Freelancers have the opportunity to get contracts and work on them one after the other. This means their income level is dictated by their skills and talents, and not by one employer but by multiple clients. However, the influx of all this work has a downside since freelancers also have to do their own accounting for each project.
Many freelancers might not be that experienced at organizing their accounting transactions, which explains why some opt to hire accountants of their own. There’s nothing wrong about hiring an accountant but some may choose to do their own accounting to save money.
The good news is that you can always look online to find the best software for freelancers who’d like to take care of accounting for their finances. This can help you sort through all your invoices and records so that they’re organized and ready to use when you need them. It will also give you more time for the actual work that you were hired to do.
Here are some other tips that may help freelancers manage accounting transactions and avoid being overwhelmed by them:
1. Treat Your Freelance Job As A Business:
Even if you don’t work for a company, treating your freelance job as a business can help you manage your accounting better since you’re more likely to view these earnings from a professional standpoint compared to a personal one. With this mindset, you’re less likely to spend on frivolous things and are compelled to take note of your finances in a more organized way.
2. Keep Personal Transactions Separate From Business Records:
Some freelancers may choose to merge personal transactions with business ones as this may seem more convenient. However, doing this can only affect how you manage your money. The main reason you should keep personal transactions independent of business transactions is that it’s easier to monitor your business’ progress if you only get to see business transactions. Merging personal expenses with business ones can get very confusing, especially if you suddenly spot your grocery receipts amidst your invoices when you’re hunting for a particular billing statement.
3. Open A Business Bank Account:
This stems from the need to keep your personal savings separated from the business’ income. You’ll find it easier to see how much income your business has been generating when you place the money in your business bank account. This also makes it easier to see how profitable your business has become by a certain date. Having your own business bank account also prevents you from spending the money for unnecessary purchases.
4. Keep A Budget:
You already know that having a definite budget for your personal expenditures is a wise step to take. That principle also works well for the business side of freelancing. If you have a definite budget for your business, you can remove or minimize unnecessary expenses. And if you stay within budget, it will be easier to determine how much markup you can bill your clients for.
5. Be Diligent In Keeping Receipts:
A business that’s organized is one that has a filing system for receipts. If your style of organizing receipts is to stuff them all into a large brown envelope, you may find it difficult to keep track of the progress of your business. You will find that taking 10 minutes just to sort through your daily receipts will result in a more organized way of accounting for your business finances.
6. Prepare For Famine:
All freelancers should be aware that, sometimes, work comes in its own season. In plain language, there’ll be times when there’s little to no work coming in. This means you have to set aside a percentage of your income to cover for your basic necessities when it’s hard to find work. You may also use a percentage of your income to solicit new contracts so that marketing stays up-to-date during the dry spells.
7. Prepare For Tax Time:
Taxes are a fact of life for any freelancer. To manage this aspect of your business, set up a calendar so that you keep track of deadlines for processing your taxes and other government requirements. You can also consider keeping an excel sheet to help keep track of your business earnings, and how much you need to pay for in taxes during that tax season.
For many, freelancing is preferable to working as an employee since you command your own work hours. You also have the potential to earn much more as a freelancer. However, you should also remember that your freelancing business will require your daily attention for it to flourish.
Be prepared to make your business work by keeping your accounting transactions organized. That way, you’re always prepared to see how much progress you’ve made so far and how much further you need to go financially.
For more than ten years, Virgil Talley has been producing high-quality blogs to his loyal readers. Virgil regularly updates his blog with timely articles on health and wellness, business startups, and home improvement.