8. Track Your Revenue and Expenses Carefully
Perhaps the number one reason to track your payment activity is to ensure you can properly calculate your taxes.
Whether you freelance as a sole proprietor, LLC, corporation, or some other model, the tax man will come for his portion of your freelance revenue. As
we’ve mentioned before, the method by which you calculate and report taxes vary depending on your business structure. Regardless of your freelance business structure, you can’t calculate, report, and pay your taxes correctly if you don’t track your expenses and payment. If you screw up your taxes, you expose yourself to suspicion from the IRS.
Tracking will also help adjust your planning and structuring. Your freelance work will not be the same next year as it is today. Your client base may grow, or shrink. You may be able to charge more in the future, or maybe you are charging too much today. Your expenses will evolve as your business strategy evolves.
Whether your freelance business is wildly successful, or requires you to make some personal sacrifices to get it up and running, you will inevitably need to adjust your plan and structure to meet both your business and personal goals. But, if you don’t track your expenses, and what you are paying yourself, there’s no effective way to adjust your plans and structure. The best way to plan for your future is to track your current.