As befitting of a profession as it may seem, freelancing is not all roses and unicorns. Even though you get to be your own boss, there are a zillion things you need to take care of in the process. Work execution, client management, and filing company taxes for freelance workers are all part of this job description. It is of utmost importance that freelance workers keep their books up-to-date. This not only streamlines their work, but also ensures that filing taxes by the end of the year is a hassle-free task.
Hire a CPA to file your company taxes for freelance workers. A professional can also provide you with better strategies to manage your accounting and can help strengthen your financial gains. Nonetheless, hiring an accountant is only beneficial if the scale of work is high enough to accommodate the need for an accountant. Otherwise, it can be just another expense. There are multiple considerations you need to make when hiring an accountant for freelancers.
If you just started as a freelancer, then it is advisable you manage your accounting on your own for a while. This will give you a good understanding of your business. Work on your business’ growth and try to cover different projects, then hire an accountant to file your company taxes for freelance workers. This implies that in your initial years, you will be on your own. The first and foremost way to keep up with your finances is by ensuring your bookkeeping skills are on point. Excellent bookkeeping skills allow you to account for every little profit you earn, as well as for the corresponding expenses.
What is bookkeeping?
Bookkeeping is the process of managing business transactions and maintaining the daily transaction records in the organized in an organized way. With the help of updating the business transaction, the businessers can examine and measure their business performance.
Irrespective of accounting, bookkeeping can be done by both accountants and non-accountants.
Bookkeeping tips for self-employed
Here are some tips and tricks from experts about bookkeeping tips for self-employed, to help them stay on top of the accounting.
When you are the only person managing everything about your business, it can actually be easier for you to stay organized, as there is no middle man and potential miscommunication risk. Bookkeeping is all about keeping track of your financial transactions. It is really important you have a sound filing system. For digital filing, have properly labeled folders and for offline management of documents, do the same physically. If you find it difficult to do this on your own, then yes, it is time to hire an accountant – organization is the fundamental aspect of bookkeeping! Something you can do to make sure your filing system works is opting for online invoicing software that will manage your invoice statements for a small monthly fee.
It does not matter whether it is just a receipt or a lot more; every document is necessary and you might end up needing them at some point in time. Tangible documents may not be prominent among millennials, but they can prove to be a lifesaver when filing company taxes for freelance workers. Make sure that you have hard, as well as soft, copies of all documents and receipts. This will ensure that, even if a file crashes on your system due to malfunction, you have a backup copy of every document that you might need to either file your taxes or for an audit. Alternative: place your documents into cloud storage such as on Google Drive, iCloud, Dropbox, etc.
Monitor your expenses
It is of great importance for freelancers to keep track of expenses. People tend to focus on their income, but it is their expenses that play a critical role in managing their finances. For freelancers, it can be difficult to track expenses as they are numerous and you are all on your own. However, every penny you spend towards building your business is an expense. So, detailed and thorough monitoring of your expenses will allow you to manage your finances and, consequently, prevent the squandering of your hard-earned income.
Planning ahead for tax filing gives way to preparing and organizing in a better manner. It ensures that you get enough time to streamline your documents and to make essential corrections in your accounting when needed. If it seems that you are falling behind in tax filing, then planning ahead can prevent any possibility of carrying over tax debt. A rough estimate suggests that taxes cost you almost 30% of your income. Make sure you build up to this amount adequately by planning ahead.
Since you don’t need to answer to anyone, you might get tempted to sweep a few paychecks “under the rug.” Yet make no mistake, the Internal Revenue Service (IRS) can audit any individual. If the IRS concludes that you are trying to hide some of your income, then it can lead to big-time repercussions for you.
Keep track of your due payments
The way a freelancer earns money is through the projects they work on. Once a project is completed and approved by the client, the agreed-upon amount should be paid and the freelancer moves on to new projects. However, there always seem to be a handful of clients that take the term ‘freelancer’ too literally and create problems when it is time to pay up. Do not shy away from sending emails to such clients, reminding them their payment is due.
It does not matter how small the projects you work on are: if you do not keep track of your accounting, it will eventually pile up and, by the end of the year when it comes time to file your company taxes for freelance workers, you will find yourself sitting on a pile of poorly-kept documents. Well, fret not! It is not too late to manage your accounting efficiently.
Agro Accounting CPA is an online CPA platform that provides convenient and hassle-free business formation and tax services, along with taking care of your bookkeeping needs. Visit the official website, www.agroaccounting.com, to find out more. And hopefully, this article was helpful in guiding you through the essentials of bookkeeping.
Use Accounting Software
One of the best choices to manage your bookkeeping business is to use accounting software, which holds bookkeeping features. Freelancers benefit more from the bookkeeping software. One of the huge benefits is, they can manage multi-business bookkeeping easily, which reduces the paperwork.
For small businesses, freelancers can choose small business bookkeeping software.
The major use of accounting software for bookkeeping freelancers are,
- Custom invoice in a few seconds,
- Can set alert message for invoice and their client,
- Managing business transactions in an organized way,
- Easy to follow up the late payers.
Splitting Personal & Professional Assets
It is more difficult for freelance bookkeepers to separate personal assets from professional assets. Make sure to use a different bank account for personal and professional. It will help freelancers to avoid confusion.
To estimate and analyze your business growth, it is more important to separate both from each other.
Evaluate Your Financial Records
Without the financial records, it is difficult to make the next step. The bookkeeping freelancer is responsible when there exists business decision-making. Only with the help of financial reports businessers can improve their business and business decisions.
With effective financial reports, the freelancer will help to create efficient business budgets by filtering different periods. Don’t fail to close off your accounts at the end of each reporting time.
Some of the reports used to analyze the data are,
- General Ledger
- Aged account payable
- Aged account receivable
- Trial balance
- Balance sheet
- Journal report
Reconcile Bank Transactions
Managing the books in an organized way and matching the bank account is the difficult portion of freelancers. But with the help of bookkeeping software, a business can effectively reconcile the bank account without any time delay. You can also visualize the cash flow for your business.
What are the duties of a bookkeeper?
The responsibilities of a bookkeeper are,
- Recording everyday business transactions
- Leading daily bank movements
- Payment processing
- Creating different kinds of financial report
- Bank reconciliation
- Accurate accounts payable and receivable.
Can I start a bookkeeping business with no experience?
With zero experience a person can make their self-employment as a bookkeeper. They don’t need any Certified Public Accountant (CPA) to start their freelancing career as a bookkeeper.
Is freelance bookkeeping profitable?
Freelance bookkeeping can be advantageous and profitable. One point to keep in mind is that the work and the payment will never be steady, as it will be fluctuating. It can never be as getting a stable paycheck. But you have more freedom and time to work than a 9 A.M to 5 P.M employee.
Can a bookkeeper call themselves an accountant?
Accountants are the people who should proceed with their career as an accountant, only with the proper certification. But, when it comes to bookkeeping, it is different. It can be done by anyone. Bookkeepers should not call themself as an accountant unless they have Certified Public Accountant(CPA).