What are the best bookkeeping tips for self-employed individuals?
- Keep logs of your income & expenses.
- Hold on to all financial documents.
- Separate professional and personal assets.
- Educate yourself in finance and taxation.
- Make use of available tools available to simplify the process.
One of the biggest walls that self-employed individuals often run into is handling their finances. It’s more than just filing and paying their taxes – because those in the Philippines can use an online tax calculator for that – but the entirety of managing their money.
Handling your own finances is one of the many responsibilities that come with being self-employed and also one that not many are ready for. It is not a skill that can be learned overnight, which makes it even harder to develop. It takes weeks, months, and maybe even years to be able to do it properly.
However, if you have enough drive and determination, then you’ll be able to learn how to do it in the nick of time. We’ve even left some bookkeeping tips for the self-employed and all you have to do is to scroll down:
Keep Logs of Your Income & Expenses
One of the best ways to stay on top of your financial situation is to keep detailed logs of your income and expenses. Sure, online and mobile banking has given us the ability to check our balance at any moment, but do not be satisfied with this. Although you know how much you have, it doesn’t exactly tell you when and where your money is coming and going.
Having actual logs of your expenses will allow you to check your spending habits and adjust accordingly. It will also make budgeting easier since you’ll be able to see where you can cut down costs. Plus, this is another great way to keep track of your cash inflow vs. outflow. And that’s how you’ll know if you are making profit or not with your business.
Hold on to All Financial Documents
On the off chance that you or your business gets audited or investigated, you are going to be asked to present several documents like invoices and bank statements. If you can’t provide any, then you’ll be put under a bad and may get into some trouble.
Besides this fact, financial documents can also help lessen your tax. If you provide proof that a purchase or transaction was made for the purpose of your business, then you can immediately deduct it from your total tax due.
Moreover, it makes tracking your expenses a lot easier if you hold on to the documents. But don’t just chuck them in your desk drawer. File your receipts, statements, and other documents in chronological order so you can easily access them at any time.
Separate Professional and Personal Assets
It’s hard to separate your professional and personal assets when you’re working for yourself. The line between the two is often blurred since work is so heavily integrated into your daily life. However, you need to make an effort to clear the line between them and you can do this by opening up separate accounts for your business transactions.
There are many benefits that come with doing this–one of which is that it allows you to see just exactly how much money is tied up in your business. It also prevents you from getting into financial trouble because budgeting and costing are made simpler. By the end of every year, you’ll find it easier to track your business activity because your personal expenses have already been separated from the ones made for your business.
Educate Yourself in Finance and Taxation
Knowledge and information is the best thing to have when it comes to managing your finances, especially for self-employed individuals who are aiming to build their brand. You’ll be surprised at how quickly freelancers and start-up businesses lose their money because of lack of knowledge on the matter.
This doesn’t mean, however, that you have to get some type of formal education on finance and taxation. There’re lots to learn when it comes to bookkeeping like effective and plausible ways on how to cut back, save, and make money, and you can learn all of them through online resources or by asking the right people.
Make Use of Technology to Simplify the Bookkeeping Process
For many of us, as much as we’d like to diligently keep our books, we may not have the time to do it ourselves, nor the budget to hire a bookkeeper for us. This is where technology comes in. There are online apps you could use such as Taxumo, that allows freelancers and SMEs to simplify the bookkeeping process, by auto-generating journal entries, which you can download, paste/transfer to your Manual Books of Accounts.
It’s hard to be self-employed and manage all your finances and taxes on top of your workload. Thankfully, those in the Philippines can use an online tax calculator to lessen the difficulty of filing and computing taxes, but what about the rest of the money stuff? How do you make bookkeeping easier?
Well, it starts by developing the right habits and obtaining the right information. If you just follow the tips listed above, you’ll be able to properly handle your finances like the true boss that you are!