November 22 2019 - If you're one of those people that relies on pithy sayings to travel through life, you might have encountered some favorites. Of these, many people cite "close only counts in horseshoes and hand-grenades" and "nothing is certain except for death and taxes" are favorite go-to nuggets of wisdom.
As Mark Twain will let you know, confusing and intermingling these quotes works poorly. When it comes to self-employed bookkeeping, close will not be good enough. You need a system that is accurate for yourself and the taxman.
Now, unless news of your death gets misreported as well, the bookkeeping methods you chose need to also stand the test of time. A thorough bookkeeping regiment that takes too much time or space makes keeping document around for the recommended timeframe difficult.
This guide will walk you through a good method of gathering, and storing, documents.
Self-Employed Bookkeeping To-Dos
The key to doing your own bookkeeping is to understand the purpose behind it. It's not like you need to put in more work to keep track of the money you are spending so much effort earning. How much you are owed, how much you've spent, and how much you need to make all occupy a solid chunk of brain-space.
Fun fact: bookkeeping for freelancers and self-employed types of all stripes eliminates some of that stress.
The goal is to externalize those three hows so you can focus on your actual work.
Pick a System
Books can be kept by hand in a ledger or spreadsheet, digitally through a program, or a mixture of the two.
You can opt to record every transaction or only record the funds that arrive.
Each option works but takes different levels of concentration and time. Pick the one that helps you learn how to keep track of expenses over income.
Automate What You Can
One reason to automate (digital bookkeeping specializes in this) is to save yourself the trouble on the math. Calculating what potential sales tax, transactional taxes, or which state or jurisdiction you are paying those taxes to is far better handled by software.
When affordable, outsourcing to a bookkeeper nets you what you pay for it.
The most important benefit of bookkeeping is the records it creates. Proving you have made any money as a self-employed worker isn't easy. Many of the documents needed to apply for loans, financial aid, or other financial products requires records.
Invoices need approval to count. A bank statement also helps. The best way to show proof of income is with paystubs.
Since you don't formally pay yourself, using a site like paystubcreator.net gets you the documentation you need to make applications easy.
Copies and Redundancies
It's easy to copy and store digital files. For hard copies, make certain you invest in a fire-proof locking cabinet or safe for your most vital documents.
If you pay a bookkeeper, make certain you get copies of any documents they create as well.
When you do self-employed bookkeeping is only one of your extra jobs. You're also your own driver, personal assistant, IT staff, and director of human resources.
Check back with us to learn more about how to maintain and run your business effectively without so much strife between you and yourself.