As you take your first steps into the freelance world, it will soon dawn on you that from now on, you’re not only an editor, but also a CEO, marketer, secretary and accountant. Undoubtedly, the most dreaded tasks for many freelancer editors are managing finances and filing taxes. After all, you became self-employed to use your love for words, not to despair about numbers and tax filings.
It doesn’t have to be all that complicated though. If you develop a system to keep track of your finances from the start and find tools that work for you, you’ll save valuable time that you can spend on tasks you actually enjoy doing.
Here are some tips to help you stay organized:
1. Keep track of your projects
As a freelancer, your earnings vary widely and are subject to fluctuations in your industry. While you might earn €20 one day (and perhaps second-guess your life choices), you might get a big project the next day that earns you €200. Knowing that this is the nature of being a freelancer, it is essential to manage your (financial) expectations and keep a record of your projects.
Starting off, you might want to ask yourself how much you’re expecting to earn from your freelance career. Taking the expected hourly rate into account, you can then estimate how many hours you will have to invest to get there. By asking other freelancers in your industry or your clients, you can easily find out how your income might fluctuate throughout the year and in which months you might want to save for a rainy day.
Whether you are a fan of the good old notebook or you prefer the digital way, keeping track of your projects will help you know where you stand financially — particularly as a freelance beginner. The app Cushion, specifically designed to help freelancers plan their projects, might help you with this task.
2. Organize your invoices and receipts
Now that you’re responsible for creating invoices and making sure your clients pay you on time, losing track of your bookkeeping can easily result in losing money. Like many customers that work regularly with freelancers, Scribbr takes care of the invoicing process (self-billing), saving our freelancers a lot of time. However, not all clients offer this luxury, and in these cases, an invoicing tool might be helpful.
Another thing to keep in mind if you don’t want to lose any bucks is to learn which expenses you can deduct from your taxes and to organize any relevant receipts. Finding a course on taxation for freelancers in your city or online could give you an overview of the rules for tax deductions in your country — and you might even be able to deduct this course from your taxes! ;) To avoid an indecipherable clutter of receipts in your wallet, you can simply upload photos of your receipts to Google Drive or use an app like Gekko.
With multiple sources of income and regular business expenses, I highly recommend opening a new bank account and keeping the expenses for your niece’s birthday present separate from your coworking subscription.
3. Set aside a percentage of your earnings
As a freelancer, you usually declare your income annually and are required to fulfill your duty as a lawful citizen and pay taxes. To avoid an unpleasant surprise — and the realization that you haven’t saved enough to pay this bill, you might want to set aside a percentage of your earning each month. Unless you took out a reliable social insurance, this is also a good strategy to account for sick days.
Usually, accountants recommend setting aside around 30% of your earnings. Speaking of which…
4. Hire a good accountant
Consider appointing an accountant to help you with your finances. A good accountant will save you a lot of time and allow you to focus on making progress in your career, so you can invest your time in activities that make a real impact. Even if hiring an accountant long-term might not be in your budget, as a starting freelancer, it can be useful to schedule a one-hour meeting to ask your questions about what’s expected of you as a freelancer and how to get started.
At Scribbr, we support our team of 600+ freelancers with invoicing, tax support and bi-monthly paydays. Would you like to be part of the Scribbr editor community? Test your language knowledge by taking our quiz, and apply to be an English, German, Dutch or French editor.