Freelance work comes with tons of perks. Freelance workers get to set their own hours and be their own bosses. Some freelance workers get to work from home. Often, freelancers get to choose a specialty where they have passion and competency.
Unless freelancers’ specialties happen to be accounting, they’re likely to be in the dark when they’re left to manage their taxes or evaluate the strength of their independent businesses.
Basic Accounting Needs for Freelancers
Freelance workers should be able to identify business expenses and personal expenses. They need to know what they can deduct from their taxes – and how to pay their taxes. They also need to keep records and track their progress.
Prepared freelancers how to create and fill out important financial documents and forms. They have separate business bank account and know how to properly utilise and track business credit cards.
Established freelancers also have to manage clients, which includes tracking invoices and expenses as they occur. This can be especially challenging for newbies, because the act of being self-employed doesn’t necessarily mean that every business expense suddenly becomes deductible.
Cloud-Based Accounting on the Go
The rise of cloud-based computing is exciting news for most freelancers who work on the go or from multiple locations. With a little discipline and the right accounting software, most freelancers can put accounting on autopilot.
Good cloud-based accounting software will automatically generate important forms and reminders, sync with bank accounts, save client information and provide reminders to perform important tasks. A freelancer in Canada is running a business, and freelancers always need to be aware of their legal obligations as business owners.
Another substantial benefit advantage to using professional accounting software (as opposed to tracking everything solo) is the customer support and expert help. Most freelance workers are unlikely to have the time or inclination to familiarize themselves with every rule for self-employed workers as expressed by the Canada Revenue Agency. That would take a lot of time and would probably be very frustrating for non-accountants to parse through.
Evaluate Accounting Trade-Offs
Freelancers face lots of opportunity costs. For example, should you spend an extra hour sourcing new clients for your business, or should you spend that time working on existing projects for your current clients? Is it really worth the time and money to pick up new skills that might enhance what you can offer to clients, or should you go through continuing education? If you raise your rates, how many of your current and potential clients are you going to chase away?
Accounting decisions are no different. How much is good accounting software worth to your business? How much time should you have to dedicate to keeping track of your financial data? If an accounting software could simplify your accounting needs and deliver you peace of mind, how much is that worth?