With the economy in the state that it’s in, there are more and more people who are “stepping out on faith” and freelancing for a living. In many ways and for many reasons, this is a really good thing because when you’re working as a contractor in fields that you enjoy, it can be self-empowering because you are doing what you love on your terms.
Of course, everything has its “peaks and valleys”. For a freelancer, it tends to be related to what can happen when you’re so busy making money that you are not making wise financial decisions. One of the best ones that you can do is be thorough when it comes to your personal accounting.
So, what are some accounting tips that are great for all freelancers, no matter what your area of expertise may be? Check out these five below:
Do online invoicing. A lot of people prefer to doing their invoicing by hand (like on an Excel or Google Spreadsheet). But, there are plenty of online invoicing programs that are extremely user-friendly and are designed to keep you far more organized. Less Accounting and Fresh Books are two apps that you can download for a really reasonable price. Zoho another program that is favored by many.
Track your bills and expenses. The IRS allots for quite a few business expenses to be deducted each year. The thing is that you need to be able to provide them with some kind of documented proof as it relates to them. This means keeping track of your bills and expenses. There is actually a website called MindYourOwnBusiness.com that provides you with a spreadsheet so that you can do it for free online.
Pay your taxes quarterly. A lot of freelancers fill out 1099s rather than W2 forms. This means that they get paid for their services without the removal of taxes from the employer. This also means that if they don’t keep up with the amount of taxes that they owe, they can end up in quite a bit of financial drama and trauma. One way to avoid this is by paying your taxes on a quarterly rather than annual basis. It helps you to be more responsible with your spending and it also keeps you from going into shock every April 15.
Create your own profit and loss statement. If you don’t know what one of those is, it’ pretty much just what it says: It’s a way for you to track the amount of profits that you made from your freelance work vs. the losses that incurred. There is a website that is devoted to showing people how to set this kind of template up: ProfitandLossTemplates.com.
Hire an accountant. Someone hired you because you’re a professional at what you do. We hire accountants for the same reason; especially during tax season. If you’re feeling a bit overwhelmed when it comes to trying to keep up with all of your paperwork, there is certainly nothing wrong with hiring an accountant to help you “crunch your numbers”. Or, if you know someone who is studying to become an accountant by doing something like getting their online masters in accounting, you might even be able to get them to provide you with some pointers. When your finances are in order, it makes it easier for you to focus on the real matter at hand: getting more freelance jobs and making the kind of money that you want to make.