Freelancers wear several different hats since they are the ones to take care of finding customers, maintaining relationships, and actually doing the work. But the one aspect many dread is accounting. 

True, there is the option of hiring a specialized accountant, but not many freelancers (especially in the beginning) can afford it. Therefore, it becomes yet another hat they have to wear, which can add to the total stress and workload. 

However, it is not an activity you can ignore, especially since you will be paying taxes as a freelancer (according to the rules and regulations in your area). A well-kept bookkeeping system is more than necessary to make sure you calculate your taxes right and know just much is left after. Still, we know it can be overwhelming, so here are a few tips to make sure you don’t fall behind.

#1: Use a Software Tool

Luckily, you don’t have to do your bookkeeping old-school, with pen and paper. In today’s day and age, there are plenty of cloud-based platforms that let you create invoices, introduce expenses, and keep track of your customers’ payments as they happen.

Moreover, these tools are designed for the needs of very small businesses, so you’ll only be paying for the features that are useful (and the fees are quite affordable). In addition, you’ll have a way to keep track of the money coming in and out of your business and get an idea of what to expect when it comes to overall growth.  

#2: Keep Track of Everything

Even when you use a smart tool for your accounting, you still need to use it on a regular basis and check the reports it generates. Also, most bookkeeping tools allow you to create customized reports that can be helpful in monitoring expenses and various customers. 

Therefore, it may be a bit of a pain to set everything up, but once you make a habit out of it, it’s a lot easier. And, since it can be confusing at first, here are a few things you should be keeping a close track of:

• How many hours you’ve worked on each project (for hourly paid jobs)
• Cost per hour, or any other unit, for every client
• The type of jobs you do for each client
• Business expenses
• Payments you made
• Bank transfers
• Travel expenses
• Power, utility, phone, and internet bills
• Bills for various purchases (such as devices, software, office supplies, books, and more) 
• Website design, maintenance, and hosting
• Rent

#3: Set Money Aside

If you’re new to freelancing, it will take a while to get used to the idea that you are responsible for everything, including paying your own taxes. After all, up until recently, you had your employer cover this task. 

Therefore, it is paramount to practice setting around 30% of your earnings aside for taxes and unexpected expenses. It may be difficult to know there is money just sitting in the bank, but it is the best practice when you’re on your own. It is also a good habit for business owners since you can’t anticipate when things can go wrong. 

Wrap Up

As a rule of thumb, bookkeeping for freelancers is not difficult. It may seem stuffy and confusing at first, but as you get used to the idea and set the basis for a system, it gets easier. Just make sure you have the right information and tools!