More than 16 million Americans, or about a third of the workforce, is now self-employed.
But while there are plenty of perks of being your boss, there are also plenty of challenges. Keep reading to learn 8 simple tips on how to bookkeep while you’re self-employed.
1. Stay Organized
Perhaps the most important tip you can follow when you’re self-employed is to always keep any and all business materials organized.
From receipts to invoices to time tracking, it’s up to you to know what’s what and where everything is when payday or tax time comes.
Luckily, there are a variety of tools out there that can help. Mobile apps can help you keep track of hours and time. Digital scanners make it a breeze to create searchable copies of a variety of types of paperwork.
For those materials that you don’t have copies of but may need, like a pay stub, you’ll need to get creative. An online paystub creator can not only help you may a pay stub when you need it but also allow you to download and store it for your future record as well.
2. Track Every Expense
When you’re self-employed, it’s up to you to outfit your business. Whether that means buying post-its for your home office or using your own car and gas to drive across town for a meeting, these little expenses add up fast.
That’s why it’s so important to track and record any expenses related to your business. You’ll not only need this to keep your personal and business finances separate, but it’ll also come in handy come tax time.
3. Plan Ahead for Taxes
Most employees working for businesses have taxes taken out each paycheck. Freelancers and small business owners don’t.
Come tax time, this can lead to some serious sticker shock. To keep from upsetting your entire year’s finances at tax time, plan ahead and estimate your taxes. You may then need to pay these quarterly to avoid penalties.
4. Send Reminders to Get Paid
If you’ve been relying solely on your clients to remember to pay up, its time for a change.
When paychecks roll in randomly, managing your business finances can be a challenge. To help ease this struggle, send reminders to your clients and set strict pay dates for when they need to have their money in to keep working with you.
5. Don’t Let Yourself Fall Behind
When things get busy in your business, like around the holidays, it can be tempting to put off important bookkeeping tasks for later.
Try to resist this urge.
Falling even a little behind can mean having to play catch up even as new deadlines and paydays are passing.
6. Keep Business and Personal Separate
Even if you’re the only employee of your small business, you should still keep your business and personal finances separate.
This makes it easier to track your success, manage your accounts, and better file your business taxes.
7. Get Help in Areas Where You Need It
While it is possible to manage your self-employed finances on your own, it’s also okay to ask for help.
If you struggle to understand tax laws or simply don’t have time to track everything yourself, you can always get professional help. There are also plenty of bookkeeping software options that still put you in control, but help with routine tasks.
8. Hold Onto Old Records
Even after a year has come and gone and taxes have been paid, it’s a good idea to hold onto hard and/or digital copies of everything.
Self-employed individuals are still subject to tax audits, and having those copies will go a long way towards proving that your finances are in order.
Learning How to Bookkeep Like a Pro
From keeping detailed records to separating your personal and business accounts, these tips can help you master your bookkeeping and allow you to succeed as a freelancer.
For more tips on how to bookkeep and manage your business and finances, check out our Business section for the latest news.