Being a freelancer requires knowledge of basic bookskeeping requirements for freelancers. Knowing this will enable you to keep on top of payments from clients as well as when and what their payments should be due, as well as tools available for use to track outstanding invoices and secure payments from clients owing you money. Lunafi consulted over 100 skilled freelancers over the last year and developed an innovative and straightforward method of managing finances of freelance businesses according to their needs and goals. Our exclusive beta group has been testing Lunafi since July 2015 to ensure the best user experience; Lunafi wanted to ensure you had access to top software designed specifically for freelance bookkeeping.
Recording all aspects of your business operations will give you more knowledge about it and provide an accurate snapshot of cash flows, while being better prepared for tax time or an audit. If keeping tabs on finances becomes an issue for you, hiring an accountant on staff or using bookkeeping software could help free you to focus on growing what matters in business – not bookkeeping!
Accounting may not be at the top of freelancers’ priorities for business, but taking time to set up basic structures could save a great deal of stress when filing taxes later on. Tracking customers and invoices also ensures timely payments – we have some bookkeeping tips here that may make things simpler!
Start with a system
Don’t wait until the end of your first tax year to start thinking about keeping records; otherwise it can be easy to forget old bills or expenses. As a freelancer, creating your own bookkeeping service for freelancers will require creating your own bookkeeping service for freelancers and there are various solutions out there for this – accounting software might be best as it requires entering information to start keeping your records. However, consulting a professional bookkeeper could also be helpful at the start.
Volunteer Your Time to Gain Experience
Though it might not be top of mind for everyone, bookkeeping services were an effective way for me to build my name out there as I started my career. Working for some acquaintances as bookkeepers for their small businesses also proved beneficial. Experience has proven invaluable as I was able to develop my abilities by working for actual companies. Your volunteer efforts can broaden your impact, as the business owners you assisted will likely recommend your skills and services to their peers – creating word of mouth business growth for you! Once I had been volunteering for some months, a group of my friends hired me as their bookkeeper. When someone is familiar, trustworthy and confident in you it makes for an easy transition from volunteering to full time bookkeeping services – this win-win arrangement was beneficial to all involved since I knew about their business and their books while they understood my operations as well as what they could expect from me.
Build accounting into your work schedule
As freelancers, you face many tasks to manage each week. Aside from providing services to clients, these include marketing, lead generation, quality control and follow up. A to-do checklist or calendar application may help keep track of these responsibilities – whatever system you choose make sure that every Friday afternoon you set aside an hour for documenting expenses and payments as this can make a big difference when managing accounts for freelancers.
Use Your Existing Network
One of the best investments I ever made was sharing the news of my bookkeeping business with family and friends when I launched. On my Facebook page I announced it, informing everyone I worked as a bookkeeper accepting new clients while asking friends who own businesses to spread the news amongst themselves – this single step brought me the majority of clients! Many successful employees come via referral from either an existing employee or someone recommended by another colleague in business.
Keep detailed records
Recording daily activities is a key aspect of self-employed bookkeeping, so once your system has been implemented it’s essential that you maintain detailed, precise records about them. This should include everything from:
List of clients you collaborate with
- Hours spent working or tasks completed
- Cost per hour or task
- Business expenses, with receipts
- Payments made via bank transfer
- Payments received from clients
Client payment information can easily be entered into financial software that will create invoices and accounts payable, receivable and cash flow statements to keep your financial records accurate – essential if ever audited or when applying for credit lines.
Know which expenses to track
There are expenses directly related to work, like hosting fees and office supplies, while accounting software should also be considered an expense of business. When working from home, however, the distinction can sometimes become blurry between personal and professional usage – what might count as office rent expenses could also apply as home office costs.
Separate personal and professional accounts
Similar to this, freelancers should create separate bank accounts for business use by creating separate financial accounts in their personal name. A basic accounting system for freelancers involves knowing the flow of money entering and leaving your business; having dedicated accounts allows this. Knowing these amounts helps plan projects accordingly and create budgets accordingly; while simultaneously keeping an eye on whether clients have paid invoices.
Budget for your tax bill
A common difficulty among self-employed bookkeepers is failing to account for tax bills properly. Although this money would usually come out of paychecks if an employee received salary, as self-employed you will have to take this responsibility upon yourself. Set aside money every month into an account dedicated to savings; this could serve as an alternative to the automatic deductions taken out by your employer. A general guideline suggests saving at least 30 percent of earnings every month. Being self-employed gives you plenty of flexibility, including choosing a bookkeeping software program tailored specifically to your needs. No matter if it’s automated with software or just file cabinets – what matters is keeping a close watch over every aspect of your finances so as not to surprise any audit.
Software can assist freelancers in cutting time by offering various functions, such as:
Invoicing and billing
Bookkeeping software will automate invoicing and billing to track recurring orders as well as remind clients when it is time for payments.
Online payments
Most bookkeeping software is compatible with popular payment platforms that make it simple and safe for your customers to make timely and safe payments to you.
Expense tracking
Software provides you with an effective and user-friendly solution to keep track of expenses and categorize them for you, so you are aware of where your cash is going each month. Download or scan receipts so as to reconcile at the end of every month.
Reconciliation
This step involves reviewing your business and banking activities by reconciling both bank account statements as well as financial records. Bookkeeping software makes this easier by connecting to your bank account in order to retrieve statements directly and record them electronically.
Reporting
Effective accounting solutions will allow you to keep an eye on both your finances and data analysis capabilities. Accounting reports can give insight into financial trends in your freelance business and help preserve its financial health. Neat’s accounting software enables users to run key reports, such as profit and loss statements, cash flow statements, balance sheets and transactions reports – among others.
