How Can Freelancers Keep Business Expenses Low

One of the main reasons people become freelancers is the fact that they won’t have a boss anymore. Working with the clients you choose is much different than working for someone. Also, another important incentive that drives people towards entrepreneurship is the financial freedom it brings. While you don’t have a steady income on your bank account anymore, you have an opportunity to get much more money for your work.

However, there are also lots of expenses in freelancing, which is why you need to be extremely cautious with them. The next few lines will advise you how to optimize your business expenses.

Subscriptions instead of buying software

Needless to say, everybody needs to have legal computer software, especially in business. Still, there are different ways to avoid wasting money on software tools you need only a few times a month.

The smartest way to save money is to subscribe to the software solution you need for your business. Instead of buying a software license, which is a more expensive option, you can simply subscribe to a software solution for a certain period of time.

The research conducted by Gartner showed that about 80% of software manufacturers will turn to the subscription model by 2020.

On the one hand, software users will benefit from this model due to its flexibility to their current needs.

On the other, software producers will adapt to the lively online market and the diversified needs of the workforce on the Internet.

As for new freelancers, embracing the subscription system will help you avoid some terribly high expenses regarding software licenses. That way, you’ll have a few dollars more on your business account.

Keeping business receipts

Apart from saving money via smart software investments, you can keep your business expenses under control by keeping your business receipts. Of course, no one would throw away the receipt of their office computer or any other piece of business equipment.

However, new freelancers might not be aware of the fact that you can have some gain from keeping some less formal receipts. In line with that, you can claim a tax deduction for business travel expenses, both for everyday commuting and special trips to business events.

Apart from that, business dinners are also tax deductible. Still, this doesn’t mean that you can add every meal you have outside to your list of tax deductions.

On the contrary, such a dinner needs to have a certain effect on your business. What’s more, you’ll need to prove it to the tax authorities, as well. For example, a business contract signed at the dinner or in its near aftermath will do for this purpose.

Still, bear in mind that freelancers who don’t register as sole proprietors of self-employed business entities won’t have the right to claim any tax deductions. If you officially register as a sole proprietor, have a look at these sole proprietorship deductions and try to claim as many of them as possible.

Also, you need to keep some other business-related receipts, like the office telephone bill or the electricity bill. In case you work from a home office, you’ll be able to deduct only a part of the bill – the share calculated to be used for business purposes.

Since entrepreneurs are always under stress, forgetting to ask for a receipt or to keep it is a common thing. Because of that, you should always have an envelope in your car or in your business bag. When you get a new receipt, just put into that special receipt case and you’ll keep it for good. Also, you can use the hacks from the next paragraph.

Real-time expense tracking

When talking about business expenses, we need to stress out the importance of continuous expense tracking. In addition to the aforementioned storage of various business receipts, this is another element of simple accounting for freelancers.

What might get in the way of seamless expense tracking is freelancer’s preoccupation with various business tasks. As a result, you might forget to note down and keep a receipt from time to time. Although this doesn’t have to be a crucial expense for your business, it won’t flow under the radar of the tax authorities. And you know the old business mantra – you don’t want to mess up with the taxman.

The simplest way to keep track of every business purchase you make is to take a photo of every business receipt immediately when you get it. Also, you can even scan it with your mobile phone, which is where these handy accounting apps come on stage. It will take a few seconds of your time at that moment, but it will have a tremendous effect on your general financial record.

Apart from that, the tax officials will be happy to see that none of your inventory expenses has been left out.

Improving your productivity

Productivity and work efficiency is the driving force behind every successful freelancer. What’s more, efficient freelancers will spend less time doing a task per unit of time, which keeps their expenses under control.

Also, a recent study about freelancers’ productivity brings some interesting opinions from freelancers themselves. Namely, about 91% of the surveyed home workers claim that they’re more productive as home workers than as office workers.

However, not all freelancers will be able to reach that level of productivity from day one. It will take some time to get accustomed to that nature of work.

This is why it’s crucial to handpick the projects you accept to work on. If you bite more than you can chew, your freelancing effort might choke before it even takes its first breath.

Similarly, you need to recognize what projects you shouldn’t accept. Still, it doesn’t mean that you should turn down the business offers you’re getting. What you can do is create an outsourcing plan from the beginning of your career. That way, you’ll have more options to combine when it comes to your projects, productivity, and efficient expense management.

Conclusion

Keeping your expenses low is one of the key goals of every business effort. Working as a freelancer can be a bit tricky at the beginning because you can’t always tell in advance what expenses you’ll have in a project. Because of that, it’s important to save on software whenever you can temporarily subscribe to the services you need. Also, keeping track of every business expense you make and sharing your work with outsourcers will contribute to improved work efficiency. All these features will make your business more profitable and less expensive for maintenance.

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.
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