There is a definite shift in the career market away from 9-5 office workers and those that choose to branch out on their own as freelancers. With over 57 million freelancers already hanging out their shingles, that number is expected to grow substantially in the next decade. With the recent coronavirus pandemic requiring many employees to work from home; the way that we get back to work could be a very different kind of “normal”.
The draw towards an independent working lifestyle is easy to understand. Taking control of your own talents and career destiny can be hard to resist. However, one of the largest obstacles that freelancers face is how to take care of their accounts. In past careers, most employees relied on their company to take care of the accounting part of the job. If you are starting your own freelancing business, it’s important to learn a bit about how to keep your books in order.
Before you started freelancing you may not have given much thought to how your pay stubs get processed, where your tax money goes and how your rates are calculated or how to monitor cash flow. As a business owner, you will need to pay close attention to all of these aspects as you ply your trade.
Let’s take a look at a few tips that can help you get your freelancing finances in order.
Stay Organized
Your freelancing business will keep you running in many directions. You will need to find contracts, bills and receipts for reference daily so staying organized is a priority. Keep all of your receipts and set up a filing system that works best for you. It’s a good idea to keep an individual file for each job or project where you keep all the related paperwork.
It’s important to not get overwhelmed or behind on your bookkeeping. Setting aside a bit of time just once a week to get your paperwork in order can help you stay organized.
Make Copies
Papers flow quickly through the hands of a freelancer. Customer contracts, supply receipts and bills should all be copied and filed before handing them out. Even if you use a software program to help you with your bookkeeping it’s always a good idea to have a hard copy as a backup. If you have a scanner you can take your paper copies and transfer them directly to your software program.
Plan Ahead For Tax Season
No one wants to be surprised by a huge tax bill. As a freelancer, you will be responsible for filing your own business and personal taxes. Roughly 30% of your income and profit will need to be delegated to a separate tax account.
Each week when you go through your books, it’s a good idea to calculate the amount of taxes owed and set them aside. This will allow you to stay on track and have the money ready when tax season hits.
As a freelancer, you likely don’t have any experience filing taxes for a business. For beginners, it’s wise to consult with a tax specialist that can help you set up your books properly and file for your first few years. This can greatly reduce the amount that you owe and reduce the chances that you will have to go through an audit.
Freelancing is becoming a popular career path for people across the world. If you are planning on starting your own freelancing venture make sure that you are set up to properly track and monitor your finances.
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