Being self-employed is one of those things in life that when you get there, you receive the ultimate freedom in many aspects of life. But that comes with a price. And that price is the responsibility you take.
By being your own boss you become the one who needs to find bookkeeping clients and make them happy, work enough and structure your days in the most effective way possible, make enough money to meet your monthly budget, and – last but not least – taking care of that money.
Yes, even if you hire somebody to take care of your finances, in the end of the day you’re the one in charge. And if something isn’t paid on time, if you haven’t made a smart financial decision, have forgotten about a new tax rule, or don’t watch out your expenses, the freedom you’re enjoying so much can be gone.
Let’s make sure that doesn’t happen by taking control of the money you’re working so hard for. You should know some basic tax principles to always be feeling safe and avoid unnecessary stress.
Here are some bookkeeping tips to keep in mind as an independent worker:
1. Keep track of everything going on with your money.
Some get scared when they hear about budgeting. But that’s where all the control over your money and managing them well begins. By knowing what’s coming in and where it’s going.
That’s the surest way to know you’re making enough to live the life you love, and that you’re spending much less so you can set something aside.
2. Make saving a habit.
Habits are important. So we must develop the right ones about every area of life we want to improve.
One such habit when it comes to your finances as a self-employed person is to always be saving no matter what.
Have a separate account for that and set aside something weekly or monthly.
3. Don’t be afraid to ask for help.
You don’t need to do it all on your own.
Speaking to professionals and asking for advice is always a good investment of your time and resources. It will pay off in the long-run too.
Using the services of an invoice factoring company, for example, can turn your whole financial situation around and guarantee you a more secure future.
Their experts offer friendly, fast and reliable services.
4. Save all documents.
Now here’s something so many small business owners and freelancers don’t actually do: keep hold of anything related to your finances.
I’m talking about receipts (even those that seem absolutely unnecessary), email and other types of online or written correspondation, and anything you can think of that has something to do with the business.
You shouldn’t live with the thought that you’ll get audited, but if something happens and you have more than they ask for when checking what you’ve been making and spending on, you’ll make quite a good impression and the guess work will be avoided.
5. Learn more about all the things you can deduct.
So many people pay more taxes in the end of the year than they actually need to.
As a self-employed individual, you’ve got more deductions than you probably know.
Let’s begin with office space and supplies, and anything directly related to the business. If you’re working at home, that can be half of the rent in some countries, or percentage of the house used for office space.
Then comes travel. Your next trip can be considered business costs if you find a way. So keep track of all transactions related to it.
As for mileage, you can calculate what you use from when you’re leaving the office (or your home if these are one) to the moment you come back.
Using your phone too much? International calls, 2 lines, or else? Well, deduct phone bills then.
Some meals and/or drinks can also go without tax considering they go together with meeting a client or potential partner.
If you dig deeper into the whole tax deduction thing, you can find out a lot of more interesting opportunities and tax saving strategies.
For instance, you can save on taxes if you employ a family member.
Wondering what other business owners think about doing their taxes?
According to a recent Freshbooks report, accountants and bookkeepers believe accounting software is too complicated for business owners. 2 out of 3 even believe small business owners require specialized accounting skills or experience to use it.
However, with the right accounting software you shouldn’t have any troubles. FreshBooks is designed for the self-employed and has helped over 20 million people located anywhere in the world manage their money better.
Your money won’t handle itself, you need the knowledge and dedication to track everything and take decisions that concern your budget for years to come.
What other bookkeeping tips do you have that help you manage your finances better?