Bookkeeping and accounting tips for freelance projects
Getting started as a freelancer? When it comes to bookkeeping, consistency is key.
As a freelancer, bookkeeping is likely the last thing you have energy for. However, staying on top of your finances will allow you the mental space and freedom to tap into your creativity and focus on serving your clients. Otherwise, you could be stressed about upcoming, or unexpected, bills that may impact your freelance projects.
If your reaction is, "Well, I’m terrible at numbers," or "I'm not smart enough to do my books," you could work to change that thinking. You've proven yourself as a successful freelancer and with a little practice, bookkeeping might become very easy for you.
Think of bookkeeping like taking care of your teeth. Although the dentist does a deep cleaning twice a year, it's ultimately your job to maintain your teeth regularly to reduce your chance of issues down the road. Similarly, ongoing maintenance of your books will help you — or your accountant — during tax filing season and throughout the year.
When doing your books, there are three things you should remember.
First, you want to separate your personal and business finances to quickly see how well your business is doing. Then, create a chart of accounts that includes all business financial accounts, income, and expenses separately. Some common accounts for freelancers include a business credit card, income from a particular service, marketing fees, and office expenses. You want to keep your chart of accounts as simple as possible in order to streamline the process of doing your books.
You want to use a program that makes doing your books as easy as possible. Consider tools like Xero, QuickBooks online, or Wave. These tools allow you to auto-send invoices and access your books anywhere. Plus, you can integrate them with your bank account in order to reduce potential errors from manual entry.
#3. Set a weekly date
Commit to doing your books on a weekly basis. This includes reconciling, which is a fancy word for categorizing your transactions into your chart of accounts. During this time, review your accounts receivable — outstanding invoices with clients who owe you money. You should also review your accounts payable — upcoming bills. Finally, review your profit and loss statements which capture how much money is left over in your business after all expenses are paid.
Start with these three steps to build bookkeeping and accounting into the process of completing your freelance projects.
To flex your bookkeeping muscle, learn more about key terms and different accounting practices.
Danetha Doe is an accountant and creator of Financial Foundations, the #1 accounting training program for small business owners. For more information, visit http://www.danethadoe.com.