Via Lifehacker, I found this excellent blog post on Freelance Switch with accounting tips for freelancers. Many of my small business clients also do consulting or writing which is an additional stream of income so they are freelancers as well.
1. Set up a billing system. I personally use Blinksale to bill some of my clients. If you only send three invoices/month then it is free. Also, the invoice can have a link to your Paypal account.
2. Know who owes you money. I bill people usually every time I work or work on a monthly retainer. I also maintain a Google Document (FREE) with clients and the date of the last service, so that I can check if they are ready for a monthly bookkeeping check-up. Consider me to be like a mechanic for bookkeeping. 🙂 Besides, clients are also maintained on Blinksale.
3. Track Expenses Carefully. A fine tooth comb is not necessary if you set up an easy system. First, be proactive and minimize receipts by using debit card for your business expenses, then they will already be captured on your bank statement. Otherwise. I suggest collecting cash receipts monthly in an envelope or even put in the back pocket of a moleskin notebook. Then when a free moment, scan the receipts and enter them into the bookkeeping system you are using. You can use Spending Diary to track your spending. This can be great if you are doing cash purchases and also if you are getting reimbursed.
4. Keep ’em separated. How many times must I SHOUT from the rooftops that you should maintain a business and personal account separately. It’s necessary to keep from commingling funds, figure out deductible expenses and it’s a good way to budget yourself.
5. Find a good accountant. Someone who gets you. I am an accountant, but I am not a CPA. Some people are looking for a CPA to do their taxes. I am more of a coach who preps you for the CPA. Ask friends who freelance like you to refer a CPA. If you get organized and follow the advice of tips 1-4, then you may be OK with getting Turbo Tax and doing it yourself. If all this money stuff scares you the living daylights out of you, then contact me.