Being a freelancer can be a very rewarding career. You are in control, plus you get to do what you enjoy doing and what you do best. You can’t just do this, though, as being a freelancer means you essentially run a business. In most cases, that will be a business as a sole trader. This means you must think about other things, including accounting.
Our 12 accounting tips for freelancers will help get you started.
- Register for income tax with the Revenue – when you first become a freelancer, you must register with the Revenue. The process for doing so is quick and easy.
- Keep separate business and personal bank accounts – things can get very messy if you mix up your business and personal finances. One of the best ways to avoid this is to keep separate bank accounts – one for your personal finances and one for your business finances.
- Start bookkeeping immediately – don’t put off your bookkeeping or accounting tasks until a later date. In fact, you should start bookkeeping as soon as you start working as a freelancer. This will save you time and money in the future.
- Set time aside regularly for accounting – following on from the last point, make sure you regularly update your accounts. This makes your accounts more accurate which, in turn, will make your tax return more accurate, ensuring you pay the right amount of tax. Also, the fastest way to do your accounts is to do them regularly.
- Use accounting software – accounting software speeds up the whole process, from keeping track of payments, to invoicing, to completing your tax return. Premium services are usually the best. One tailored to freelancers/self-employed is usually the best option.
- Know the deadline dates for tax – the big one is 31 October. This is the date you must submit your completed tax return for the previous year and pay any outstanding tax.
- Save for tax – following on from the last point, don’t wait until the 31 October deadline approaches to start thinking about where you will get the money to pay your tax bill. Instead, you should save throughout the year, so you have the money available.
- Record the right information – this includes hours worked per client, jobs completed per client, expenses, payments made, and payments received.
- Get your credit control policy right – getting paid can be one of the most challenging aspects of being a freelancer, particularly getting paid on time. It is worthwhile, therefore, setting up careful credit control policies as soon as possible. Do you require part payment upfront, for example, and are invoices due on receipt? Make it as easy as possible for your clients to pay you plus follow up with overdue invoices quickly.
- Forecast cash flow – cash flow is another challenge many freelancers face, particularly in the early years. Creating cash flow forecasts can help you plan.
- Plan for slow periods – following on from the last point, you will have slow periods during the year. This could be because of cycles in your industry, when you are on holiday, or for other reasons. You should have a plan to ensure you have enough income to cover you during these periods.
- Get professional assistance – finally, getting an accountant will help you with all the above. This investment will save you time as well as money.
We can provide all the advice and accounting assistance you need as a freelancer. Please contact Gilroy Gannon today.