Whether you’ve decided to take your skills and sell to the highest bidder as a full-time freelancer or as a side-hustle, I want to say, “Kudos!” to you. Taking this initiative is what our economy is built on. Having said that, becoming a legitimate freelancer is more than hanging out your shingle and exchanging money for services.
An often ignored part of the business is the accounting. That is, until tax time. Then, new freelancers have to scramble to track the money coming in and expenses that went out over the year. Heaven forbid you don’t remember what that cash receipt was for.
Monica Ross, expert bookkeeper, virtual money coach, and founder of Virtual Bookkeeping has shared a few tips to ensure that you’re building your business on a firm foundation, so that you know how much you’re earning, how you’re spending your money, and that you’re prepared to pay your taxes, when the time comes.
- First things first. Set up a banking, savings and credit card account in the name of the business. These are to be used ONLY for the business. All expenses and income should be run through these accounts ONLY.
- Set up an accounting program, like Quickbooks. These programs are online, will connect directly to your bank, and will allow you to easily download the income and expenses that are related to your business.
- Set up a relationship with a bookkeeper. A bookkeeper already knows how to use the software, and what’s important to track, and can quickly and easily track what’s coming and going from your accounts.
- Set up a relationship with an accountant. An accountant differs from a bookkeeper, in that they keep on top of all tax code and provide business owners with financial insights based on the reports generated by your bookkeeper.
- Track all expenses and income monthly. This will allow you to add in the details while the transactions are fresh in your mind, and will give you a snapshot each month of the financial status of your business. In addition, if you keep up with this monthly, tax time is a snap!
- Set aside 30% from every payment. Set this amount aside in a separate savings account for taxes.
Now you have six tips that will set up the structure of the finances in your business. Overwhelmed? Reach out to Monica and let the Virtual Bookkeeping team help you get everything set up correctly, so that you can focus on finding new clients and delivering your expertise. Having Monica’s help for my own business bookkeeping has been a life saver, especially at tax time.