This is a post from a member of the Freelancers Union community. If you’re interested in sharing your expertise, your story, or some advice you think will help a fellow freelancer out, feel free to send your blog post to us here.
When most people think of accounting, they think, “Ugh, counting.” Creative, right? But truthfully this is how many people approach the topic of keeping tabs on their business finances.
It doesn’t have to be this way.
Your accounting can help you take your business to the next level. By paying a bit of extra attention, you can bring exponential dividends to your business and your bank account. Many freelancers and businesses in general do not pay enough attention to their books. And this is a big mistake.
Your records hold the key to the treasure you seek
Yes, you read that correctly. Good records are a treasure trove. If you keep accurate, up-to-date, and organized records you will have a goldmine of information on your company. You will know what your highest-selling products or services are, what month is the most profitable for you, and who your most loyal clients are. By analyzing these records you can determine where you should allocate your time and energy to deliver superlative results. You can only do this if you keep accurate, up-to-date, and are disciplined enough to assiduously analyze them.
Good record-keeping makes tax time a breeze
Whether you want to or not, you are going to have to pay taxes on your income. By keeping immaculate records, you ensure you pay the correct amount of tax. If you under-report you may be penalized, and if you over-report you may never realize that you overpaid. By reviewing your finances—I suggest at the first of every month—you make sure you have a definite amount in your books and that your records verify these totals. Keep every document that relates to income or expense and make sure you record it. Every time. This is your money we are talking about. When tax time comes you can look at your monthly summaries, add them up, and put them on your tax return. Furthermore, you can keep an eye on your deductions, which means more money for you. The next time you go to your local coffee shop to meet a prospective client keep the receipt. If you do it’s more money in your pocket.
Your records tell you the truth about your business
How do you know for sure if your business is growing? The best way is to keep a keen eye on your accounting. To grow your numbers you have to know your numbers. Let’s say you want to double your income this year. The only way you will able to do this is by knowing EXACTLY what you earned the year before. The more definite the better: 201,765.89 is better than 200,000. Our brains gravitate to definite numbers. Knowing the exact amount you made will make the total more personal for you and push you to succeed.
As a freelancer, your control your own destiny. Make sure your numbers serve you, and not the other way around. Money solves 97 percent of problems, and being cognizant of your records will help you keep more. Spend a little more time in your records and you’ll be amazed what can happen.
Marcus White serves as an independent contractor in Seattle Washington and is dedicated to helping clients with their accounting needs, pay the correct tax and understand their tax responsibilites. To contact Marcus feel free to email him at firstname.lastname@example.org.