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How to Do Bookkeeping as a Freelancer or Self-Employed Professional

How to do bookkeeping

Bookkeeping is done to record all financial transactions that are related to your business. It is an essential task for freelancers and self-employed professionals like you to ensure that you keep track of your invoices, expenses, and tax dues. Recording every business transaction can be tedious, but there are effective ways to do bookkeeping to make it easy for you in the long run.

Why is bookkeeping important?

As a self-employed professional or freelancer, you work with many clients and manage your invoices. You also incur various expenses to support your daily tasks. Bookkeeping is necessary and will be beneficial for you for the following reasons:

  • You can organize your invoices and expenses.
  • You can keep track of your receivables and dues.
  • You will have an accurate picture of your business’ earnings.
  • You can spend less time preparing reports when it’s time to file your taxes.
  • You can easily identify discrepancies.
  • You can make better decisions when you know your business’s cash flow.

Being on top of your finances is one of the best ways to sustain your business, achieve your financial goals, and continue freelancing. You can prevent significant losses and eliminate unnecessary expenses that eat into your income.

Tips for Effective Bookkeeping

Not all freelancers and self-employed professionals have a degree in finance and are knowledgeable in accounting. It is understandable if you are hesitant to do bookkeeping for your business. But it is not as complicated as it seems. Here are a few basic bookkeeping tips to help get started:

bookkeeping

olia danilevich, Pexels

1. Keep accurate records.

For every business, every cent counts. Take note of invoices you’ve billed, payments you’ve received, and expenses you’ve incurred. You can do this at the end of your workday to establish a workflow, turning this task into a daily habit.

2. Establish a bookkeeping system.

There are many ways to do bookkeeping, whether by keeping manual records or using spreadsheets or cloud-based software. The bookkeeping system you choose must depend on the scale of your business and how comfortable you are with learning new tools. You can start small with a pen or notebook and eventually move on to bookkeeping software.

3. Separate your personal and business finances.

One common mistake some freelancers commit is having just one account for personal and business expenses. This can lead to inadvertently spending money that should be used for your business. If you haven’t created separate accounts, it is best to do so now. This way, you will have better control of your expenditures.

4. Set a budget.

As a freelancer, there may be times when you may need more consistent cash flow or months with low earnings. You must be able to set aside money for necessities and expenses such as taxes. A specific budget can help you save up for those rainy days and ensure you are covered for emergencies.

5. Hire a bookkeeper.

Handling everything by yourself can be time-consuming and overwhelming. Managing your books can also become more complex when you grow your business. You can always ask for help from finance professionals and hire a bookkeeper. They can give you valuable advice, help you keep track of your transactions, and prevent costly mistakes.

bookkeeping 2

Karolina Grabowska, Pexels

Bookkeeping Services for Freelancers and Self-Employed Professionals

Many accounting firms offer bookkeeping services to companies, enterprises, freelancers, and self-employed professionals. If you anticipate that bookkeeping alone will take up too much of your time, you can search for a bookkeeper instead. A professional bookkeeper can do the tedious task of managing all of your records so you can easily monitor the financial status of your business.

Here are some of the bookkeeping services that freelancers and self-employed professionals can take advantage of:

  • Accurate recording of every transaction
  • Generating tax-ready reports for filing
  • Managing invoices and receivables
  • Monthly bank reconciliation to identify discrepancies or accounting errors
  • Handling payroll for your staff
  • Ensuring your business is compliant with government regulations

The cost of bookkeeping services varies depending on your needs. Some bookkeepers may charge an hourly rate, while others offer a flat rate. You can look into the services offered by different bookkeepers and compare their rates to make an informed decision.

Prevent Costly Mistakes by Doing Bookkeeping

Managing your business as a freelancer or self-employed professional requires hard work and dedication. Keeping track of your finances is crucial to ensure that your effort in your work will be well-spent.

Recording your daily transactions and other expenses can take time, but you can apply these bookkeeping strategies to help you get the hang of this task. Hiring a professional bookkeeper is also good for your peace of mind. Most importantly, you can set clear financial goals and continue a fulfilling career as a freelancer.

FAQ Section

How can I do bookkeeping as a freelancer?

Be diligent in tracking all of your transactions, whether it’s billing invoices or purchasing new equipment. You can utilize tools such as spreadsheets and bookkeeping software or keep it manual by writing in pen and paper.

Is bookkeeping necessary if I only have a small operation as a freelancer?

Bookkeeping is necessary regardless of the size of your operation. You can have several transactions with different people and companies as a freelancer or self-employed professional. Keeping track of each one ensures you know your business profit and loss. It also lets you grow your operations and sustain your career as a freelancer.

How often should I do bookkeeping?

As much as possible, do bookkeeping daily so you won’t miss any records. It helps you establish a daily habit and prevents you from feeling lazy or forgetting to do this task.

Frequently Asked Questions?

How can I do bookkeeping as a freelancer?

Be diligent in tracking all of your transactions, whether it’s billing invoices or purchasing new equipment. You can utilize tools such as spreadsheets and bookkeeping software or keep it manual by writing in pen and paper.

Is bookkeeping necessary if I only have a small operation as a freelancer?

Bookkeeping is necessary regardless of the size of your operation. You can have several transactions with different people and companies as a freelancer or self-employed professional. Keeping track of each one ensures you know your business profit and loss. It also lets you grow your operations and sustain your career as a freelancer.

How often should I do bookkeeping?

As much as possible, do bookkeeping daily so you won’t miss any records. It helps you establish a daily habit and prevents you from feeling lazy or forgetting to do this task.

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