This week’s post comes to you from bookkeeping pro Artin Aghamalian.
Managing the freelance economy as a contractor, tasker, or on-demand worker is no easy feat. Although you might have sought out non-traditional employment with a desire to be your own boss, you may have found that being an entrepreneur comes with a whole new set of challenges.
When you’re the only one running the show, there’s a lot to keep track of: scheduling, project management, marketing, advertising, accounting, business development, sales, and more. As a bookkeeper myself, I help a lot of solopreneurs by acting as a second set of eyes and keeping track of their billing, accounts, and invoicing.
Fortunately, there are a lot of other online tools and apps out there to assist you in keeping track of all of the details. Here are just a few of my favorites.
|What It Is||Why It Matters||PRO Tip||
Tools To Use
|Invoicing||An invoice is a list of goods sent or services provided, with a statement of the sum due for these; a bill.||Once you finish a project or task, you’ll need to send the client an invoice. Then, it’s your job to keep track of when you sent it to the client and when they paid it.||A lot of the freelancers I help have terrific work ethics; they have no problem getting jobs done. Billing for their hours, however, is a different story. My suggestion is to set one day each month (the 15th, say) to handle invoicing. When your clients get a bill at the same time every month, they’re more likely to pay in a timely manner. Just be sure to track your hours throughout the month, as you go, using one of the helpful tools listed to the right.|
|Receipts||A receipt is a written acknowledgment of having taken into one’s possession a specified amount of money, goods, etc.||For tax purposes, you’ll need to keep track of all the money you spend. (Yes, all of it.) This includes lunches with clients, computer upgrades, gas and car repairs, office supplies, and more. You won’t be able to claim any of it as a tax deduction unless you keep your receipts (either paper or digital).||Make a file for all of your receipts and scan them into your computer (or mobile device) monthly. Then, upload everything to the cloud to keep it safe and centrally located.|
|Budgeting||A budget is an estimate, often itemized, of expected income and expense for a given period in the future.||Fluctuating income makes it especially important to track what’s coming in and what’s going out…and when.||Keep track of: (1) money already received, (2) money that should be arriving soon, (3) money going out, and any difference between those numbers. In my opinion, the best way to keep your finances in order is Quickbooks Online, Self Employed Edition (less than $10 per month). Also, check out the Public Templates that Google offers for small business budgeting.|
|Savings||Savings are sums of money saved by economy and laid away for a later date.||The biggest problem for freelancers is a failure to save for unforeseen expenses (and upcoming taxes!). When your income fluctuates from month to month, you need to be even more prepared than the next small business for whatever may come your way.||First of all, be sure to talk to your tax professional and get a projection of next year’s tax estimate. Put money away every month to cover your tax liability. Perhaps more importantly, pay yourself first. Don’t make savings your lowest priority; make it your highest priority. You can start small! (Even stashing $50 from each check makes a difference.)|
|Retirement||Retirement savings are the income on which a retired person lives.||There is no more gold watch at the end of the road–and, as a freelancer, you certainly can’t hold your breath waiting for a pension. Unfortunately, you just can’t work forever…nor should you. So, no matter how old you are, you need to start thinking about retirement planning today.||You’re the ONLY one who’s going to keep an eye on your retirement. So, go see a professional (preferably, a certified financial planner) to start putting pen to paper…and money into the coffers. Start a bona fide retirement account now (e.g. IRA, ROTH, etc.) that you will not touch until retirement age. Remember to watch your social security stats. Oh, and don’t forget to diversify!|
|Taxes||Taxes are the sum of money levied upon incomes and demanded by the government for its support.||In order to avoid fines and penalties, you may need to make quarterly estimated tax payments. It sounds scary, but it’s better to know in advance than have issues with the IRS later. Even “moonlighters” — those only freelancing on the side — might still need to cough up additional income.||Get an excellent freelance-savvy accountant and ask him or her questions about how to best prepare for tax season, based on your specific line of work. Ask your CPA for estimated quarterly tax coupons that you pay as you go, throughout the year, lessening your end-of-year burden. My favorite resource for tax questions related to the sharing economy is 1099.is. It’s a blog for those on Etsy, eBay, Kickstarter, AirBnB, TaskRabbit, etc.|
No doubt, there are a lot of little details to keep track of when it comes to freelance financials. With some organization, calendaring, and a few dedicated hours each month, you can stay on top of it all…and get ahead.
If your business is growing, chances are, you have less and less time to take care of the paperwork. Don’t worry, though. There are professionals out there who can help you stay on track. I guarantee they’ll save you more time and money than their services cost to use. In addition, your tax preparer or CPA will thank you for not waiting to do everything until April…and you get to let go of the stress.
If you spend $100 a month in bookkeeping fees, on average, you’ll save yourself at least four hours a month. Thus, if you pull in an hourly rate of $75 for those four hours, then you just saved $200 (after the cost of the service). Or, earned yourself another four hours to spend with your family. Either way, you’re winning.
Artin Aghamalian is the CEO of D-Vision Inc. Bookkeeping Services, which offers year-round bookkeeping, Quickbooks reporting, and freelance logistics consulting. As a lifelong entrepreneur, who understands the challenges of freelancers first-hand, Artin ensures that every client receives one-on-one, white-glove service with easy-to-understand answers. Call (310) 467-0942 today for a free consultation and friendly advice. firstname.lastname@example.org