As a freelancer, you enjoy the freedom of setting your own hours, pursuing the career you love, and working when and where you want. But if you skimp on bookkeeping, it’s time to invest in freelance accounting software.
Although freelancing comes with many benefits, it requires exceptional financial organization. Read on to learn how automated bookkeeping can supercharge your business.
As a freelancer, you have a lot to keep track of when it comes to your financial needs and obligations. While accounting probably isn’t a driving passion for your business, you represent your accounting department, whether you like it or not.
Running your own business can feel downright bewildering when it comes to quarterly taxes, deductions, invoicing, and all of that financial stuff. But as a business owner, you must keep track of personal versus business expenses.
And you need to avoid getting into trouble with the IRS by knowing how and when to pay your taxes. This means keeping track of your financial progress and records at all times.
Freelancing can prove highly lucrative. But you have to stay organized and manage your cash flow in order to take advantage of these opportunities. Luckily, you don’t have to go it alone thanks to the new generation of accounting software.
Best Financial Practices for Freelancers
Sound financial practices for freelancers include keeping separate bank accounts for your business and personal finances. The same goes for credit cards. You need a separate credit card for your business and your personal transactions.
This way, you can keep better track of your business expenses. It’ll also prove easier to show the IRS which expenses remain personal versus business.
You need a thorough handle on which financial forms to file and when. You also must know how and when to pay quarterly taxes.
Of course, these responsibilities don’t even touch on other duties including managing your clients. You need a way to document the services you bill for, and you also need a consistent means of invoicing them and tracking invoice payments.
1. Creating Repeatable Processes
One of the best ways to streamline your business remains creating repeatable processes that work. This lets you take the guesswork out of small business accounting and hone in on systems that work, like automated bookkeeping.
The right accounting software will help you put these processes in place. Instead of feeling like you have to reinvent the wheel every tax season, you’ll rest secure in the process you’ve created with the assistance of accounting software.
2. Stay Current
When it comes to tasks that we don’t relish, it’s easy to procrastinate. But few things muddy the accounting waters for small business owners more than getting behind. Fortunately, freelance accounting software can put you ahead of the game.
Not only will it help you stay on top of your most pressing financial matters, but good software lets you stay organized. It prompts you to regularly update and input important financial information so that you never get left behind.
3. Track those Deductions!
One of the biggest tricks when it comes to staying on top of bookkeeping remains keeping track of everything. Well, this proves easier said than done as a small business owner with a million other priorities on your mind.
But that doesn’t let you off the hook…
You must keep track of everything. Period. And more than likely you’re already doing this when it comes to tax deductions.
For example, you probably track expenses such as:
- Office rent
- Website design
- Website hosting
- Business software
- Office supplies
- Travel expenses
- Equipment costs (e.e. phones, printers, computers, tablets)
Today’s freelance accounting software lets you keep track of all of these expenses with a click of the mouse. Good programs allow you to import data from your bank accounts, which makes tracking expenses a cinch.
4. Prove You Mean Business
Tracking doesn’t stop with deductions, however. As a freelancer, you need to demonstrate to the IRS that your business represents more than a hobby.
You can do this by keeping track of information such as:
- Payments from clients
- Payments you make
- Bank transfers
- Business expenses
- Your hours worked
- The number of jobs you completed (listed by the client)
- The cost per project or per hour (for each client)
When you keep track of these items, you demonstrate to the IRS that you work hard to run a profitable business. That gets more important the more deductions you take. The IRS could start to question the solvency of your business.
You must show you’re serious about making money… Even when you don’t have the profits to back it up.
The records above let you demonstrate attempts to increase profits and grow your company, both important factors in calling your business a true business. These records can also get used in dealings with clients and to support your invoicing.
5. Start Saving
As you make the transition into freelancing, you may get shocked come tax time. It can feel like shooting in the dark if you don’t have accounting software to back you up. Automated bookkeeping will help you determine taxes ahead of time.
That way, you can anticipate how much you need to set aside for your annual tax bill. After all, you don’t have an employer automatically withholding a portion of your earnings for income tax. So, you’ve got to do this for yourself.
Accounting software can help you gain a better understanding of:
- Which clients pay you on time
- How much you owe others
- How healthy your cash flow looks
- The total amount of all your invoices
- Why you need to keep prospecting for more clients
Having this information at your fingertips will prove invaluable to your business. It’ll let you check in regularly to see what works for your business from a financial standpoint. It’ll also help you know where to reduce expenses and economize.
6. The Value’s in the Details
Having your finances locked and loaded will help in many additional ways. For example, it will ensure that you receive payments in a more timely manner. After all, you can create consistent invoices and send them in under ten minutes apiece.
The software also lets you send billing notifications to customers. You can easily identify late payers and follow up with them.
Accounting software puts your financial history at your fingertips, and it also lets you divulge that information to others such as banks. In fact, when you use accounting software, you increase your odds of getting loans.
Why? Because financial institutions can look at the financial data stored in your accounting software as proof of income.
And should the worst ever happen and you get audited by the IRS, your methodically organized financial records will prove priceless. Just think about the peace of mind that comes with knowing you’re prepared.
Freelance Accounting Software
Keeping close tabs on your financial situation has never proven easier. Freelance business software can aid you in staying on top of freelance billing. It can assist you in establishing a repeatable system for how to get paid as a freelancer.
And when it comes to invoicing for freelancers, bookkeeping software will also help you keep track of when your clients pay and when they need a payment reminder.
Besides keeping track of your customers, you can use bookkeeping software to stay on top of how many hours you work and what your hourly pay looks like. It lets you track how many projects you’ve completed for clients.
Automated bookkeeping permits you to stay on top of expenses and deductions. The tax system makes different demands of self-employed individuals, and you can expect to turn over about 30 percent of your income to the government.
Staying current with what you owe and paying it every quarter represents the most pain-free means of confronting freelance taxes. Automated bookkeeping lets you track it in real time so that you pay the optimal amount each and every quarter.
Peace of Mind Proves Priceless
Working as a freelancer comes with many perks. From the freedom to work your own hours to the ability to make important career decisions for yourself, the lifestyle proves satisfying. But it can feel stressful, especially in terms of money.
After all, freelancers don’t have the same security net as conventional employees. They don’t have a company or corporation handling accounting for them. Or setting aside tax money and benefits for them.
But with the right accounting software, you can make a streamlined transition into the freelancing life without the financial bewilderment. The peace of mind that comes with accounting software pays for itself.
Automated bookkeeping allows you to put a repeatable accounting process in place so that you can go back to worrying about the things that really matter, like your entrepreneurial future.
We’re Here to Help
Interested in learning more about freelance accounting software? The right system can place your freelance business on the fast track to success. Why stifle your company’s growth when you could ramp it up relying on the latest technology?
At ScaleFactor, we are passionate about seeing your freelance business succeed, and we have the tools to help. Follow our blog to stay on top of the latest news about small business bookkeeping. Or contact us today with your questions.