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What freelancer has time for bookkeeping? There are 70.4 million freelancers like you out there whose days are almost exactly like yours: frenzied, barely structured battles to get the work done. Every deadline seems impossible. Your clients are all over town, so you have pretty much memorized every pothole between them. When you can work, your office may be your car, a coffee shop, a library, or your dining room table. You have probably even Zoomed from a place or two you are not proud of.
To freelance successfully — and then grow that business — requires managing a full range of things that are not often your top priority. This includes your billing, your expenses, and your incoming payments. Strong bookkeeping makes loan applications easier and approvals more likely when you need to grow. It makes paying taxes simpler, too — whether you do them or your accountant does.
Most importantly, if you are not paying attention to the financial details of your freelance operation, you might wind up out of business. Avoid this by tracking not only if you are making money but how you are making money. Which of your services are most profitable? What clients are not paying on time? Will the work you have agreed to do cover your expenses? You need to know these answers sooner rather than later.
Keeping Books: Obscure and Elaborate
In the old days of accounting, physical books were used. Every business transaction was recorded, as it happened, in a journal. Using double-entry bookkeeping — a practice defined in mid-15th century Italy by Benedetto Cotrugli — every transaction was entered as a debit and a corresponding credit. Cotrugli and his successors then created additional books called ledgers for each of those types of accounts. Using those ledgers, they produced reports that provided a complete picture of a business’s financial health.
Every transaction must be recorded. For a freelancer already exhausted from a full day, it is easy to fall behind. Put off your entries, and you might misplace receipts or forget about invoices. Even spreadsheets make things worse if a cell is defined for the wrong kind of data or contains incorrect formulas or links.
The Best Way to Keep Books as a Freelancer
Bookkeeping is just one of those tasks that has to be done. However, it can be mind-numbing to enter every receipt and invoice into your paper journal or spreadsheet. Even if you are not using a financial management platform, you can still apply a digital solution to reduce time and effort spent organizing essential business data. Once captured with a scanner, mobile phone, or software app, the data from each paper or digital document can be automatically assigned to accounts. This lets you spend less time keying the data and more time working with and understanding it.
Capture your invoices, purchase orders, and receipts digitally, and your accountant will find your taxes easier to prepare, too, saving you money at tax time. Whether you are freelancing to put extra money aside for your child’s college fund or want to grow your freelance gig into a multinational conglomerate, you can spend more time making money and less time tracking it.
You control your freelance business (probably why 58% of non-freelancers want to freelance). In addition, you are more in control when your bookkeeping takes less of your time.
The post The Freelancer’s Quick Guide to Keeping Track of Financial Data appeared first on Home Business Magazine.