As a freelancer or self-employed professional, it’s crucial that you manage all aspects of your company, including bookkeeping. That means making sure that profits are earned and tax deductions taken advantage of as efficiently as possible. We have put together some key tips on bookkeeping specifically designed for freelancers and self-employed professionals. Lunafi has spoken with over 100 freelancers with experience over the last year and created a brand new and easier method of managing finances for freelance businesses to meet their specific needs and preferences. A private beta group has been testing Lunafi, to ensure users receive a top experience when using our software – Lunafi was designed specifically to address freelance bookkeeping needs!
Separate Personal & Business Accounts
Calculating your net income or loss could be challenging if you’re not keeping track of which financials belong to your personal accounts and which are for business transactions. To avoid confusion, create a separate account dedicated specifically for transactions associated with business activity – even if it is supplementing freelance work with freelance work income – this will reveal exactly how much money is associated with each venture and make tax preparation time much less daunting.
Invoice on a Regular Basis
Though it might seem counterintuitive, freelancers often postpone sending invoices to clients. Delays could extend payment dates; to speed things up it is recommended to invoice immediately upon completion of an assignment or reaching milestones or the close of each month for work completed during that period. To simplify things you could utilize an invoice software like Bill.com or make use of its features within accounting software that come equipped with invoice features.
Keep Detailed Records
One key aspect of bookkeeping for freelancers and self-employed individuals is keeping meticulous records. Even with small businesses, expenses will add up over the course of each tax year; freelancers may claim expenses related to work if verified by the IRS upon request.
Establish a System That Works for You
Over 60 percent of business owners manage their own bookkeeping thanks to accounting software’s intuitive user experience, but freelancers still find it challenging to balance all their work within a busy week. Tax time may sneak up on you faster than anticipated, and so we suggest creating an accounting schedule in order to document every expense and payment properly.
Outsource to an Expert if Needed
Though you might be tempted to handle all your accounting and bookkeeping needs yourself, hiring an expert might be more cost effective. Depending on the software chosen for this task, its learning curve could either be steep or nonexistent. Assist in setting up and creating the accounts of your company. This could include creating the chart of accounts vendor/customer lists as well as services and products offered by them. They will also instruct users on the most efficient use of the software, including how to make changes or solve any issues that may arise. Once you know how well your financial professional is setting up your bookkeeping, you can decide if you would like to collaborate alongside them on a monthly, weekly, or quarterly basis. Bookkeeping is often a collaborative task if you prefer designing invoices yourself and paying bills yourself; an excellent bookkeeper should be able to customize their services according to what tasks are outsourced from their duties.
Create a System for Managing Receipts
Receipt recording is essential as the IRS demands receipts in all circumstances for tax deductions. For best results, accounting or expense software with mobile apps that allow users to capture photos of receipts and upload them into the software is recommended; alternatively you could install a receipt scanner app instead. Alternatively, an old-school option would be creating separate filing folders for each supplier’s receipts that you store physically or setting up an email folder specifically dedicated for receipt transmission regularly to accounting software programs.
Use Time Tracking Software
Time tracking software can provide valuable insight into the duration of various types of projects. Even if they involve fixed costs rather than hourly billables, time tracking programs allow you to accurately gauge how long various endeavors take to complete. Your time management strategy should allow you to effectively allocate time between areas such as administration and business development/communication with clients. Time tracking software designed specifically for freelancers allows them to visualize their time spent, which allows them to improve bids or identify tasks that don’t require as much of their attention. Such systems should feature online payment, invoicing reports, integrations and reports – the more precise this information is the better it will serve your work! Even though your project might seem financially feasible at first glance, consider all of the time needed in acquiring requirements of your business or communicating with clients before making this determination.
Establish a sales and marketing plan
Establishing a company requires more than knowing people; you need a plan in place for sustainable expansion of your venture, from business cards and advertisements to podcasts and podcasts – including finding potential new businesses at an economical cost.
Develop an online presence
Make sure your online presence is strong by creating a website to outline your qualifications, experience, business focus and customer testimonials.
Use your connections to find your first assignments
Regaining the first customer is often the hardest part of being a freelance accountant, especially at first. Don’t be afraid to utilize your connections – especially those familiar with you and their work – particularly former employers or internship supervisors who may refer work your way. Don’t hesitate to ask family and friends for recommendations so you’ll find your ideal client!
Determine the kinds of services you’ll offer
An integral aspect of self-selling lies in understanding which services you will offer – financial reporting or auditing and assurance, taxation strategy or performance management, or something else?
Understanding basic bookkeeping techniques for self-employed professionals and freelancers is crucial to the growth of any company. Understanding these processes will enable you to make educated decisions, which in turn position your business for future expansion.