You’ve jumped ship. Now you’ve gained your first client or two or maybe you’ve started gaining money from your affiliate site.
You’ve never had to track earnings before. You don’t even know a whit about taxes. Now you’re scared.
You thought this life would be free and fancy. But it’s not as glamorous as you’d imagined. All the paperwork payroll was doing for you back at your 9-5, you now have to keep track of. You’re not in charge of your own small business accounting.
Don’t worry. Here’s a pillow to scream into. Feel better? Now listen to me. It’s time to settle down and start taking action. Keep reading to find out how I do bookkeeping as a freelancer.
1. What You Need to Know About Bookkeeping
Bookkeeping and budgeting are kind of like identical twins. They look the same, but in the end, they’re two different people who will probably make slightly different choices in life.
What’s the difference? Scale. Budgeting is broad and looks at overall totals and averages. Bookkeeping is granular. It looks at the details.
Also, budgets look to the future. In personal finance, you’re supposed to budget three months out. But bookkeeping is something you do after the fact. A shady form of bookkeeping is cooking the books. You’re making your past financial deeds look above board when they’re not. This isn’t what we’re going to teach you today. We’re not breaking bad, sorry.
Keeping track of your business accounts will help you save time later. You’ll know when a client has paid you and when they haven’t. You’ll be able to quickly hand over your books to your accountant and he can do your taxes.
And once you formalize your bookkeeping practices, you won’t get overwhelmed when you expand your business.
2. Track Payments Through Invoices
I used to just rely on emails for my invoicing. And then I got stiffed. I had no way to hold my client accountable for the work I’d done.
Invoicing will save you time when completing your books. I use PayPal at a small cost only because my biggest client pays me through PayPal and it’s my defacto business account. But you can use QuickBooks, Xero, and other invoicing services if you want.
You want all your invoices to look professional. The best invoicing service will track when someone pays you and notify you through email or text.
When you get paid, you want it to go into a separate business account. You’ll be less likely to spend the money before doing your books this way. And you can keep some money aside for business purchases and enhancements.
3. Use Accounting Software
Unless you’re a wiz with excel spreadsheets, you’re going to make a mess and waste a bunch of time customizing your “books” through excel. I use accounting software that lets me quickly export my numbers and send them to my accountant.
You’ll also gain peace of mind that your accounts are accurate and orderly. You’ll be more likely to export a format that your accountant’s software plays nice with. And you’ll be able to take advantage of accounting automation.