There are many freelancers out there in the world. While some states, like California, have implemented laws that essentially kill the freelancer, other states know the value of a freelancer. With that being said, it’s important to know how to handle your bookkeeping as a freelancer.
I’ve been working as a freelancer since 2006. I was mostly into direct sales for the first two years, until I started to dabble in making a blog for money, then I started a freelance writing business that I now have a partner in, my oldest child who recently graduated high school.
When it comes to being a freelancer, it’s important to keep solid paper trails of expenses and income. Previously I just used my 1099’s and 1099-K from PayPal as I didn’t have that many expenses. If you think about it, a freelance writing business doesn’t have much overhead.
As a blogger, I only had the cost of a computer such as the summer I had to invest in a business laptop to handle work while I didn’t have a home. Then there’s the cost of hosting for my blog site, annual domain costs for all of the blog domains I own, and then very little in supply expenses. The list of expenses as a freelance writer or blogger wasn’t very high in the beginning.
Accounting Tips for the Freelancer
Get the Supplies
There are many ways you can work for solid bookkeeping. Some people will use an accounting software program, but since my business and personal expenses may be intermingled, since I don’t make that much annually yet, an accounting software gets confusing when reviewing business details annually.
I much prefer an electronic paper trail where I created a “label” in my Gmail account (all of my business emails FWD to this Gmail account through my CPANEL hosting emails). The label is “2020accounting” and I move all new emails from expenses into this label in Gmail to have a running tab of the expenses for my freelancer business.
Supplies for Freelancer Accounting
Now that I’m trying to be more organized and do a monthly income and expense report, I’m looking into the following supplies to get my accounting documents more organized in a psychical paper trail:
- File Cabinet
- File Folders for Month to Month
- Three Hole Puncher (to punch the printed papers for your binder)
- Accounting Book for Tips
Whatever method you use for bookkeeping as a freelancer, it’s important to document everything. You need to know what little expenses you’ve had, what income you’ve had and anything else that pertains to your freelancer business on file. You have to keep 7 years of tax information, so having a solid organization will assist in keeping these files for the minimum term required.
Do Monthly Reports
It’s important to keep track of what you’re making each month. I organize my income into the various streams of revenue I have. My streams of revenue include:
- Affiliate Earnings (Amazon, Shareasale, CJ, etc)
- Sponsored Blog Content
- Paid Ad Placements (banner ads, text link ads, etc)
- Ghostwriting Services (freelance writing for other brands and bloggers)
- Chore Threads (boosting social media posts for bloggers)
- Amazon Gift Guide Creation (developing gift guides using Amazon affiliate links for bloggers)
- Google Adsense (ad revenue)
I may have other streams of revenue, but those are the main ones I can think of right now. Each month I document my income and organize it into each category to see which category is earning the most. This helps me develop a marketing plan for my freelance business to boost specific areas or to alleviate a stream if it’s not worth the time invested.
Now that you have your income evaluated and documented for each month, you’ll want to three-hole punch your expenses into a binder for that month. You’ll create a Profit Loss Statement for each month for bookkeeping and to ensure your accounting for freelancing is accurate. This profit loss statement is essentially a piece of paper that takes expenses from your income to come out with a total profit or loss month to month.
Lastly, I’d recommend that you get a fire safe file cabinet or box to keep your tax documents in so that you don’t lose them but with so much being electronic, you may be able to use Dropbox or something similar to keep an electronic paper trail in case the unthinkable, like a fire, occurs to destroy your files at home.
Now that I’ve been doing this freelance writing and blogging for quite a few years, I’ve started to invest back into my business. Some other expenses that I must include in my accounting tips for the freelancer include supplies, printer costs, depreciation of my business computer and laptop, costs for marketing, and so on. I’ve started to hire writers and other professionals who can offer skills like printable creation and pin image creation to assist in my marketing efforts for my blogs that make money.
Every time you spend money on something that helps your freelance business, you’re creating new business expenses. All of this can be difficult to keep track of, that’s why I wanted to make sure you had some accounting tips for the freelancer. These tips shared today will guide you forward in staying organized this year as you continue to build your freelance business as a professional entrepreneur.