Making the decision to leave the familiarity of the office can be a big step. As an employee, you probably had assurances about your finances, like organised tax payments, a pension scheme and regular pay checks. However, as a freelance home worker, all of the financial pressure suddenly falls on your shoulders.
Not only do you have household bills to consider, now you have business utilities to contend with, too. While freelancing can be an incredibly liberating experience, without the right financial planning you can soon find yourself held back by overdue statements and mounting debt. Knowing how to handle your accounts is paramount to any future success and should be top of any home worker’s to do list.
- Keep Track Of All Your Expenses
Since you’ll be working primarily with your own resources, freelancers are entitled to a considerable amount of tax relief. Anything that is feasibly related to your home business can be considered an expense. For example, if you designate an area of your house to work, the lighting and heating used in this room can be chalked down as recompensable. Usually, you will be able to work out an estimated figure for this expenditure and claim back any tax you pay on it. The same goes for travel or office supplies. As long as you make a note of each expense in real time, you will have the evidence to support the claims you make in your annual tax return.
- Set Time Aside Each Week For Bookkeeping
Bookkeeping is a fundamental part of business. Without it, it becomes incredibly difficult to monitor the activity in your accounts. Along with organised receipts for expenses, you will also need to log and retain any other financial document that holds vital business information. Scheduling time each week to run through your books and ensure all the relevant paperwork is present will help you stay on top. As a freelancer, you never want to discover that your documentation has gone AWOL. Should you be subjected to a government audit, gaps in your books could result in a penalty fine or even accusations of tax evasion.
- Stay On Top Of Your Client Correspondence
While this may seem more like an admin-based task, consistent correspondence can be the difference between being paid on time or not. Clients won’t push you to take their money, which means you need to be the one chasing. Prompt invoicing will mean your customers have fewer excuses for making late payments. By sending reminder emails a week or two in advance, you can ensure that they are fully prepared for payday. An online bookkeeping service can send automated reminders on behalf of your small business, meaning you’ll have one less thing to think about. Maintaining a constant connection with your clients is vital and will give you every chance of staying in the red.
- Separate Your Business And Personal Accounts
When your office sits next to your kitchen, there’s bound to be some overlap in your home and work lives. What’s much more important is that these two entities remain financially separate. If money from your job is being paid into the same account you buy groceries with, then it can become tricky to differentiate between a business transaction and a personal one. It gives you zero margin for error when it comes to bookkeeping, unless you want to spend entire evenings trawling through financial archives to find your mistake. Do yourself a favour and set up two unique accounts once you are earning as a freelancer.
- Work With An Accountant In The Early Stages
Setting out on your business venture alone is admirable, but it can be dangerous if you’re not completely prepared. While many might deem an accountant for freelancers an unnecessary luxury, simple financial guidance could be all your business needs to blossom. Even if you only end up working together for the first few months, the expert advice can be invaluable. As your business picks up speed, a small business accountant will ensure all your books are in order, construct financial projections and generally keep things ticking over. Once you are ready to part ways, you can do so knowing you have a strong base to build from.
