Whether you have just started out as a freelancer, or you’ve been going solo for years you know that keeping tabs on your finances can be tricky. With demanding clients, there’s little time for bookkeeping, or chasing down unpaid invoices. But if you’re not keeping tabs on your finances as a freelancer, you will end up losing money that is rightfully yours.
We’ve come up with some helpful tools and advice that can really help save you valuable time.
Gotta keep ’em separated
As a freelancer, it’s often tempting to use your personal bank account to deposit payments from your clients or pay out expenses. However, when it comes to tax time you’ll want a clear separation of business and personal expenses.
Was that charge at Starbucks from that time I took a client out for coffee or was that me splurging on a Mocha Macchiato?
If you make it a point to pay for business expenses with a dedicated business checking account, questions like this will have a much more clear answer.
Let’s face it. Unless you’re a freelance bookkeeper, chances are you don’t know how to keep your books in order correctly. Even if you do, who has time for all that?
Use a service like Quickbooks Self-Employed*, which is designed for businesses like yours.
*This link will provide you with a discount off of the standard price. We also may get a commission if you purchase through this link.
It will automatically import transactions from your bank account, and can even learn how to categorize each type of transaction. Teach it to categorize recurring transactions once, and you’ll never have to do it again. Talk about easy!
If you frequently drive places for work, you can use their app to track mileage automatically. This lets you deduct the mileage on your taxes at the end of the year.
All businesses should also be paying quarterly taxes. If you don’t want to risk forgetting to pay your quarterly taxes, and don’t want to figure out how to calculate how much you owe, let Quickbooks do it for you. They project your earnings and determine how much you should pay each quarter. You can see the estimates throughout the year, so it’s easy to budget for the tax expense each quarter. With a click, you can print out the estimate form that you need to mail into the IRS.
Easily create invoices in Quickbooks, and optionally get paid instantly by credit card.
Prepare for Dry SpellsThere is no guarantee a #freelancer will get paid next month. Click To Tweet
Unlike our employee counterparts, there is no guarantee that a freelancer will get a paycheck tomorrow. One month may be overwhelming with work, and the next you could have no work at all. Even if you have regular clients who send you steady work, they may run into their own financial troubles and need to cut back somewhere.
Putting some of your money aside early on can help weather the storm when dry spells happen. This money will help you pay for living expenses like your mortgage, rent, food, and utilities during slower periods.
There is another benefit of having this money set aside. You have the freedom to say “no” to a project when you otherwise might be financially forced to take it. When money is tight, it might be tempting to take a project to help pay the bills. You may go against personal beliefs or venture outside the normal set of services you offer with certain projects. Having a “rainy day fund” gives you options when faced with the choice to take on a new project or not.
Get Payment Up Front
I’m not suggesting you ask for 100% payment up front every time you work for someone. However, it is a good idea to ask for a deposit from new clients. At least this way if you get a 50% deposit and the client decides to stiff you on the rest you’re not at a total loss.
Some freelancers who deal with clients who are slow to respond will put payment timelines into their contracts. Timelines such as 50% up front, 25% after 60 days, and the remainder at the completion of the project. If the client is not responsive to requests for materials after 60 days, you can inform them that no further work will be done until the additional 25% is paid.
Set Some Money Aside for Retirement
This is an area that many freelancers neglect to consider. Often times when we are employees, the company we work for has a 401k or some other retirement savings system in place. We don’t even have to think much about retirement savings.
As a freelancer, you are our own boss, and retirement is a real situation that needs to be considered. Even if you love what you do, and want to do it forever, give your future self some options. It’s better to save now and have the option to retire in the future. If you spend all your money now, you give yourself no choice but to keep working.