Way back in March I started using FreshBooks as my bookkeeping tool of choice. This was the last time (hopefully for a while) that I changed my method of bookkeeping. Since high school I knew I wanted to keep my books and general accounting organized but when I was new to the game I wasn’t quite sure how. I did what made sense to me and used Excel. This actually went on for quite a while- well into college- because it worked for me, I wasn’t making that much money so I didn’t have a whole lot to keep track of, and it wasn’t costing me money. Then I switched because I wanted something more sophisticated- it was more of a need based thing. Whatever it is you’re looking for, really think about it so you’re not switching software or processes when it’s least convenient- information can get lost and you don’t want to have it in several places as opposed to one. Whatever you choose, it needs to work for you.

There are several different methods you could use for bookkeeping; the one I’ve most commonly heard of is the “shoebox method.” This entails keeping all receipts and invoices in a shoebox for your accountant to review every so-often, and I wouldn’t recommend it. For one, you’d have to regularly pay an accountant. Secondly, you don’t get a good idea of  how you’re doing income and expense wise. Finally, it can’t be fun for your accountant. I would recommend finding a good computer based tool and setting a specific time every few days to take care of your books.

A couple of things you should know: Most of my expenses are from web based companies which means I get emailed invoices, and I use Freshbooks for invoicing and expense tracking. Whenever I get an invoice emailed to me, I apply the label ‘Expenses’ to it in GMail and archive it. Same when I get an email stating I’ve been paid- I apply the label ‘Income’ and file it away. Any print receipts get put in a folder along with any outstanding invoices I’ve sent to review later. Once a week I will go into Freshbooks and review my payments (any online payments made from a Freshbooks generated invoice automatically get marked as paid) and input any invoices paid by check or otherwise. Then I will review my ‘Expenses’ and ‘Income’ labels, and input accordingly. Last is the print receipts. It’s worth noting that I don’t unlabel anything once it’s in my books, just incase I need to find it quickly down the road.

But this is just my system- it may not work for you. I use GMail and the internet for just about everything, so this is most convenient. Plus, Freshbooks is well worth the $14/mo for the time it saves me. Also, I’m not saying you don’t need an accountant. At the end of my fiscal year, I hand over the reports to my accountant so he can review them and ask questions as needed. I’ll also go to him a few times a  year for advice on my bookkeeping, what I can write off, and how I should handle taxes, etc. The system is just to make everyone’s lives easier and keep you organized. The bookkeeping aspect is one of the most important parts of freelancing and it needs to be done right.

Tags: accounting, freshbooks, invoicing, productivity, tips, tools | Posted in Advice |