If you're a serious freelance writer, you know very well that it's a business. People may think you schlep around in your pajamas all day, pulling your laptop into bed when the mood strikes you, but that couldn't be further from the truth. In fact, serious freelance writers are probably more committed and disciplined to their work than most 9-to-5'ers. And in addition to doing the actual work, freelancers are also in charge of all sorts of other things like business development, marketing, and yes, accounting. That's why accounting for freelancers is such a critical knowledge set. Let's dig into the basics...
Track Each and Every Expense
No matter what type of freelance work you’re doing, it’s essential to keep track of your expenses, whether they’re monthly recurring expenses (like your PayPal service fee) or a one-off (like ordering some new business cards or attending a writer’s workshop). That means keeping receipts for any and all business expenses (just your bank statement isn't enough) in case you end up getting audited down the road. With Kashoo’s mobile apps for iPhone, iPad and Android, you can snap a quick picture of receipts with your device and store them in the cloud for easy organization.
If you’re working from home, you can work out how much of your space is used exclusively for business purposes. This is a tax deduction. You can also deduct that percentage of utilities that are used for business purposes.
Accounting for freelancers doesn't have to be hard. You just need to stay on top of each and every expense—from pens and paper to internet service to a new computer—so that you're able to maximize your bottom line.
Keep in mind that this blog post or any Kashoo blog post is not intended to be construed as legal, tax or financial advice, and it never hurts to get in touch with a tax or accounting professional with any questions you have about business deductions as a freelancer.
The Importance of Invoicing
Irregular paychecks may come with the territory of freelance writing, but that doesn’t mean you shouldn’t do all you can to ensure you get paid on time and in full by your clients. This means putting in place some good invoicing habits and following up on late invoices as appropriate.
As a writer, you know that clarity is key. Whether you’re penning op-eds or blog posts, the same goes for your invoices. Make sure your client knows exactly what work they’re being billed for, including the agreed-upon payment terms: are you charging per word? Maybe per post or an hourly rate? These details need to be worked out ahead of time to avoid any potential misunderstandings, as well as the payment methods you accept: from PayPal to EFT to a plethora of other payment solutions.
Savvy Money Management
Let’s say you’ve got steady writing work pouring in, your monthly expenses are under control, and you’ve put in place some smart invoicing habits. What happens if one of your writing gigs falls through or you’re faced with an unexpected hike in expenses? While many freelancers don’t have the luxury of leaning on any significant savings during drier months, avoid the temptation of racking up debt from credit cards and loans. Carrying a certain amount of debt is unavoidable (and can even be a positive in terms of building up your business credit history) but you really don’t need the stress of accumulating excessive debt and interest on top of writing deadlines and fluctuations in income.
If you’re relatively new to the freelance writing game and are still working on building up your roster of clients, you may not feel the need to invest in accounting software yet. Don't follow that feeling! There's nothing more agonizing than realizing that your business is taking off but that you have to spend countless hours backtracking to bring your books up to speed. We've said it before and we'll say it again: Get set up with accounting software on Day 1 and you'll always be days ahead of the curve.