Many people dream of working for themselves and being their own boss. Going freelance can be a double-edged sword, as independent contractors find themselves landed with the responsibility of dealing with their business finances for themselves.
For freelancers the key to financial management is organization, as losing track of bookkeeping information can have dire results both in the short and the long term. Short term, a failure to invoice or chase payment can result in an unsatisfactory cash flow situation. Long term, mismanagement can lead to trouble when tax return time rolls around.
So what can freelancers do to make their financial affairs run smoothly? Following a few tips and making some sensible choices can help ensure that earnings are received, noted and declared in a pain free fashion.
Money Management Tips for Freelancers
While every worker and every business will have slightly different financial demands, there are some things that can be universally helpful to those who work as a freelancer in their field. Things to consider when managing your money as a freelancer include:
- Keep business and personal finances separate. Open a new account for business transactions and use it for incomings and outgoings related to your work. While this is not compulsory for freelancers, it can help reduce the possibility for confusion between business and personal funds when the time comes to total up the taxes.
- Keep a financial diary. Good business people will have a diary of appointments or jobs where they will be in attendance. Creating a separate diary for finances can help to keep things on track. Note the dates of invoices in here and the dates that payments become due, as this will allow you to chase payment if necessary. Also, note the dates on which payments are received, be it in cash, check or by bank transfer. This will allow you to ensure that business and bank records match up and tally.
- Ensure that you keep and file all business related receipts, so that expenses can be properly calculated at the end of the year.
Getting Help with Your Freelance Money Management
While many people are skilled in the field in which they choose to work, few freelancers are experts in accounting. Nobody needs financial mix-ups adding to the pressure of their work, so seeking help with money matters from a professional can be a great idea. Options open to freelance workers include:
- Employing an accountant. Using an accountant to keep your books and complete tax returns at the end of the year is a great way to take the pressure off. An accountant will also be able to give up to date advice on money management that is relevant to the way in which you work.
- Using a Freelancer Payroll Solution is also an option, allowing those who prefer to work for themselves to enjoy the security of a PAYE position without the hassles of handling their own finances.