How badly do you hate accounting?
Yeah, me too. We certainly can’t avoid it. But, we can automate it with some really slick and easy-to-use accounting tools. Let’s take a look so you can spend less time battling those numbers.
A few weeks ago, we discussed the importance of streamlining your business with systems, software and automation. Today we are going to take a look at how to automate, quite possibly, your least favorite part of freelancing… Accounting and invoicing.
Far too many freelancers poorly maintain their finances, probably because it’s so frustrating to do. Many freelancers can’t stand numbers at all. They may not understand bookkeeping, or aren’t familiar with the terms, and consider managing clean books a serious headache.
Even the smallest of the small freelance businesses needs to have properly maintained books for future financial success. If you really want to grow, it’s even more important. One mistake can come back to haunt you years later, and could potentially require hours of expert help to unravel a financial mess.
Money is the lifeblood that keeps your business alive, and accounting is what keeps it organized. It’s how you can determine if you’re making money, see the areas in which you’re losing it, examine where money is being spent, and how to save etc…
If you’re going to pay attention to any area, accounting is the most important to ensure your success.
Our Recommendation for Easy Accounting Tools
Our strongest recommendation is that you buy accounting software or use a web-based accounting system that helps you avoid having to calculate anything at all. These systems, like QuickBooks, Freshbooks and IAC-EZ, let you quickly and easily enter basic data, and then provide you with all sorts of reports. From there, you can decide to monitor your business financials on your own or you can take the printed reports to your accountant.
Another good reason to automate bookkeeping? It’s easy to do! These tools are now so simple to use that anyone can enter the data without having any accounting skills at all. Collect all your receipts and hand them over to your bookkeeper or a Virtual Assistant to enter the information. If you want to enter data yourself, that’s fine too, because it isn’t difficult.
Some freelancers use online invoicing systems like Ronin or Zoho Invoices, but remember that these systems aren’t enough to cover all of your accounting needs. There is much more to bookkeeping than just invoicing and collecting. You need to monitor business expenses, like printer ink and membership fees. You’ll need to see if you’re earning a profit or coming up short. Remember taxes as well, you’ll want to keep good records and maintain organized financials to make tax-time easier on yourself.
Invoicing systems can help you reduce additional bookkeeping tasks, and they work nicely in conjunction with accounting software to heighten accuracy and speed up processes as well.
Let’s look at a two a tale of two freelancers. Which one resembles your current system?
Situation A: No Accounting Tools or Billing System
Jordan just got a new client project and can’t wait to get home to start the process. As soon as he’s back, he fires up Microsoft Word and creates a quick invoice. When he’s done with the invoice, he sends it over to his new customer.
His new customer receives the invoice and sends a check back over to Jordan, who then deposits it at the bank and sends a receipt to his customer (which he created manually in Word).
After sending the receipt, Jordan opens up Microsoft Excel and enters the payment and customer name to keep for his records. He’ll use this to calculate taxes later on.
Finally, long after the project is complete, Jordan opens up all of his Excel records and manually calculates the information he needs for his taxes. He puts all of that together and sends it to his accountant.
The previous example is a common situation for many responsible freelancers. Jordan was even using some basic systems, but overall there is a lot of wasted time. Let’s take a look at someone using a more ideal setup.
Situation B: Accounting Tools and Billing System
Cara just got a new client project and can’t wait to get home to start the process. As soon as she’s back, she fires up Freshbooks and enters the project costs and the client’s contact information.
Freshbooks automatically emails an invoice to the client and provides several payment options. When Cara’s client sends payment, the system automatically sends a thank you email with a receipt. Freshbooks also provides a website where the client can view their past invoices, payments, and receipts.
Freshbooks, which now includes accounting tools, allows Cara to track her expenses and manage invoices all in one system. This means she can easily send all of her information to her accountant at the end of the year.
This second example shows how much time you can save by implementing a few easy systems. The easy accounting tools we mentioned in Cara’s system is only one possible combination out of hundreds. Depending on your clients and your methods, you can choose something that works best for you.
What are your favorite tools for invoicing and accounting? Share in the comments below.