The Basics of Bookkeeping for Freelancers

Now let’s be honest. It’s not easy to keep track of payments and income. Particularly if you want to continue being financially beneficial in the long run, it calls for a lot of perseverance and attention to detail.  

The good news is that there are software solutions that can aid you in improving your financial management. Unfortunately, not all of them are excellent and user friendly. Actuality, some are awful!  

But don’t worry, we’ve got you covered and this article will guide you to the best bookkeeping software for freelancers. 

Let’s first discuss the basics of bookkeeping for freelancers before getting into the details of online bookkeeping software.  

The process of recording financial transactions, expense tracking accounts, and payroll-related information in a way that is carried out in compliance with regulatory standards is known as bookkeeping.  

Businesses’ ability to operate profitably and gain insight into their financial health comes from the bookkeeping process.  

For businesses, and especially for freelancers, bookkeeping is important. Freelancers are employed under a contract and are paid at the end of each project. To avoid losing money due to poor bookkeeping, it is even more important to keep track of your financial transactions. 

A cloud-based bookkeeping software is what you need

You should use cloud-based bookkeeping software if you’re going to use one of the online services. You can access your data from any computer or device with an internet connection if you use a cloud-based bookkeeping software.  

You won’t have to worry about installing software on your computer or purchasing new computers to support the software if you choose software that is hosted online. You only need to log in to get started.  

 On-premise software is more expensive than cloud-based software. Utilizing a cloud-based solution is typically less expensive than hosting the software internally or on a virtual private server (VPS).  

In general, cloud-based software is more scalable than an on-premise software. 

Track your income, expenses, and invoices all in one place

You can keep track of both the inflow and outflow of cash of your business using a reliable bookkeeping program. You should be capable of keeping track of your income, departing costs, and labor hours for each invoice.  

Additionally, it needs to be simple for you to see how much money you made from each invoice. This information can be used to monitor the financial progress of your company over time. 

You can track your clients’ payment terms and get a better sense of when you will be getting paid by using a reliable bookkeeping program.  

Client payments shouldn’t ever be a concern for you, especially if they are being made with a credit card. Most credit cards have a 90-day grace period, which means that even if the customer doesn’t pay you by the due date, you will still get paid. 

Don’t just rely on your memory.

You might forget large monetary transactions, like when you paid your internet bill or the day you purchased your computer.  

Additionally, you might fail to disclose certain financial transactions or forget to include important details, like the rate at which you depreciated your computer.  

This will end up you not paying the correct tax amount to the legal authorities which would result in paying up fines when audited. 

Pro tip: Keep track of at least the last 6 months of history.

The most recent six months of history should be kept, though it’s best to keep track of as much history as you can. The better option is to keep it for longer. You never know when you might need to remember details about a long-ago transaction, like when you bought your computer.  

You might end up paying more taxes than necessary if you don’t keep good records of your finances. And even if you don’t, you might want to look back and see how much cash you brought in and how much you spent so that you can proceed with future business decisions more wisely. 

Other benefits of using bookkeeping software

There are numerous additional benefits to using bookkeeping software. They can aid you in, 
  • Better organizing your finances 
  • Improves your financial planning 
  • Improves your financial tracking 
  • Improves your financial forecasting 
  • Improves your cash flow forecast. 
In other words, they can make it easier for you to control your finances. And track them with the aid of a bookkeeping software.   The software allows you to keep track of your income and cash outflows by client, task type, category, and any other criteria you choose. The software can be used to manage your budget, forecast your cash flows, and file your taxes, among other things. 

Wrapping up

For freelancers, bookkeeping software is a lifesaver. It makes it possible for you to manage your money in a variety of ways and improves managing your cash flows. While you are entirely free to use a pen and a paper to record your financial transactions. It is strongly advised that you use an online bookkeeping tool instead.  

What are you waiting for, then? It’s time to manage your money better!