Regular bookkeeping can assist your business in meeting all legal requirements and identify any problems it might face. Freelancers especially will find keeping detailed records of expenses and income useful as it makes tax preparation simpler as well as aids when audits arise. Lunafi has spoken with over 100 freelancers with experience over the last year and created a brand new and easier method of managing finances for freelance businesses to meet their specific needs and preferences. A private beta group has been testing Lunafi, to ensure users receive a top experience when using our software – Lunafi was designed specifically to address freelance bookkeeping needs!
Bookkeeping may not always be at the top of freelancers’ agendas. When starting up their businesses, freelancers usually begin with an idea they are passionate about – which typically doesn’t include accounting requirements. There are various reasons freelancers should keep track of their bookkeeping practices – here are just a few:
Easier Trips to Your Accountant
Chances are if you enlist the services of an accountant to prepare your tax returns, their hourly costs could become quite costly. If your documents and numbers are scattered throughout, time spent organizing will cost a substantial amount in fees charged by accountants; on the other hand if all finances are managed independently they can focus their billable time billable to ensure all your tax forms are completed accurately before filing your returns for you.
You’ll Be Ready for an Audit
The key to successfully passing audits is keeping your financial records organized and stored appropriately. The IRS typically selects freelancers at random for audits, often targeting deductions such as home office costs, travel expenses mileage etc. If an audit reveals mistakes that result in tax refunds due, subsequent years are more likely to select you for auditing; but if your bookkeeping practices are more organized you are less likely to commit errors that result in red flags from tax authorities.
Keeping up with Your Daily Business Tasks
Doing a bit of accounting each day can make managing your entire business simpler. Making accounting part of your daily routine allows you to track invoices and receipts more effectively while cutting back on tax preparation time. By setting aside time each day to do bookkeeping tasks, your focus can remain on other daily tasks while at the same time planning for its long-term financial health.
Protecting Your Assets When Things Go South
As unpleasant as it is to think about, unexpected personal circumstances could arise that have an adverse impact on your business. A proper bookkeeping system can help prepare for everything from an angry client going to court against you to a difficult divorce, so having a clear financial history will aid any legal proceedings which arise and establish who owns which assets and money.
Avoiding Legal Problems
There may be legal requirements regarding the keeping of financial records depending on where your business operates. Failing to maintain accurate records could lead to significant fines or penalties that could significantly decrease profits for your enterprise.
Recognizing Potential Issues
Staying on top of your bookkeeping and accounting by closely reviewing profits and losses statements can help anticipate any problems your company might be encountering. By continuously examining financial statements, it will become possible to spot serious irregularities before they become problematic, such as cash flow issues that cause funds to be wasted regularly or another serious issue that affects profits. Don’t underestimate how an accounting program designed specifically for business can make a positive difference in day-to-day activities as a business owner.
How do freelancers record income?
Tracking all of a small firm’s income can be challenging, so using freelance accounting software that records taxes and earnings could be the ideal solution. Some top accounting programs are user-friendly and will reduce stress as you monitor financials.
How often should I review my bookkeeping as a freelancer?
Freelancers should manage their books once a month at minimum; however, you may review your accounts more frequently if desired. Some freelancers complete their bookkeeping each Friday at the conclusion of each week while others go over their accounts daily – just a few minutes each month will help ensure a balanced accounting.
What bookkeeping software is best for freelancers?
Lunafi is an accessible free accounting and bookkeeping software option designed for freelancers that is both reliable and efficient, boasting powerful tools such as invoicing software, automatic mileage tracking, payment instruments that increase efficiency and profits of small-scale enterprises.
How much should I pay a freelance bookkeeper?
Small-to-midsized businesses should pay an independent bookkeeper between $50-$100 USD an hour depending on the complexity and experience of your requirements, and the bookkeeper themselves.
What are the benefits of bookkeeping for freelancers?
Bookkeeping can help freelancers manage expenses and tax-related income more efficiently, manage late client payments more easily, and gain insight into the state of their business.
What expenses can freelancers claim on their taxes?
As part of your taxes filing process, major expenses that you can write off when filing include business membership fees, educational expenses professional charges marketing and advertising expenses as well as home office costs such as automobile costs insurance expenses legal fees professional charges retirement savings plans.
What are the differences between bookkeeping and accounting for freelancers?
Bookkeepers need only basic accounting knowledge and certification to keep transactions and financial information organized while recording them. Accounting professionals, on the other hand, possess extensive expertise in taxation and accounting enabling them to provide advice regarding business finances that best suit each business’ finances.
What are the bookkeeping mistakes that I should avoid as a freelancer?
As freelancers often have limited time for bookkeeping duties, their primary difficulties with bookkeeping often involve mixing personal and business transactions together, failing to complete bookkeeping on a regular basis (at least once every month), or disposing of receipts without keeping records.