(Art credit: Pedro Gomes)
You quit your salaried job to become a full-time freelancer. Hooray! You’re the boss of your own time and your business.
Now you have a lot going on, from handling clients to managing the projects you choose to work on.
But wait, there’s bookkeeping!
You know fellow freelancers who sort their paperwork by name, type, and date and think, meh, they’re just strange souls who value rigid order rather than maximizing their creative time.
So, you pull out a shoebox and throw in all your receipts, bank statements, deposit slips, and invoices. That should work, right? Until it doesn’t.
Why? Because “shoebox bookkeeping”:
- Makes it hard to track who owes you money and when it’s due
- Frustrates tax preparers trying to figure out your taxes and file returns
- Costs you more for your business tax return than someone who keeps proper records
Bookkeeping doesn’t have to be a time-consuming chore. You can automate the process and level up your tax and financial game in an efficient and scalable way.
But first, let’s see how bookkeeping can add value to your business.
Why bookkeeping is important
It’s easy to think that bookkeeping matters just for taxes. Er, kinda, but it’s more than that.
Bookkeeping is the record-keeping arm of your business that provides a paper trail of your money, so you know how much you made and spent.
Here are several reasons bookkeeping should be a priority:
- It saves you money: Bookkeeping organizes your records, so you don’t struggle to sort through messy papers. Plus, it’s easier to file your taxes or give them to your accountant during tax season. Having everything organized ahead of time means your tax professional will charge you less.
- You’ll be ready for an audit: Few things are more nerve-wracking than being unprepared during an audit. There are many benefits of keeping records and organizing your documents regularly, including having the documentation to back up tax credits or deductions, so you don’t have to scramble when an audit strikes.
- You can properly manage cash flow: Bookkeeping shows you how much you have, what you owe, and what you’re owed. This way, you won’t get confused over how much you have and avoid cash flow crunches.
- Makes overall operations easier to handle: Organizing your business documents (receipts, invoices, bank statements) as they come helps you keep up with your daily business tasks. Plus, you get more time to focus on client projects and plan future growth.
- Avoiding legal issues: Depending on where you operate, you may need to keep your financial records based on specific legal requirements. Otherwise, you could end up paying more in penalties and fines.
- Anticipate future problems: Bookkeeping helps you anticipate potential issues you may face, like upcoming cash flow problems or financial irregularities that affect your bottom line.
See? Bookkeeping is a lifesaver for your freelance business.
Now let’s explore how technology can help you automate this tedious, headache-inducing, yet unavoidable task.
How technology can help your bookkeeping
You’re a freelancer, not an accountant. So, you may not have all the skills needed to crunch numbers, compile financial documents, and make decisions from them.
You could hire someone to do the bookkeeping and other tasks beyond the basics. However, many bookkeepers charge hourly, which becomes an extra expense.
You can do your bookkeeping, cut costs, and save hundreds of dollars with cloud accounting software.
But don’t take our word for it. Here’s how such tools can help you automate your bookkeeping.
Cloud accounting software is your ally: It’s user-friendly and integrates with your banking for easier record-keeping.
You no longer need to go line by line through bank statements and then enter that data into a ledger or spreadsheet — it’s unnecessary and time-consuming.
The software connects directly to your bank account and downloads transactions and key information like dates, amounts, and descriptions from the bank into the program.
Your part is to tell the tool who you paid or who paid you. No more typing a bunch of numbers or information — just enter the payee’s name and income/expense category, and you’re done.
Cloud accounting software can remember your spending patterns and enter payees or categories for you. But you’ll still need to review what the tool does just to confirm that everything is correct and adjust where necessary.
Don’t struggle to key in your transactions into a spreadsheet or ledger manually each month. Switch to a cloud accounting tool and shave off hours, automate bank syncing, and reduce your stress levels.
H3: Digital invoicing and collecting payments
Here’s what invoicing used to look like for many freelancers:
- Create a Google Doc or Word document
- Insert a table and enter your billable hours
- Manually add up each line
- Convert the doc to a PDF
- Email the invoice to your client
Sounds familiar? That’s the old manual way of invoicing, which was time-consuming, tedious, and prone to errors. But it doesn’t have to be that way anymore.
You can automate how you bill your clients and collect payments directly from the invoice and into your bank account with cloud accounting software.
Just enter the service you’re billing for, quantity, and your rate — the software will do all the math for you. Once you hit send, your client will receive a digital invoice via email, and they can view and pay for it online.
A recent study by Wave, a cloud-based accounting software, found that enabling instant electronic payment increases getting paid on time by over 15%.
Automating the invoicing and payment collection saves you and your clients the hassle of creating invoices, writing checks, and depositing them manually.
The software keeps tabs on unpaid/overdue, open, and paid invoices. It’s practically impossible for any invoice to slip through the cracks. Oh, and you can send invoice payment reminders with just one click.
The more you automate your bookkeeping, the more time you’ll have to focus on your client’s projects.
Cloud accounting software integrates with other apps that automate and simplify your expense tracking so you can:
- Track your time
- Create invoices
- Snap photos of receipts
- Reimburse expense reports
The result: Reduced admin work, cost savings, and you stay on budget, too.
Make bookkeeping work for you
As a freelancer, getting paid is one of your top concerns, no matter how many clients you have. Bookkeeping helps you track your income and expenses so you can quickly see the state of your cash flow.
If you find you run out of time for regular bookkeeping, automate the process and free yourself up to do more of what you love.