How freelancers can manage their finances
If you have started your own business or work as a freelancer, you probably know by now that there is plenty to do to keep things running smoothly. One of the most important aspects of operating a startup is the budget. Most business owners need to initially spend money to make money and then ensure that income exceeds expenses in order to be profitable. But keeping track of accounts payable and receivable is time-consuming, especially for a one-person business. Here are a few tips that may help to manage your finances.
Keep personal and business finances separate
Although it may be more convenient to operate your freelance business out of your personal checking or savings account, keep the business expenses separate. For one thing, it is unethical to combine expenses if you plan to report your income for tax purposes each year. Another reason is that it will be far easier to track your business financials and file annual tax returns when you manage them separately.
Maintain an emergency fund
From the start, set aside a certain amount of income each month in an emergency fund. Problems can pop up unexpectedly, so it is wise to be prepared. When money is needed, you won’t have to go into debt for repairs or needed purchases. You may also want to add enough money each month to cover expenses like taxes and insurance for your office, if you have one, or for your home office if you claim one on your tax filings.
Use a software program
There are plenty of apps available that can organise your finances in a spreadsheet that is as simple or detailed as you might want. If you enjoy working with figures on the computer, buy a basic program and set it up to manage your company’s financials. If numbers are not your speciality, then you can hire a college student or someone part-time to run the software app for you maybe once or twice a week along with monthly and yearly reports.
Consult an expert
If your business finances are becoming increasingly complex, it may be advisable to contact an accountant and financial planner who can help you organise income and expenses as well as the related monetary concerns of your business. A professional accountant may have suggested practices that can save you time or money, while a financial planner can assess your company’s net worth and offer investing options to optimise your profits.
Making money as a freelancer doesn’t have to cause headaches. Follow steps like these to get your finances under control.
Do you have any more tips on how freelancers can manage their finances? Let us know by tweeting us at @CareerCamel.