Freelancing has many benefits. Freelancers set their own hours and fees, work well around other commitments, get the chance to follow their passions and dreams and make something for themselves. But, the life of a freelancer isn’t all rosy. One area many people struggle is money.
The first challenge comes with knowing what to charge and preparing invoices. Then, many freelancers spend time chasing clients for payments, and even more time learning how to look after their own accounts and filing tax returns. And, that’s when everything is good. At some point, as a freelancer you may want to apply for a loan or mortgage. In which case, you’ll need to jump through multiple hoops to prove your income.
Accounting is often the thing that freelancers dread. Many even hire an accountant, even when their income is relatively low because they can’t face the idea of doing it themselves. But, there is no need. Freelance accounts don’t need to be difficult, and you certainly don’t need to spend money on an accountant to help. Here are some tips to help.
One mistake many freelancers make is not realizing that they need to record their income straight away. As soon as you earn money you need to register as self-employed and start tracking your income. Or, you could find yourself in trouble at the end of the year.
One issue freelancers face is making money from a variety of different sources. This can make it harder to track your earnings. Create a template for invoices, so you only need to fill in the details before sending them. Save a copy to your own files, with a number. Use a Check stub maker, and then a spreadsheet to record everything and keep things organized.
Create a System
Once you’ve got your invoices, check stubs and spreadsheets set up, find a system that works for you. Some people sit and file invoices and fill in spreadsheets every time they get paid, others have 30 minutes for admin at the end of every day, and then some leave everything until the end of the week or even month and set an hour aside to do it all in one go. What works for you will depend on how often you get paid and how much time you want to devote to admin in one go. Whatever you choose, make sure you stick to it and don’t let yourself put it off.
Keep Track of Expenses
As a freelancer, you may not have too many expenses. But, whatever they are, record them. This could include things like stationery, subscriptions and other supplies. Keep your recipes together and set up another spreadsheet, recording date, expense, amount and receipt number.
One thing many self-employed people struggle within the first year or so is remembering to set aside money for tax. Then, they’re faced with a massive bill at the end of the year. Filing your return as early as you can, means you could have around nine months to pay anything you owe.