Guest Blogger Cameron McCool is a freelance writer and content manager at Bench, the online bookkeeping service that pairs you with a professional bookkeeper and uses simple, elegant software to do your books for you.
Open a retirement account. Squirrel away extra funds for emergency expenses. Cut down on store-bought lattes. This is basic financial advice for freelancers and, as a fellow freelancer who loathes financial management, I know you’re sick of hearing it.
Fact is, we all know that we should do these things. We read about them everywhere. And they do make sense. But for those of us who recoil at the mere thought of a spreadsheet, managing financial tasks can be painful.
If you’re a freelancer who can relate, here are five non-traditional tips you can use right now to take the stress out of managing your finances.
Separate Your Personal and Business Finances Immediately
If you currently manage your business and personal finances in the same bank account, separate them as soon as possible.
Many freelancers choose to commingle business and personal finances because it’s easier in the short term (fewer bank fees, less set-up time). But keeping finances separate offers less headaches and greater advantages in the long run.
In addition to saving you from having to painstakingly review and separate business and personal transactions each year come tax time, operating separate accounts puts you in a better position to monitor business spending and outsource your financial management.
You can also connect a business credit card to a business bank account, which gives you an extra line of credit for emergencies and helps you build good business credit for the future.
The basic steps to separating your personal and business finances are:
- Open a business checking account
- Manage all of your business incomings and outgoings from this account
- Pay yourself a salary from the business account
- Do not use your personal account for any subsequent business transactions
For detailed instructions on the process, read Bench’s step-by-step guide on separating your business and personal finances.
Batch Process Financial Tasks
Have you noticed that the longer you ignore your finances, the scarier and more unmanageable they become?
Financial responsibility never goes away. That outstanding bill you’ve been avoiding will still be there when you finally get around to opening it, and that tax return will still need to be filed whether you miss the deadline or not.
I knowingly put off filing a tax return once. “I’ll get to it later. It’ll be fine!” I thought. It was fine -- an $800 fine, to be precise.
To prevent avoidance and penalties, batch process your financial tasks. Mark a day in your calendar as ‘Finance Day’. Do nothing else on that day but plough through invoicing, payments, and outstanding financial admin.
Make the day fun by teaming up with other financially avoidant freelance friends. Go to a great cafe. Buy yourself something nice to eat. Drink coffee you love (more lattes!). Do whatever it takes to finish everything in a single day so you don’t have to look at your finances again until the next time Finance Day rolls around.
Make Friends with Financial Apps and Software
Storing receipts and invoices in a format that makes them easy to record and categorize will save time when it comes to filing your taxes.
Shoeboxed is a paid service that goes the extra mile and allows you to scan & organize receipts and business cards, create expense reports and track mileage straight to the cloud.
Double Your Rate
Freelancers Union recently posted a step-by-step guide on how freelancers can double their rate, which offers advice on when and how you should go about charging more for your services.
Follow the guide and get yourself into a position where you can introduce higher rates to both new and existing clients.
Once you have additional cash rolling in, allocate some of the extra income to paid software and services that can manage your finances for you.
Of course increasing freelance income isn’t always as easy as it sounds. And while this may seem like a far fetched way to make financial management easier, if you really can’t stand dealing with your financial To Do, the incentive to earn more money – and pay to have it managed for you – should be strong enough to make this method work!
Outsource Your Bookkeeping
Freshbooks.com is one of many popular self-service tools that you can use to manage your business finances (accounting and bookkeeping) online. These tools are great if you’re number savvy and diligent enough to track finances on a regular basis.
However, if you’re too busy, too stressed, or simply not interested in reconciling business expenses, producing financial statements, and filing your tax return, consider outsourcing the process entirely.
One option is, of course, Bench, an online bookkeeping service that pairs online software with professional accountants to manage your bookkeeping for you. Charged monthly, Bench is free for the first month so you can see if it’s a good fit for your needs. (Note: I work for Bench and I see how they make life easier for freelancers, so I am biased!)
If you’d prefer to have someone in-house, aim to outsource locally. Limit costs by arranging for someone to visit your office and manage your books once a week, or even once a month.
Those on extremely tight budgets could also try outsourcing their bookkeeping to a university student, preferably one who’s close to completing a degree in commerce or finance.
Of course, outsourcing financial management costs more than the DIY method, but if managing your own books costs you time and stress then consider outsourcing as money well spent.
What other tips do you have for freelancers who don’t like dealing with finance? Share them with us in the comments section below.