Are you new to the world of freelancing? Congratulations! This is a big milestone in your professional career. No matter if you are freelancing part-time or full-time, your life is going to change â€“ for the better, of course.
As a freelancer, you need to get serious about the financial aspect of your endeavor. Many people make the mistake of â€œworking for the fun of itâ€ and hoping that money never gets in the way. Unfortunately, this is not how things work. Not only do you need to set income goals, but you must deal with every dollar that comes into and out of your business.
Early in my freelancing career I made many finance related mistakes. Fortunately, I learned from these errors and have been able to avoid repeating them.
Here are three financial tips for all new freelancers:
1. Hire an experienced accountant. Even if you are only earning a few thousand dollars a year, it is important that you deal with this income accordingly. The last thing you want to do is get in trouble with the IRS.
Note: your freelance business may not stay small forever. When it blows up, you will be glad that you have an experienced, knowledgeable accountant on your side.
2. Religiously track all income and expenses. From day one, this is one area of my business that never faltered. I am obsessed with organization and realized early on just how important it was to track every dollar coming in and going out.
Although there are many software solutions, both free and paid, that can help you track income and expenses, you can setup basic Excel spreadsheets to do the same.
This may not be the most exciting aspect of your freelance career, but it is something that is essential to your long term success.
3. Open a separate bank account for business purposes only. When your business is small it is easy to overlook the importance of this detail. After all, you only have a few checks coming in from time to time. As noted above, this is not going to be the case forever.
When you begin to earn more money you will need a separate bank account. Not only does this help with the tracking of income and expenses (tip #2) but it will help with formalizing (such as an LLC or S-corporation) your operations down the line.
Donâ€™t be intimidated by all these details. Instead, make sure you are well informed and organized from day one.
Final tip: if you face any financial issues, donâ€™t put them off until a later date. Doing so is not going to make them go away. Instead, the situation will get worse and you will be faced with an even bigger problem in the future.