Must-Have Tools to Keep Self-Employed Finances in Order

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Aug 10, 2020
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It can be difficult to manage your finances when you're self-employed. These tools make it easier to keep your finances in order.

As a freelancer, your accounting responsibilities surpass those of a standard full-time worker. You're not just someone who works day in, day out to find new projects, complete them on time, and get paid for all that you've done. You're also a one-person business and, like a business, you need to keep track of all your revenues and expenses. This means that you need to organize your personal and business expenses while keeping them separate – and that's not always an easy feat.

To streamline the many tasks involved with keeping your self-employed finances in order, you can rely on a variety of tools that have proven invaluable for freelancers and independent contractors time after time. Below, find some must-have tools that can help you maximize your tax deductions, organize your personal and business expenses, and automatically track your miles when you're traveling for business.

Separate personal and business bank accounts

When you spend non-business money using the same bank account where your business earnings are deposited, you can quickly find yourself struggling to untangle your personal spending from your business expenses. Come tax time, you'll find it hard to maximize your tax deductions if you don't have an obvious way to organize your personal and business expenses. Open separate business and personal bank accounts to streamline this process.

When you set up your business bank account, make sure that all your clients' payments are deposited in that account. You may also do well to give yourself a "salary" – namely, an amount of money you transfer from your business account to your personal account on a predetermined regular schedule. You should keep approximately 25% of your revenue in your business account for paying taxes.

Separate business credit cards

Sometimes, you'll want to delay paying for business costs. That's where credit cards come in. If you need a new laptop for your business, but you worry that you'll struggle to afford it until you're paid for your most recent batch of projects, you can use your credit card to make the purchase now but pay for it later.

When paying off your business credit card, be sure to do so from your business bank account instead of your personal one. This way, you ensure that you properly organize your personal and business expenses. Be sure to keep copies, whether electronically or physically, of all your business credit card statements so you can itemize your spending and maximize your tax deductions.

Expense tracking software

If the prospect of tracking all your credit card spending through statements seems daunting, expense tracking software can take this burden off your hands. You can link your expense tracking platform to your business credit card and banking account so that all your individual transactions are logged, dated and timed for full verification.

You can use expense tracking software to manually sort your transactions into categories or remove any transactions you don't plan to include on your tax return (such as transfers from your business bank account to your personal one). You can also tag, label and categorize transactions, and these organizational tactics may prove useful for arranging your finances come tax time. If your clients have offered to cover some of your business-related expenses so you can more effectively complete your work, you can also use your expense tracking software to send them expense reports and ensure they cover all the agreed-upon costs.

Budgeting software

Even if you organize your personal and business expenses and carefully track all your revenue and spending, you'll need to do more work to establish a monthly budget and stick to it. Budgeting software can take all your financial information and help you use it to build a budget. It can alert you when you're overspending and in turn cause you to develop smarter business spending habits or realize you need more clients – or better pay rates – to keep your finances stable.

Alternatively, if you're already operating on a budget, then you can enter your predetermined budget limits in your budgeting software to take all the manual work out of staying the course. Instead of checking a spreadsheet all the time, you can count on your budgeting software to alert you when your spending is about to cross the line.

Invoicing services

Even if you've come up with a trusted invoice template and remember to regularly file invoices with your clients, an invoicing service can reduce human error and keep better tabs on your clients. If you notice a client is overdue on a payment, you can use an invoice service to easily flag that invoice and follow up with the client later. Some platforms can even automatically contact and remind the client about their overdue payment on your behalf.

Accounting software

Accounting software combines budgeting and expense tracking software, but it does even more than that. Accounting software ensures tax compliance and calculates your quarterly estimated taxes while helping you to maximize your tax deductions.

Some especially modern accounting software platforms can go even further for you. These tools can take full control of your invoicing, enable you to send invoices on the go and follow up with clients who are late on payments. They can also tag and sort expenses in the same way expense tracking software does. In some cases, they can automatically track your miles when you travel for business, allowing you to estimate how much you spend on travel costs such as gas when you're on the job.

The tool that combines all these must-haves into one

If you need expense tracking, budgeting, invoicing and accounting capabilities all in the same tool, QuickBooks Self-Employed can provide you with just what you need. QuickBooks Self-Employed automates all the processes these tools address while finding its users, on average, $4,268 in tax savings per year.

When you use QuickBooks Self-Employed to keep your freelancing finances in order, you choose a platform that quickly separates your business and personal expenses. You can download the app on your phone and give it location access to track your miles as you travel, a feature that can introduce you to as much as 45% more in tax deductions. While you travel, you can send invoices and overdue notifications from the app on the go.

No matter where you use QuickBooks Self-Employed, you'll maximize your tax deductions and have your quarterly estimated taxes automatically calculated for you without thinking twice. And if you use TurboTax to file your taxes, you can claim a discounted package deal on both services to seamlessly pay your quarterly taxes online.

If you're looking to maximize your tax deductions while minimizing your bookkeeping tasks, QuickBooks Self-Employed is currently offering new users a 50% discount on their first three months. 

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