Bookkeeping for Independent Contractors and Freelancers
- Bookkeeping is an essential part of managing your finances and ensuring that your business is profitable and sustainable in the long run
- If you set up good systems bookkeeping doesn't have to be a big headache. You’ll always know where you stand and avoid sheer terror when tax season arrives!
If you’re not an organized and/or numbers-oriented person, bookkeeping can be a nightmare. But trust us, if you’re not keeping tabs on all your expenses and income, the tax season will feel like a horror movie marathon, and you may end up with a much bigger tax bill than you expect.
Bookkeeping is keeping track of your income and expenses as a business. It's something every business needs to do, and if you're freelance or doing 1099 work, the government considers you a business whether you think of yourself as one.
Bookkeeping is composed of three parts:
The "Main Character Energy of Bookkeeping”
Income and expense tracking is recording and categorizing all the debits and credits in your bank accounts. By tracking your income and expenses, you can determine how much money you are making, where your money is going, and identify areas where you can cut costs or increase revenue. If you use WorkMade, the app will do this automatically. If you don't use WorkMade, you can do this manually with a spreadsheet or purchase a QuickBooks Subscription (or another bookkeeping software.)
The "I Know What You Did Last Summer Part of Bookkeeping”
Accounts receivable is the tracking of all the money that other people owe you. Bookkeeping is also a great reminder to follow up on accounts that haven’t paid you. Who doesn’t love the email that says “I was doing a little bookkeeping and realized…” If you use WorkMade's invoicing tool, we will show you which invoices are unpaid.
The "Ex That Can’t Get Over You Part of Bookkeeping”
Accounts payable is the tracking of all the money that you owe others. These are the bills that you need to pay contractors or vendors.
Why Should I Care About This?
Bookkeeping is important because this is where you will keep track of your tax deductions and 👏get your money, 👏
The reality is that most freelancers miss out on tax deductions, especially when they’re first starting out. The best way to fix this is to start bookkeeping and find out what tax deductions you are eligible for.
Okay, I need to start Bookkeeping NOW what can I do immediately?
Separate your business and personal bank account
Repeat this with us: Keep your business and personal bank accounts separate. Now say it 3x fast. *Insert WorkMade plug here.*
This will save you time and money and make bookkeeping soo much easier!
Rather than searching through hundreds of transactions in your personal account to find a few business transactions, you can get hours of your life back by keeping all business transactions in your business account.
Don’t Let Your Bookkeeping Pile Up!
Bookkeeping can help you plan for the future and it’s an essential part of running a successful freelance business by understanding your financial position, you can make informed decisions about your business!
If you want to automate your bookkeeping check out WorkMade.
Each individual and business tax situation is different and unique, so WorkMade does not provide specific tax advice, only supplying general information based on information published by various taxing authorities, which may change over time.