Keeping your books straight as a freelancer is actually really important.
In fact, many freelancers have learned this the hard way.
When you first dive into freelancing, it’s exciting.
It’s a whole new world just waiting to be conquered.
Before you know it, you’re getting some money. You’ve got clients signing up and income coming in, and your pockets are loaded with cash.
Until something goes wrong.
Maybe you get an unexpected tax bill.
Or, you file for some kind of loan, and suddenly realize that you’re going to need to show them every transaction you got paid for going 3 years back.
This may sound like a nightmare—but for many freelancers, at some point, it becomes a reality.
Therefore, it definitely pays to keep the books well–and we’re about to explain why.
Here are 4 advantages of spot-on bookkeeping when you’re a freelancer.
1. Your Taxes Will Be Easier
Taxes are definitely something that you’re going to want to watch out for as a freelancer.
Since nobody is going to be taking your taxes out of your income for you, it’ll be up to you to make sure that you’re pulling enough aside to cover that tax bill next time it comes around.
With that being said—this is super easy to overlook if you don’t keep your books well.
Or, even worse, you may not keep close track of how much you earned in-general—and you may struggle to account for everything once the time comes to file.
It’s super important to track not only your income, but also your expenses as a freelancer.
For this reason, you’ll really be ahead of the game when you nail-down your bookkeeping situation.
2. Loans Won’t Be As Hectic To Apply For
If you try to apply for a loan, you’ll always need to supply financial information.
But here’s the thing.
Lenders like to run freelancers through a few extra hoops, mostly because their income is tougher to verify.
So guess what?
If you haven’t really kept your books straight, and if you haven’t meticulously kept track of how much you’re earning on a consistent, regular basis—that’s going to hurt you when the time comes to apply for any kind of loan.
This can impact your ability to buy a house, finance a vehicle, get a business loan, or really anything else.
3. You’ll Understand Where Your Money Is Going
When operating as a freelancer, it’s super important to understand where all of your money is going.
You’ll want to make sure that you know exactly what all you’re paying for, how much money is coming in, what your expenses are, how much you’re paying yourself, etc.
If you don’t keep track of this stuff, it can all come back to bite you (and it can definitely hurt).
So it’s always a better idea to make sure that you know exactly where your money is going within your freelance business.
So make sure to stay on top of your books!
It’ll save you a ton of trouble in the long run.
4. You’ll Be Better-Equipped To Get Extra Benefits
Whether you’re applying for some kind of SBA loan, wanting to get disability insurance, or are applying for some kind of government assistance—getting extra benefits for your business is going to be a lot easier and more user-friendly if you keep your books straight and do them right.
Anything that’s going to require you to show a record of your income and/or your expenses is going to require clean books before they’re going to ‘give you the goods.’
And as a freelancer, unfortunately this is all going to fall onto your shoulders.
If you struggle with this, you may want to consider hiring a professional CPA to help.
But still—the responsibility for it is going to fall to you.
And it’s vitally important that you take it seriously.
You have the potential to inherit a serious headache if you don’t.
Hopefully, this post has helped you to understand some of the advantages of clean bookkeeping when you’re a freelancer.
But this article has really only scratched the surface.
There are many more reasons for why this is important.
So rest assured—balancing the books every month is definitely an activity that you should be taking seriously.
You’ve got this!