Freelancing definitely has its perks. Being self-employed and in charge of your day with flexible working hours is a great motivator. If that’s not enough incentive to freelance than stats that suggest you could be making more money if you started freelancing will. When you make your own money you need to think about your accounting. Read on for a freelancer’s guide to DIY accounting.
Things to consider
There are things we must consider in terms of balance with any freelancer’s guide. There are activities you’ll need to account for (if you pardon the pun) which you otherwise wouldn’t need to worry about. There’s the added job of actually keeping track of them. The more clients you have, the more complicated your accounting process gets. If you’re making enough money to hire someone to do the work for you – great! For most, that simply isn’t a viable option and they’d definitely like to be able to spend that money elsewhere.
Do it yourself?
Doing your own accounting is definitely an option and needs to be taken seriously. If you can devise a solid, organized system that you can adhere to, you’ll have a good chance of avoiding the extra expense of hiring an expert while making sure you don’t get in trouble with the IRS (or an equivalent organization of your country). In this freelancer’s guide we’ll go over some of the key principles of accounting you need to pay attention to, discuss the use of available software, and finally, explore if and when should you ask for help.
Bookkeeping: Keeping Track of Your Records
A solid well-structured system and having organized papers is the first and most important step in this freelancer’s guide to doing your own accounting successfully. You’ll need to record and categorize financial documents containing billable hours and finished projects, invoices, receipts, and every payment you’ve made or received. Another item you’ll need to consistently keep adding to your filing cabinet is your freelance contracts. If you don’t have much experience with writing them, learn how to make them rock-solid with this detailed guide!
Freelancer’s Guide to Invoices
Invoices are essential for all your business transactions, they communicate details of an agreement between two parties. They provide a clear picture of your transaction history. If signed, they can be used for legal protection. Invoices will give you insight into your past and upcoming transactions. You will be able to determine your productivity levels over longer periods of time with ease.
Make sure you choose a filing system that suits your needs best and is easy for you to manipulate and browse through. Being able to find any financial document quickly is crucial. This will save you headaches. Opening up a completely separate bank account will go a long way in optimizing your accounting chores. Using a specific bank account to receive payments and charge business expenses from will definitely save you from having to sift through your transactions and wasting time trying to sort everything out.
Freelancers Guide to Doing Your Taxes
Keeping organized records is useful in many ways. Being well prepared makes tax time easier. If you’ve followed the previous steps, you can exclude added stress from the entire ordeal.
Familiarize yourself with taxation laws
Familiarize yourself with taxation laws. Set aside a lot of time for researching. First, figure out the forms you need. Second, understand what each form is for. After that, comes down to putting the right numbers in the right boxes. To find more helpful tips about doing your taxes as a freelancer, click here.
There is one time throughout the year where it literally pays to be a freelancer, tax time. It is the time you need to consider everything spent directly related to your work. You will be able to in some shape or form, deduct from your taxes.
Tools, Apps, and Accounting Solutions
Determined to do your own accounting? This is the part where things start to perk up. Think about using an accounting software to simplify, improve and optimize your tasks. There are lots of free solutions out there that will help you take tedious activities like invoicing and bookkeeping to the next level.
You can consider spending a little money to make things run even smoother. You can buy Software that will help with your taxes. The software can be costly. However, it will automate your processes. For instance, calculating your taxes and more.
Final Thoughts: Should You Consult a Professional at Some Point and Why?
Accountants think it’s extremely difficult and pointless to do your own accounting. You could argue that they are subjective and they have a lot to gain from making you believe that’s the case. Accountants are correct. There are certain drawbacks. The main drawback is that instead of working on your own business you are working on your books. Not everyone will be in a situation to actually get to make a choice. The fact of the matter is there are a lot of hurdles on the way and there at times some form of assistance might be necessary. Sometimes getting a basic consultation will be all that you need to get back on top of your finances.
What if I need additional help?
If you at any point decide that you are in need of help, make sure you ask these 5 questions before hiring an accountant.
And if you are ready to start your freelance career, find opportunities here that are right for you.