Bookkeeping for freelancers is one of those tasks that feel super boring to do, but it's something you can't avoid. But what if we told you bookkeeping doesn't have to be that complicated? There are multiple ways you can streamline the bookkeeping process, without messing up the calculations, transaction details, or your peace of mind.
So without further ado, let's dive into the 6 essential bookkeeping tips every freelancer must keep in mind.
Bookkeeping might be a tedious task, but it's a necessity for freelancers and businesses. The first tip is to build a system for efficient bookkeeping. When you have a full-fledged system in place, you are less likely to get overwhelmed with all the calculations. Hiring a professional accountant is a great option in this case. They will use state-of-the-art software and expert techniques to maintain every single record, so you can focus better on your job.
When you're a freelancer, you must have two separate bank accounts – one for your personal expenses, and the other strictly for business purposes. Keeping these two separate will make the bookkeeping process so much easier, and helps you maintain a budget. On your work-related account, you can trace the incoming and outgoing expenses clearly, without mixing them up with your personal expenses. It also becomes seamless to check whether your clients have cleared their invoices or not, or if you have any pending payments.
The next tip is to plan your freelance expenses. It could be the amount you pay for software, website hosting charges, office supplies, utilities, and so on. Note down which of these expenses you incur every month. Sometimes you might also come across a sudden or one-off expense, like investing in a work desk, an office chair, or maybe a new computer or a printer. When you have a plan for these expenses, bookkeeping becomes easier.
Now coming to hardcore bookkeeping, you have to keep a detailed account of each and every income and expenditure that happens on a regular basis. You can note these down daily, weekly, or monthly. You could either do this by yourself or let a professional bookkeeper handle it on your behalf. Proper bookkeeping will help you analyze your performance, and you'll get clarity on what you're doing right and where you could improve. In some months if you notice that your total income is lower than the previous month, you'll know you'll have to close more clients the next month or increase the price of your services.
You're putting in hard work and lots of effort into the work you do for your clients, and you should get paid on time. And to get paid on time, you have to send invoices on time. Based on the arrangements you follow, you can send weekly or monthly invoices to your clients right after you finish the task. Don't delay this – remember that your client will process your payment only after you send them the invoice. Timely invoicing will keep your bookkeeping error-free, and make sure payments hit your bank account at the right time.
One of the biggest mistakes freelance contractors commit is ignoring their tax liability. As a freelancer, you are responsible for budgeting your own taxes – there is no employer to deduct taxes from each paycheck. To be sure that you have enough funds to pay for taxes, keep aside a part of your income every month in your tax fund. Saving around 30% of your income should be enough. Keep this amount in a separate account to avoid any confusion.
We know how difficult it can be to juggle between work, managing bookkeeping, and doing taxes, all by yourself. Hiring a professional bookkeeper will not only save you time but also your income and expenditure records will be absolutely flawless. Talk to our professionals at Accountants Now, and let them look after the boring tasks, so you can shift all your focus towards scaling your freelance business to the next level.
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