If you’re not a numbers person, it is easy to get swept away by freelance work without giving much thought to how you will organize your finances. Especially in creative fields that don’t have much to do with organization of facts, bookkeeping can seem like a daunting task. But it does not have to be! There is an art to good self-employed bookkeeping, however, and it is important to get the hang of it early before it becomes a headache later on.
If you start your self-employed bookkeeping, you might indeed find that it is a rough start requiring research and patience. However, we put together five strategies that can help you get into it:
1. Have A Separate Business Account
In order to truly be aware of how much you are pulling in each month versus how much you are taking on in expenses, having a separate business bank account is the first step. A business account serves as an overall record of money going into and coming out of your business. If all your payments go directly into your personal account, it is easy to spend without thinking about how much you are actually getting paid, or particularly in the beginning, how much you are investing in making self-employment work. It also makes it much more difficult to go through and separate what expenditures were business ones, and which ones were personal.
2. Make a System for Expenses
It is easy to say you will record all of your business expenses, but much harder to actually do it consistently. Saving original receipts is a wise idea for tax purposes, but it is often a hassle to go through each individual receipt later and tally up what you have spent. A business account will give you a numerical total, but you will probably want to know what types of expenses go towards freelance work. A breakdown of individual expenses, recorded somewhere on a spreadsheet, is probably enough to give you an idea of where your business spending is happening if you do not have a lot of them. In the case of paper receipts, take pictures or scan them with the Billomat app! You can create a virtual folder for them on your desktop or upload them directly into Billomat to help yourself keep track. Billomat can automatically read the information on receipts, saving time you might otherwise spend entering them manually.
3. Make Use of Technology for Self-Employed Bookkeeping
Speaking of technology, there are several free and subscription-based software platforms that can help you organize your finances. In addition to accounting software like Billomat, there are also programs that can help you with things like time tracking, collections, and project management. Knowing which ones you need is the first step. If you don’t have complex projects, for example, you may find that you can manage them without software. But maybe time tracking software would be beneficial if you are managing a team. If you do a lot of marketing, there are analytical tools that can help you figure out which of your marketing efforts are successful leads to purchase, and which ones aren’t as good, such as Google Analytics. Remember that software can make things much easier but can also be inconvenient if you’re investing in tools you do not really need yet. Take stock of what you are spending a lot of time doing manually, and pick software that helps take the load off where you need it.
4. Structure Your Invoices Consistently
Many first-time freelancers put a lot of thought into their branding and portfolio, but your invoices need an equal amount of attention! Depending on who you’re invoicing, certain details can make it much easier to get paid more quickly. For example, if one of your clients is a larger company with their own accounting department, it will likely help them if you have a consistent invoice numbering system. If you’re working on multiple projects, you can track your income from the projects by incorporating project numbers into your invoice numbers. Likewise, you can incorporate the date or numerical project category. Billomat’s functionality allows you to customize your invoice numbers according to these parameters, because they are important ones to consider. Additionally, you will want to make sure that your invoice has all of your contact information, an itemized list of the products and services sold, and any applicable taxes listed separately before they are totaled at the bottom. As your business grows, you will want to keep track of what you’re charging per hour or per project, so you can be consistent across clients and increase your rates as you gain more experience. Invoices can be a great tool not only to give your client the information they need, but to record this information for yourself as well.
5. Take the time to Research Tax Law
Do you know what records you will need come tax time as a self-employed? If not, it is time to do some research! Even just knowing the basics can go a long way in saving you from a hassle down the road, when you need to dig up records you thought you wouldn’t have to hang on to. Also, it is useful to know which expenses tax deductible are, to help save you money in the long run. One of the crucial things you will need to be aware of is what types of tax you’ll need to charge your clients. Different products and services will have different rules regarding tax, which will make a difference when you go to do your own taxes.
If you are already doing all of these things in your self-employed bookkeeping and still have questions, it’s good to have a professional to reach out to—if you don’t already have an accountant or bookkeeper, you could book a consultation to find out if there is anything you are missing. Although bookkeeping seems complicated, it can be fun once you get the hang of it!