Bookkeeping Best Practice For Freelancers

As a freelancer, whether a coach, marketer, copywriter, programmer, strategist, or expert advisor your schedule is packed full of incredible things. All of this can be overwhelming and exciting. Things that are not as interesting get pushed to the side, while others that bring a tingle of thrill get thrust to front and center. You love what you do, that’s why you do it. You are good at what you do, that’s why you love it. Your business is rolling in cash, because you are good at what you do. That is wonderful! That is, living the American Dream.

Still, there’s this nagging thing waiting for you at the desk. There’s this confusing thing glaring at you as you give your meanest, and best, blank stare.

It’s called finances. Bookkeeping. Accounting. TAXES.

Every business has finances including yours (I know basic, bare with me). In order for your business to function: you receive payments, pay bills, pay taxes, cover expenses, make sure documents are in order, blah blah blah. Ugh finances.

Here’s some relief, I know freelancing and finances. I am going to help you get a handle on things. I am going to help you understand the importance of a bookkeeping system. If you stick with me, I’ll guide you through some of the best practices for your industry, help you create a more productive system, and try to ease your burden just a bit through knowledge.

So, lets begin with a quick and simple discussion on 5 tips for managing your books.

1. Separate Bank Accounts

I cannot stress this enough. In order to have best practice in any business, it is essential that the business account(s) and personal are not mixed. Mixing the two accounts can create confusion on expenses and received pay. This potentially can result in missing out on deductions come tax time, or getting hit with unexpected taxes after an audit. Mixing accounts also hinders your ability to truly know or understand your cash flow for the business.

2. Do your books in the cloud

If you haven’t already, sign up and get your system started by using a cloud based accounting software. I personally recommend Xero another great option is QBO (Quickbooks Online). Accounting software streamlines the bookkeeping process by automatically extracting information from synced accounts. This allows you to track and categorize things without having to do manual entries (saving you time and money).

3. Create an organized system

Set aside time each week to do your books. Don’t allow yourself to put it off. If you fall behind it can be difficult to catch back up. Create rules within your accounting software to optimize the speed of categorizing your transactions. Hiring the right bookkeeper can make all the difference in your business.

4. Offset your expenses against tax

Rules can vary from one country to another, be aware of this if you travel outside of the US for your jobs. Typically you can offset things like: travel expenses (usually not to and from work this is considered commute), power & utility bills, internet & phone bills, items such as a computer, printer, and phone, office rent including room in your home, client entertainment (some restrictions apply) and others. Be sure to record all of these details when you are doing your bookkeeping. In most cases you can only offset portions of your expenses. For example you can offset a portion of your home for your office but not the whole home.

5. Make a budget

Part of staying organized and planning your business’s future is through a budget. Budgets are often thought of as limiting, unnecessary, and dull. Budgets actually act as a guide, providing you, the business owner with a framework to make clear-headed decisions for your business. Use a budget to make adjustments when and where necessary.

As a freelancer, it is easy to loose sight of the big picture when you are working with multiple clients. Remember, bookkeeping is a vital part to your business. It helps you plan, track, and manage all things financial, which is the very foundation to every business. With good bookkeeping you will have a clear idea of your cash flow, income, expenses, and business growth.

So take control of your books or outsource to an expert. Having a good system in place will only benefit your business growth and profitability. 

4 easy ways to verify your bookkeepers work

You have an AMAZING bookkeeper that you adore. He or she is so good, that you’ve let go completely of that area of the business and put your head in the financial dark. Here’s the problem. Your bookkeeper may be the best, but they are human. Just like you and me they make…

mistakes, gasp!

I know right?

Okay go easy, because of the way your bookkeeper is built (I mean a crazy detail oriented person obsessed with number perfection that gets a slight high when those books are balanced), he or she does not intentionally mean to make mistakes. Like I said earlier they are human, sometimes mistakes happen. 

You outsourced bookkeeping so you could have accurate reliable financial information. You want to know your cash flow and understand your profit versus loss. If you have a good bookkeeper then they want this for you too! No more burying your head in the financial dark! 

Try implementing these strategies to help verify your bookkeepers work and get back in the know of your business' finances. 

Login to your accounting software

Whether you are using Quickbooks Online or Xero, login on a regular basis (at least once a week) to check on activities. If your bookkeeper updates the books on Thursday, then login to your account on Friday. Do a quick look around to make sure everything has been posted and that there's not a long list of transactions that need to be handled.

Meet regularly

If you and your bookkeeper do not meet regularly (at least monthly) then be sure to start. It is essential that you have a chance to ask questions and gain clarification on the finances. Likewise, it is essential for your bookkeeper to understand how your business operates, the business goals, and challenging areas you face. During your meetings review important financial reports, your income statement, and balance sheet. Be sure to ask your bookkeeper to explain these statements and reports to you. Ask questions till you completely understand where you business is financially.

Provide documentation

Your bookkeeper needs to have receipts and invoices to make sure it is categorized properly. Do not skip this. Make it a habit to get those documents to your bookkeeper immediately. Your bookkeeper will have a preferred method that will work best for you and them. One method is an app that will auto-fetch the receipts and automatically provide them to your bookkeeper. Talk to your bookkeeper about the options available.

Be open to and encourage questions

If a bookkeeper is not asking questions then they are guessing. Do not mistake their questions for incompetence, if they are asking questions they’re doing their job. Receipts from what may seem like obvious purchases may not actually be what it seems. For example a purchase made at Chevron could be gas, meal, or something else. In order for this to be classified properly your bookkeeper needs to feel comfortable asking you questions.

It’s your business’ success, so even though your bookkeeper is amazing and on top of it, sometimes things happen. Trust me, your incredible bookkeeper wants your books to be perfect too; they will appreciate your proactivity and support to maintain accurate records.

On the flip side if your bookkeeper is adverse to you being involved with the finances and following any of these strategies; then it may be time to break up and find a bookkeeper that is more open to your involvement and working together.