While every small business knows accounting is a vital task, freelancers often let this aspect of their business fall by the wayside. Yet proper accounting is just as necessary for solo-workers as major corporations, so here’s a simple outline on the easiest, but most important things to keep in mind:
Never mix your personal and business accounts
Just because you’re the boss doesn’t mean you should start using your personal account for business expenses and vice versa. The 'gateway drug' for accounting is mixing personal with business. You’ll never get a full understanding of your expenses if you’re not clear about what money is going where.
Consider hiring an accountant
While this isn’t an absolute necessity, if you find yourself drowning every month, this minor business expense can prevent some major headaches. Plus, it could end up saving you money in the long run, especially during tax time.
Get great accounting software
Do your research and spend time talking to different customer support teams, downloading free trials and seeing what system works best for you. While this can feel time consuming, if the software you choose doesn’t feel easy, you won’t use it. And the most important part of doing your own accounting as a solopreneuer is taking responsibility.
Understand what you can and can’t claim as an expense
You’ve heard this before and we’ll say it again: Save all receipts! That coffee you had with a potential client? Recovering lost data? Hosting fees? Be meticulous about tracking expenses and do research into what you can and can’t claim.
Be very clear about who owes you money and when
Extracting money from clients is always a touchy subject, but remember: this is how you make your living. So when you say 'payable within 14 days' make sure you tell the client before they hire you, highlight terms on the invoice, remind your client one week and again one day before payment is due and call the SECOND that day is over. The most important bit of accounting is to have money in the bank in the first place.
Grant Hewson is managing director of Accomplish. Accomplish CashManager is small business accounting software that allows business owners to focus on their businesses. You can try it yourself by downloading a free trial of CashManager.
What accounting tips have you found useful as a freelancer? Post your comments below!