As a freelancer, ensuring getting paid enough and being prepared for tax season are both crucial factors in your business. That’s why understanding the importance of bookkeeping for freelancers is crucial even though you’re self-employed.
Essentially, as a freelancer, you are considered a small business or limited company, so you are obliged to pay taxes just like any other business owner.
It can be challenging to keep track of your clients and when and how much they owe you. Understanding how to handle your income tax and the accounting tools available will assist you in keeping track of unpaid invoices and collecting payments from clients who owe you money.
To help you better understand your business and have an accessible view of your cash flow- Pearl Lemon Accountants will keep a constant and accurate journal of your financial activities, helping you be prepared for tax season and an audit.
Book a call today, and let us help you with your freelancer accounting needs.
Bookkeeping aims to keep your financial records in check. It records all of the money that comes in and goes out. Income and expense tracking is considered, including recording and classifying all debits and credits in your bank accounts.
Accounts receivable and payable are the other two parts of your bookkeeping. Bookkeeping also includes how you keep track of your accounts receivable and payments.
Accounts receivable is tracking all money owed to you by others, which will most likely include your invoicing and payment systems.
Accounts payable tracks all the money you owe others or the bills you must pay to your contractors or vendors.
Bookkeeping is not usually at the forefront of freelancers’ minds. You start your business because you have a great idea, which typically does not include accounting. However, there are several reasons freelancers should be concerned about their bookkeeping, and here are a few.
Nothing is more stressful for freelancers than learning that they are being audited. Organising your financial data is the most efficient way to get through the procedure. The IRS chooses freelancers for audits based on their claim deductions, such as home office expenses. Furthermore, if your bookkeeping is well-organised, you will be less likely to make errors on your tax return.
You’ll make your overall operations easier to manage if you conduct a little daily accounting. Organising your receipts and invoices as they arrive will save you a lot of time during tax season. As bookkeeping becomes part of your daily routine, you’ll have less time to spend on it. Therefore, you will have more time to concentrate on your daily tasks and may be able to plan for your future growth.
It’s not fun to think about things going wrong in your life that could influence your freelance business. A sound bookkeeping system will prepare you for anything.
Your financial records will almost certainly be crucial during a judicial procedure. Clean documents will assist your lawyer in determining which assets and finances are yours.
When your accounting and bookkeeping are in order, you can foresee future challenges you may encounter. You can detect severe financial abnormalities before they become serious by regularly analysing your books. Perhaps you’ll see an impending cash flow problem, realise you’re losing money on everyday spending, or discover other major difficulties affecting your bottom line.
Working as a freelancer can be challenging alone. Here are some tricks to help you keep track of your everyday finances to make your bookkeeping easier.
Getting paid enough and on time is one of the most typical worries of freelancers. As a freelancer, you deal with many clients. It might be difficult to track who owes you money, how much they owe it, and how much.
As a result, freelancers must master fundamental bookkeeping and use bookkeeping software. You’ll be able to keep track of unpaid bills and collect payments. You will not be shortchanged while billing your clients. You’ll also be able to view the status of your cash flow in real-time.
Unlike most employees, you do not have taxes deducted from your pay. That means you must plan ahead and be disciplined to save money for your tax obligation. It is critical to make tax planning a habit, so you are not caught off guard during tax season.
Some freelancers keep separate bank accounts for tax payments only. They can estimate their tax bill using reports from their accounting software. Every month, they set aside the proper percentage of their income. Then they know they’ll be able to pay the bill.
It might be difficult to separate your personal and work finances as a self-employed individual. You should open a separate bank account for business transactions to minimise confusion. This distinction in your finances might greatly simplify your life.
Having separate accounts allows you to see how much money is related to your firm at any time. This will make budgeting and providing costs for your services easy. A better understanding of your freelancing finances can help you prevent financial troubles in the future and determine which expenses are critical to your work.
Keeping your books organised and your bank accounts in sync is critical to the success of your freelance finances. This can be time-consuming, but bookkeeping software can help you quickly reconcile your bank accounts. Export data from your bank accounts, credit cards, and Stripe and PayPal transactions to ensure your accounting is up to date.
When you have a live bank feed, you can reconcile your transactions in minutes. You’ll also get an excellent feel of your cash flow. Reconciling your bank account can help you with the day-to-day operations of freelancing and prepare you for tax season.
Just because you do your bookkeeping doesn’t mean you should feel left on a desert island. The freelancers who have had the most success handling their bookkeeping are the ones who seek assistance.
If you do your bookkeeping, you can ask your professional bookkeeper to get your file reviewed and error-checked. This gives you peace of mind that you’re not messing things up while also keeping your bookkeeping costs down. However, you can also completely outsource all your financial-related activities to them.
The importance of bookkeeping cannot be overstated, but elements of your company’s finances are often disregarded. While it’s not the most exciting chore, mastering bookkeeping will significantly improve your tax and financial game.
Pearl Lemon Accountants understands how hard to manage finances for a self-employed person like you. Let us help you better manage your finances. Either ask for help from us or let us handle your transactions- here are some of the things we can do for you as your bookkeeper:
You can utilise many accounting software to make your bookkeeping easier, but it isn’t easy to find the perfect one. Pearl Lemon Accountants has already worked with several clients, so we know the best accounting software for you. We shall use one that is:
Tax deadlines, like laws and regulations, are pretty strict. Many freelancers do not prioritise bookkeeping, so deadlines might fall through the cracks. With our help, you can ensure that your accounting records are accurate to keep the taxman happy and prevent you from paying further fines.
Good bookkeeping entails regularly tracking your spending. Our bookkeeping experts will keep track of any money ins and outs, track business expenses and save copies of your invoices and receipts to make it easy to go back and analyse past transactions as needed.
Our bookkeepers can provide helpful financial advice. For instance, we’ll help you establish effective budgeting strategies like the 50/30/20 rule. Hence, avoiding unnecessary expenses and ensuring your bills and tax compliance.
Freelancing, just like any other job, can be challenging alone. However, it’s still important to know how to bookkeeping so you can track your finances well.
Pearl Lemon Accountants helps freelancers focus more on their careers by relieving the stress of dealing with financial statements. Our bookkeepers will record each transaction you make and allocate enough budget for your bills and taxes.
If you need other accounting services- just reach us, and we’ll be glad to give you solutions.
Accounting software can cost as little as $9 per person per month and as much as $999 per user per month, with one-time license fees starting from $96.
You can expect a charge between $15 to 35 dollars per hour. But, it still depends on the scope of our bookkeeping services.
If you want to know about our prices, contact us now.
When you allow us to keep track of your finances, you give yourself more time to do your work and please more clients.
It's a win-win situation for everyone.
Aside from that, you'll also gain financial stability because your assets and liabilities are managed well enough not to cause any trouble for you in the future.
So let our experts work for you, and you won't regret it even a bit.
Book a call today to get started.