Whether you have a steady nine to five or you’re a full-time entrepreneur managing your finances requires a lot of diligence. As a freelancer or small business owner you often are wearing many hats as you work on marketing, production, managing inventory, scheduling appointments and so on. Keeping the books may be on your ever-growing to do list, but it’s easy to push it to tomorrow, especially when you’re busy running the day to day stuff.
But putting your finances first can create a lot of freedom, not to mention help you grow your small business quickly. Who doesn’t want more time to network with clients, work to accomplish goals, or have enough extra cash to expand? We’re sure you’re nodding your head in agreement. So how do you as a freelancer, make your money work for you, instead of the other way around?
We’ve got a few strategies that might help you work bookkeeping into your normal routine. Plus we’ve proven that even just one or two will help grow your bottom-line and make your small business flourish.
Make a Plan – A dream is going to stay a dream, unless you make a plan. Taking even a few minutes to jot down a few goals and plan out your fiscal year can make all the difference when it comes to managing your money. It doesn’t really matter how you divide up your goals, but keep in mind that no one can do anything at once. As accountants and small business owners ourselves, we like breaking the year in to quarters. Sit down with a calendar and assign goals and tasks to each business quarter. You’ll want to dream big enough to make you stretch a bit, but plan well enough that executing the particulars is doable.
Tip: When you’re setting financial goals, play it smart. Ask yourself 2 questions.
- How much money does will it take to run a sustainable business? (This means that you’ll need to take into consideration the cost of running your business, as well as what amount you’ll need to live on and meet your other financial obligations.)
- How much money would I like to make? (This is the question where you put your dreams in the mix – make sure that you’re picking number that makes you stretch but that is still realistic.)
Then you’ll want to take those numbers and break them down. How much would you need to make each month? Each week? Each day? to reach your answers to questions 1 & 2. From here you’ll start looking at how to earn those amounts and go from there.
Make it a Date – We’ve found that we’re more consistent in sitting down with the books when we make it a date. Make it a point to sit down with your books regularly. Schedule it in your phone, in your work calendar, or even take a day off where you spend just a few of the hours working on your books with no interruptions. If you already do that, sit down and make a short list of financial matters you don’t seem to get around to – then plan to knock one out at the end of your bookkeeping sessions until you’ve completed the list.
Tip: Not everyone thinks working with numbers is fun. So take the idea of “date” literally. Make the hours you spend working on books fun by eating your favorite food, listening to music, or even meeting up with a business partner or another entrepreneur and working on the books at the same time.
Keep it Simple – We see it happen all the time. Just like New Year’s Resolutions people start off hardcore and get burned out quickly because it’s too cumbersome, detailed or just not their thing. Don’t plan to implement a complicated bookkeeping software if you’re a bookkeeping newbie or are barely keeping track of things with paper and pencil. Simple spreadsheets can get the job done and often cost far less (or are free) than the best software out there.
Tip: Look for other ways to simplify. Consider consolidating accounts, or putting all your spreadsheets together but separated by tabs, use automated bill pay if you can, and separate business and personal finances to avoid the headache of having to sort it out every month.
Put Money Aside for Taxes – The idea “a little becomes a lot” holds true when it comes to taxes. Nothing is more painful than having to cut a large check not to mention how stressful it can be the you know taxes are coming but you have no idea how much they’ll be or if you’ll have enough to cover them come tax time. Decide right now that you’ll set aside money for taxes every time you do your books. That way you’ll be ready and have at least a good chunk of cash ready when it comes time to pay.
Quarterly taxes are something you can expect to happen 4 times a year. Include the dates. Because you’re a freelancer you’ll need to withhold your own taxes rather than rely on a W-2.
Pay yourself first – it seems like you should put the money where the need is and then pay yourself out of whatever’s left. But when you run your own business, it’s even more important to pay yourself first so you ca put money aside for savings. Any easy way to make sure this happens first thing is to set up an automatic transfer – you’ll hardly notice it and little by little it grow.
Tip: Sometimes as a freelancer income varies quite a bit month to month, so the idea of setting up an automatic transfer for a set amount can be iffy. If that’s the case, decide right now on a percentage that you can pull out of every paycheck that you’ll set aside for your own wages.
Now which strategy will you implement first in your bookkeeping approach? Have additional questions, we’d love to talk with you. Contact us here.