Within the next decade, the majority of the workforce in the United States will consist of freelancers.
It’s no secret that self-employment is on the rise, with over 57 million workers already identifying as part of the new gig-economy.
But, while self-employment is becoming the new norm, many freelancers are still unsure of how they should be keeping track of their income.
Self-employed bookkeeping is becoming a must-have skill for any freelance professional. Unfortunately, it is a skill most workers usually wind up learning through trial and error.
If you are a freelancer and aren’t sure of how you should be tracking your financial records, we can help.
Here are eight record-keeping tips that will make tracking your finances a lot easier.
1. Organization is Key
The key to success in every aspect of life is the ability to find valuable information quickly and efficiently.
As a freelancer, you are responsible for keeping tabs of all vital financial information concerning your work. So, it pays to set up a comprehensive organization system as soon as possible.
Invest in a good filing system where you can precisely and securely store any hard copies of invoices, receipts, or other documents.
When it comes to digital copies of documents, make sure to have everything labeled and set up a filing system that is cohesive and easy to navigate.
By taking the time now to set up a system of organization for your freelance career, you could save yourself a lot of time and money down the line.
2. Keep Copies of Everything
As a freelancer, it is your job to track your income and expenses. The simplest and most secure ways to do that is by keeping irrefutable proof of everything. By this, we mean copies — not your notes or records.
Whether its a receipt, an invoice, or even a check — nothing is invaluable, and you never know when you might need evidence of an interaction.
Aside from saving physical copies of all documents, you should also create digital versions you can access from anywhere, just in case.
If you don’t want to invest in a scanner, there are plenty of apps you can use that can help you create PDF copies of anything you may want to save.
3. Track Your Expenses
When you think bookkeeping, the first thing most people think about is their income.
While keeping track of incoming money is necessary, monitoring all outgoing cash is just as, if not more, vital to your success as a freelancer.
And keep in mind that your expenses cover more than supplies.
As a freelancer, you are your entire company. That means everything you need to function can be an expense.
Think about everything you use during a regular workday.
You probably use a computer and an internet connection, as well as a phone that requires a service plan. If you work from home, you likely still have rent or a mortgage to pay.
Even your morning coffee is technically an expense.
Set up an explicit budget, save every receipt, and track all your outgoing cash. You’ll be happy that you did.
4. Start Planning for Taxes Early
For freelancers, tax season is every season.
Without an employer taking care of your taxes for you, it’s your job to keep track of how much you owe. It is also your responsibility to have that money on hand when it comes time to pay.
There are a few things you can do right now that will make paying your taxes that much simpler when the time comes.
First off, you should keep tabs on exactly how much you’ll owe. The best way to do this is by creating a spreadsheet.
Your taxes amount to roughly 30% of your income. Every time you get a paycheck from a client, add to one column of your spreadsheet exactly how much you made.
In the next column, calculate 30% of that number — that’s the amount you need to put aside for your taxes.
Secondly, you should open up a savings account for your taxes. With every paycheck, once you calculate what you’ll owe, add that amount to that savings account.
When it comes time to pay your taxes, you’ll already have the money you need ready to go.
Finally, every freelancer is different. The amount you pay and when you pay depends entirely on your situation and how much you make.
If you can, you should consult a tax specialist to set up a payment plan that will work best for your situation.
5. Stay Transparent
When you’re the only one in charge of handling your money, it can be very tempting to try to sweep one or two paychecks under the rug.
This temptation can be particularly prevalent if you’re living paycheck to paycheck.
Remember that the IRS can and will audit anyone. So, if you attempt to hide some of your earnings, there’s a possibility you could get caught and wind up having to pay out the nose.
The best course of action is to keep strict and precise records of everything you earn and try to stay as transparent as possible.
6. Make Sure Your Clients Pay
Unfortunately, there are a few people out there that think “freelance” means “free.”
If you’re freelancing for the first time and are still trying to build a client base, it can be difficult to demand what you’re owed. Something that is especially true when clients try to put up a fight.
Before taking on a job, make sure your client knows how much the job costs and how your invoice system works.
Additionally, it never hurts to require partial payment upfront.
7. Get Some Invoicing Software
Technology is marvelous — and it could pay to take advantage of it.
Invoicing software can take all the complicated tracking and guesswork out of your finances. With invoicing software, you can track everything from which client owes you money to your business expenses all in one place.
As a freelancer, your time is incredibly valuable. With invoicing software, you can stop wasting your work time fussing over finances and get back to making money.
8. Don’t Get Behind
Finally, we get it — bookkeeping is tedious and not in any way fun.
That said, staying on top of your money is critical, especially when you’re self-employed.
If you set aside just 20 minutes every week to go over your books, that can be all it takes to keep everything in line. If you let yourself fall behind on your bookkeeping, it can be a nightmare to try and catch up.
Self-Employed Bookkeeping Tips
One of the hardest parts of working as a freelancer is handling your money. Self-employed bookkeeping can be tricky, especially if you don’t know where to start.
But, with these tips, staying on top of your books will be a breeze.
Ready to take control of your finances? We can help!
Our free invoicing software can help you create professional looking invoices and keep track of your cash. Contact us today for more information or to get started.