4 Tips to Smooth Accounting for Freelancers

Freelancing is attracting more and more working people as time goes by. The concept is intriguing and potentially lucrative: you don’t have a full-time job, but work on different projects for one or more clients. This form of work opens more opportunities for you to express your creativity and get properly paid for your work.

Still, there are some potential dead ends, as well. One of the most dangerous ones are messy finances. As a freelancer, you need to take care of your accounting features on your own. This is something that might throw a few obstacles at your freelance effort. We’ll try to make financial things work well for you with the use of the following accounting tips.

1) Don’t fall behind on financial records

When you replace the traditional 9-5 workday with freelance work, you’ll probably be surprised by the amount of free time. However, if your freelance career takes off successfully, this sudden freedom will soon vanish.

What’s extremely important during this initial period in the freelance niche is not to lose track of your financial records. Every new freelancer needs to be well aware of the fact that they’re on their own now, with all the pros and cons such a status brings.

Therefore, you should schedule one part of your work week for accounting details. For instance, it can be the last portion of your work day every Friday. It’s a great way to close your work week, as well as to identify the weak spots and make a plan how to fix them.  If a weekly schedule seems too often, you can do it monthly.

One of the key features you should keep an eye on are the payments made by your clients. A routine weekly overview will tell you whether all the due invoices have been paid that very week. If not, you’ll have to react promptly and take care of those unpaid invoices.

Further, you should check your business expenses. If they tend to surpass your income, you’ll be able to react at once and consolidate your finances.

Moreover, you should also track your work hours and hourly rates. As time goes by and you keep gaining experience, both categories should increase. Hence, note down all these changes to keep your financial records in order.

2) Don’t throw away the receipts

Every time you buy a piece of office equipment software for your business, make sure not to throw away the receipt for that product.

On the one hand, this is a proof that you’ve spent your business assets for the business itself. Spending business funds on non-business items it frowned upon by the tax authorities. As a matter of fact, you can be severely fined for such expenditure. If you keep your receipts, you’ll be able to prove what you’ve bought with your business money.

On the other, those receipts will come in handy in case any of the purchased items breaks down or stops working. In most cases, you won’t be able to claim the warranty.

Luckily, it’s not necessary to keep all the receipts in paper form. You can simply choose one of the iOS or Android apps for receipt management, scan your receipts and keep them in electronic form.

In a nutshell, throwing away receipts is similar to throwing away money. They’re official documents that show how you spend your business assets, so keep a good eye on them and you’ll have fewer accounting problems.

3) Work with financial professionals

No matter how proficient you are in your niche, you should always contact professionals for the aspects of life in which you’re amateur if you want to get things done.

While you can easily track your financial reports on your own, especially if you get one of those omnipotent accounting software tools, more complex financial records require professional expertise.

In line with that, prepare at least your first tax return with the help of experienced financial professionals. Here you should follow some simple steps to choose the right tax preparer and get in touch with an expert that will guide you through the entire process.

In order not to omit some details that might be important for your tax return, work with a tax professional even before you set off on your freelance quest.

Similarly, whenever you’re not sure how to deal with some accounting dead ends, you should contact a certified accountant.

Of course, this doesn’t mean that you should have them on your payroll. Simply find a reliable professional who can assist you in resolving some occasional accounting issues.

4) Save your freelance assets

In business, the risk is the only thing that’s for certain. Nevertheless, every freelancer who started freelancing without any savings knows how difficult it is to gain financial independence. If you don’t have enough assets to keep things rolling in the beginning, you won’t be able to keep your books in order.

Because of that, your freelance budgeting should start way before you find your first client. A rule of thumb is that you should save enough assets to finance the first few months of your everyday living expenses and your freelance costs.

This is something you should take seriously and open a separate bank account for those savings while you’re still an employee. As you start freelancing, keep putting away a certain amount of money from every single project as you get paid for it. For instance, you can put 10% aside after every payment.

These saved freelance assets should be a special category in your books. They can be used for different purposes, from covering the budget holes caused by late payers to investing in new equipment and outsourcers. Your accounting features will be more easily managed if you can always count on a backup plan. If not, you might have to borrow money or take loans, which should really be at the bottom of your business options.

Also, without a special savings fund, you’ll never become a financially independent freelancer but remain a plain wage maker.

Conclusion

Freelance accounting can really be a pain in the neck. That’s why you should keep learning about some useful strategies to make accounting as smooth as possible. The accounting and financing tips analyzed in this article will help you keep your books in order and your finances under control. These two features are mutually dependent, which is why we suggest taking good care of them. Finally, freelance career is more likely to take off successfully if you get the gist of accounting.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
Mark Thomasson

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