You got into freelance writing for the writing, no doubt, but there’s a wake-up call that nearly every freelancer faces eventually: You also have to be something of an accountant to keep your business going. Even if you eventually decide that it’s time to bring in the pros and hire an accountant to take care of your books, you will still be on the front lines of financial recordkeeping. For many freelance writers, that is an enormous adjustment.
Although you may be tempted to let keeping financial records take a backseat to other important things, such as finding new clients, pitching pieces, and of course, writing, don’t give in to the temptation. Starting out with a plan for managing your financial records will set you up with a good routine for when your earnings become more complicated. Plus, your financial records offer a treasure trove of information that will help you figure out what is work for you and what isn’t, so you can focus on the right kinds of freelance writing jobs to help you grow your business and reach your earning goals.
If your freelance writing niche isn’t finance, then you might find the idea of doing your bookkeeping a little intimidating, but it doesn’t have to be. These steps will help you solve the mystery of keeping your financial records in order, so you can manage your freelance writing business as efficiently as possible.
Know What Documents to Keep
You can’t keep accurate financial records if you don’t know exactly what you should keep. In a general sense, you need to keep any record or receipt that either shows income for your business or a business expense that you plan to deduct on your taxes. Some examples of things you should keep are:
- Receipts of payments from clients
- Receipts for business travel
- Copies of bills for office overhead costs (internet access, electricity, phones, stationary supplies)
- Receipts for business-related equipment purchases
- Tax documents (1099s from clients, tax filings from at least the past three years)
You should also keep records that detail what you spent on your health insurance, business insurance, and retirement contributions. Business development costs, including continuing education classes and professional membership fees, are also usually tax deductible, so keep your proof of payment for these expenses.
A note about receipts from client payments and 1099s: you can’t always count on a client to provide you with a 1099 when tax time comes. You are responsible for tracking your income, even if the client doesn’t provide you with any kind of documentation. Keep your own records of paid invoices so you can file your taxes accurately.
Develop a System
You’ve got all the documents you want to keep, so what is next? If your first thought was to put them all into a shoebox or dump them into a drawer, go back to the drawing board. You need a clearly defined system of sorting and tracking your financial records that you can reference easily and use to file taxes and make business decisions.
The nature of your system matters less than actually having one. Some people feel comfortable using a spreadsheet to track their income and expenses, while others like to use software, such as QuickBooks or Freshbooks. Other people are old school and love a good paper ledger. Although modern software programs have many advantages, such as the ability to generate invoices directly from the platform, the key is to use a system that works for you. Choose a method that you will stick with, and then stick with it.
Get Help When You Need It
Most freelance writers find that the hardest part of keeping financial records at the start of their careers is getting into the habit of doing it. Once a solid system is in place, they find that their job isn’t too complicated.
However, businesses grow. The demands of your freelance writing career will escalate over time as you build a base of regular clients and continue to increase your portfolio. When this happens, there may be a point where you become the victim of your own success, and taking care of your books for yourself is too complex or too time-consuming. When this happens, don’t spin your wheels. Find an accountant or bookkeeping assistant who can manage this part of your business on your behalf. Doing so will help you avoid tax-time complications and ensure that you continue to grow your income.
Work the Numbers
A large part of financial recordkeeping for freelance writers is staying on the right side of the IRS, but your records aren’t just useful when tax time rolls around. What you have when you create financial records is data—data that you can use to make business decisions.
Look at your books and figure out which kinds of jobs pay you the most, which clients make up a small amount of your income but demand a large amount of your time, and what business expenses are eating into your income. Use this information to choose freelance writing jobs that you want to prioritize and clients that you would be better off cutting from your schedule. Identify business expenses that you can cut or reduce, so you spend can spend your money more efficiently. By carefully examining your books, you can make smart business decisions much faster than if you were just making it up as you go along.
Keeping financial records is just one aspect of building a thriving career as a freelance writer. Finding clients, networking with writers, and managing your pitches and portfolio all come into play as well. With Writers Work, you get the tools you need to take control of your career in a single place. Our community was designed specifically for freelance writers to meet their unique needs, so whether you’re just getting started or are a veteran in the field, you’ll find everything you need at your fingertips here. Explore the resources on our site and contact us to learn more about becoming part of our growing network of talented and supportive freelance writers.