt in the trash afterward because the amount you spend was so small? All of your receipts which are being spent on your business should be kept in a tidy and organized manner, at all times!

Keeping receipts will not only help you to offset your taxes against your expenses, but they also come in very handy if you happen to be audited. They are also useful if you simply can’t remember how much you spent on something. Whilst it is best to keep physical evidence, I.E paper receipts, there are now also mobile apps which you can use, but we’ll cover those in more detail shortly.

Never fall behind

When you do your books, no matter how busy you are, or how in control you may think you are, you should never, ever fall behind. Your books should be updated on a weekly basis, though some freelancers actually update them several times per week.

Exactly how you keep tabs on your accounts is up to you, but just make sure you get into a routine where your books are being updated at least once per week. It may seem like unnecessary work at first, but once you get the hang of things, it will come as second nature to you, and it will save you a great deal of time and money in the long run.

Make use of accounting software

The business world is changing and evolving at a very rapid rate, and modern technology is at the forefront of many of these changes and advancements. As a freelancer, you shouldn’t fear technology, but rather, you should embrace it instead.

For example, there are numerous forms of accounting software out there for you to take advantage of, with each one being designed to serve a very real purpose. As mentioned previously, there are apps out there for tracking receipts where users simply take a photo of their receipt and then log the image securely, so that the paper can then be recycled.

There is accounting software that includes databases, software that includes spreadsheets, software for managing clients and invoices, and much more besides. If you wish to manage your accounts and keep your books in order, make sure you make use of tried and tested accounting software.

Ensure your clients pay you on time

Another tricky aspect associated with freelancing is the fact that it is down to you to chase up payment from your clients. Most clients will pay you on time, every time, without any issues at all. Occasionally, however, you get the odd one or two troublesome clients who simply cannot seem to pay you on time.

This can be bad news for people trying to manage their accounts because it can make managing and tracking your earnings each week/month, tougher than it needs to be. However, when trying to get your accounts in order, you need to be firm when it comes to your clients and late payments.

How you ensure your clients pay you on time is up to you, though obviously, you must always be respectful and professional, no matter how frustrated you may be. Once you are receiving regular payments when you are supposed to be receiving them, keeping your projected earnings, your income, and your general cash flow in order, will be easier than ever.

Now that you know these precious tips you can start improving your finances today!

 

 

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