Kickstart Your Freelance Bookkeeping Journey: A Quick Guide

The prospect of managing money isn’t particularly enticing to most freelancers, aside from the odd freelance accountant. As a result, most freelancers don’t think twice about bookkeeping — until they aren’t sure what happened to all their income.

Bookkeeping is essential for every business, even freelancing. Fortunately, freelance bookkeeping isn’t complex; the best strategies ensure records are simple and clean and allow freelancers to think about their money management as seldom as possible. The following strategy consists of just three steps, which means you can have a better grasp of your finances in no time.

Steps to Establish a Career in Bookkeeping

1. Gain experience in bookkeeping by working for a company or taking relevant courses.
2. Obtain necessary certifications or licenses, such as a Certified Bookkeeper designation.
3. Create a portfolio of work and references to showcase your skills.
4. Set competitive pricing and establish a professional online presence.
5. Network with potential clients and other bookkeeping professionals.
6. Stay up-to-date with the latest tax laws, accounting standards, and technology in the bookkeeping industry to provide the best service to your clients.
7. Utilize accounting software and tools to streamline your work and increase accuracy.
8. Maintain accurate financial records and communication with clients to build trust and ensure timely payment.
9. Build a strong brand image and reputation by providing exceptional customer service and going above and beyond client expectations.
10. Consider offering additional services such as financial consulting or tax preparation to expand your freelance bookkeeping business and attract more clients.

Understanding Bookkeeping

Most freelancers associate bookkeeping with budgeting. While both are concerned with tracking income and expenses, they deal with that data in different ways. First, the goal of budgets is to manage money for the future — to prevent you from running out of funds prematurely — but the goal of bookkeeping is to monitor the finances of the past, to ensure you have accurate records. Secondly, budgets tend to be exceedingly general, looking at totals and averages, whereas bookkeeping records tend to be granular, detailing every transaction.

Bookkeeping is important because it gives you certitude in your financial information. The records that good bookkeeping produces will be unendingly useful, especially in tax preparation. As a relatively new freelancer, you might not realize that your annual taxes are about to get extremely complicated, but if you have well-organized, thorough books, you can save hours-worth of time — or hundreds of dollars–worth of tax accountant fees. Plus, well-kept records help you track client payments, so you’ll know when your clients are stiffing you. When you can verify your income and expenses through your books, you have more breathing room to focus on completing projects, starting investments, and growing your freelancing business.

Keeping the Right Records

Anytime money moves in relation to your business, you need to record it. When a client pays you, you need to make a record of it; when you make a business-related purchase — which could be buying a new computer or taking a client to lunch — you need to make a record of that, too.

To effectively track your finances as a freelancer, make sure your records contain the name of the payer or recipient, amount, purpose, and date. Utilizing invoicing can streamline this process by keeping all relevant information in one place. For added organization, store invoices digitally and keep bank statements, purchase receipts, and card statements to validate payments and expenses. Depending on your specific business needs, additional record-keeping may be required for tracking contractors, expenses related to vehicles or office spaces, etc. Adapt these guidelines to fit your freelance business.

“At some point in their career, many people consider taking their career in a freelance direction. There are pros and cons to doing so, but it’s the freedom of doing the work you want that attracts so many. If you’re thinking about launching a freelance career, you likely already know that it’s not going to be easy. It takes a lot of hard work to build an independent career, where it’s up to you to find the work you need to keep going. Before you decide to go freelance, you need to come up with a plan to decide how you’re going to do things.” – Invaluable Advice for Launching a Freelance Career

Keeping accurate financial records as a freelancer is crucial for tax and legal purposes. Though organizing your finances into a spreadsheet is helpful, keeping hard evidence like invoices, receipts, and bank statements is necessary. If audited, the IRS will require copies of your proof, not just a list of numbers. Retaining old records also benefits your business, as you can reference past invoices when working with returning clients. Though it may require extra effort, it is vital to aggregate and store these records for the success of your business.

Organizing Your Records

Once you start accumulating evidence of your incoming and outgoing money, you can’t shove it into a shoebox and forget about it. A disorganized book is as bad as a nonexistent one; for your records to be useful, they must be organized. Thankfully, it doesn’t take much work to keep your books in line.

While you can keep a filing cabinet full of printed invoices, receipts, and other hard copies, it is much more economical to scan all your pertinent documents into your computer and save your book to the cloud or an external hard drive. As you scan, you should make sure to give your documents useful names — or else you’ll be stuck with folders full of unknown files canned Scan01.pdf. Then, you should organize your saved files by month, then by year, so you know exactly where to locate each record.

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04/24/2024 03:25 pm GMT