A fellow freelancer posted this on Facebook a few weeks ago: “Note to self: Do NOT wait until the last two weeks of the year to enter/organize/categorize all of your expenses for your business. I am an idiot.”
Sorry for outing you, Ms. P., but you brought up a point that a lot of freelancers have to deal with. We’re business owners so, in addition to doing the work we love, we also have to do administrative tasks for which we don’t get paid. This includes paying bills, recording mileage and bookkeeping. Some freelancers avoid these tasks like the plague, while others hire someone to help.
I’ve tried both approaches – ignoring the paperwork until it threatened to take over my office and hiring a bookkeeper to help. I’ve finally settled on an affordable, relatively painless system to handle these annoying but necessary tasks. Here’s how I do it:
1. I have separate bank accounts for business and personal expenses.
2. I make deposits to my business account no more than once a week. This streamlines bookkeeping when it is time to reconcile my account.
3. I pay bills once a month through QuickBooks so all of my business expenses are automatically categorized when I make the entries.
4. Once a week, I record my work-related mileage in an Excel spreadsheet, using my Google calendar as a diary of where I went and why. [Sample entry: 12/23/11, Met with editor at South Sound magazine in Tacoma, 42 miles]
5. Once a week, I record all of my business-related expenses for the week in QuickBooks, and marking the hard copy as “posted” with a stamp and then filing them by month.
6. At the end of each quarter, a bookkeeper reconciles my accounts and double-checks my bookkeeping and estimated tax payments.
7. At the end of the year, my bookkeeper finalizes my accounting and prepares 1099s for subcontractors, when applicable. From there, I can prepare my own tax return or submit them to an accountant for handling.
This system takes me less than two hours a month of my own time and eight or so hours a year for my bookkeeper. If you can’t afford a bookkeeper, you can do those steps yourself. I prefer not to. I’d rather do a little extra work to pay her, freeing up my time to work on things I’m good at while avoiding stuff I’d rather not do.
With a New Year upon us, this is a great time to make changes in your recordkeeping. Try these seven steps to lighten your work load and free your mind for more creative pursuits. Good luck!
Dana Neuts is a freelance writer, editor and marketing professional based in the Seattle area. She serves as the regional director for Region 10 of SPJ and is the chairman of the national SPJ freelance committee. In addition, she is the owner and publisher of iLoveKent.net and iLoveCovington.com, hyperlocal blogs focused on cities in South King County, Washington. For more information about Dana, visit VirtuallyYourz.com.