When you’re an independent worker, any purchases needed for your business typically come out of your paycheck — from materials and postage to travel for client meetings and advertising. On top of this, you’re in charge of ensuring you’re making payments, and your taxes are paid.
Ultimately, you’re your own accounting department. Balance sheets, profit and loss statements (P&L), and managing cash flows are all your responsibility.
Feel uncertain? You’re not alone: According to a report from Upwork and Freelancers Union, 63% of freelancers in the U.S. are anxious about managing their finances.
Here’s the thing: Managing the financial side of your business doesn’t have to be complicated.
There are several best practices and tips for organizing and staying on top of your finances (get them in our Freelancer Financial Guide).
Today, let’s focus on why you need a solid banking and record-keeping strategy when you’re self-employed.
Freelancers have unique bookkeeping situations
Unless you have long-term customers, and sometimes even then, your income will likely fluctuate from month to month.
By identifying, labeling, and organizing your income and business purchases, you’ll have a clear visual representation of your outgoings and incomings, as well as areas you might be able to reduce waste or budget more effectively.
Having a dedicated saving account for your taxes and other money you need to keep aside also helps you avoid the temptation to use it on non-business related purchases (we see you eyeing those shiny new gadgets over there).
And, as a rule of thumb, it’s recommended to reconcile — meaning to compare your banking accounts to your internal records — once a month. This process is infinitely easier when you’re not sorting through your takeout or concert ticket purchases at the same time.
Make it easy to distinguish your personal finances from your business finances
Simplifying the task of expense identification and categorization saves you money in the long run.
Not only does having a clear separation between your business and personal finances make it easier to see how well your business is performing, but it also helps you plan for taxes.
A separate bank account for your freelancing business can help keep your personal information away from your business dealings and offer a more professional experience to your customers as well.
With the Roam Gig Suite, you get real-time tracking and identification of your business expenses and revenue within your financial accounts, along with advice specifically tailored to you.
Gives you control of your tax situation all year round
If you’re an employee, your taxes get taken out of your paycheck before it reaches you, almost like it was never there.
As a freelancer, however, you don’t have the same luxury. It’s up to you to ensure you’re withholding enough to cover your taxes quarterly.
Keeping records of your expenses is critical to successfully operating your freelance business. And you’ll save money when filing your taxes if you have a good sense of your business expenses.
By organizing your business expenses, it makes it incredibly easy to streamline your expenses and what you can count as deductions.
Pulling reports and categorizing purchases is a breeze, allowing you to keep the most money in your pocket. With the Roam Gig Suite, you can easily select charges as expenses, and we’ll keep track of everything for you!
Finally, we said “all year round” for a reason. Save yourself the stress and panic by keeping tabs on your finances all of the time, ideally monthly. You’ll always know where you stand, and everything will be organized when you pay your taxes.
Even if you’ve been an independent worker for some time, it’s never too late to brush up on your business’s financial side.