Freelance work can be tremendously rewarding, and some people can’t imagine doing anything else with their lives. Free from the constraints of offices, set schedules and traffic, those who freelance can set their own hours and still do what they love. However, freelance work requires discipline, and those who fail to track their finances appropriately sometimes run into difficulties.
Fortunately, all freelancers can develop a system that will take little time and allow them to focus on doing what they love. Here are a few tips for mastering your finances as a freelancer:
Thanks to rapid advances in technology, it is now far easier for everyone to track their business finances. I use Intuit’s small business accounting software and because I was already familiar with the desktop version, the switch to the online version was relatively easy for me. For most freelancers, the best solution will undoubtedly be one of the many cloud-based software packages available instead of the traditional, desktop software. These cloud-based packages charge predictable monthly fees instead of large upfront costs for resident software and expensive upgrades.
They are accessible from anywhere, from just about any device that has an internet connection and they will not require you to upgrade those devices in the future. While desktop programs are still viable options, online solutions tend to provide better performance, more features and lower overall operating costs.
Develop a routine
Every activity you conduct should become part of a routine. Develop an invoice that will be sent to customers, and develop a system for archiving these invoices. Determine a daily or weekly time when you will calculate your recent income and expenses, and make sure to put aside at least 25% of each payment received for your estimated quarterly taxes. As a freelancer, you do not have a boss, but you must function as your own boss in certain ways. One of these ways is developing the discipline needed to constantly keep up with financial maintenance. Fortunately, this will become a habit over time, and it is not as time-consuming as many imagine.
One of the most obnoxious parts of being a freelancer is dealing with taxes. The United States tax code is especially confusing, there are number of caveats that the freelancers will need to be aware of. For many businesses, there are deductions that can lead to substantial tax savings, but they must be used appropriately. An excessive number of deductions may trigger an audit, for example, vehicles that are used for business and for personal use can only be partially deducted.
Freelancers should also consider new methods of processing payments. In the past, most people would pay with cash or a check. Due to the widespread shift in society to a mobile-centric way of life, however, a growing number of your potential clients are expecting vendors to accept credit cards…on the go. For freelancers, mobile credit card processing can be quite useful, especially if you tend to meet with your clients in public places. The ability to accept payments using your tablet or smartphone can also lead to quicker processing of those payments. In addition, you can often avoid having to send out numerous invoices.
Ultimately, freelancing can be tremendously rewarding, but remember; those of us who have chosen to embark down this path must be aware that mastering our business finances will forever be a major factor in our success.
Pearlie Davis is a staff writer for Techbreach, a popular site that provides update-to-date news, commentary, and reviews on popular mobile devices, technology and electronics.
Image Credit: Shutterstock.com