Most freelancers wear all (or most of) the hats in their business. Even freelancers pulling in high revenues don’t want to spend significant sums on other professionals to handle these administrative aspects. Consequently, freelancers do plenty aside from their billable work: marketing themselves, continuously upgrading their skills, keeping their books, and filing taxes.
Those latter two especially are most freelancers’ least favorite tasks. Doing your bookkeeping and taxes properly takes time and isn’t fun (unless you’re an accountant). Fortunately, freelancers can take advantage of a plethora of accounting software solutions. Keep reading to learn several ways in which you can improve your own freelance business by investing in accounting software.
1. Saves Time and Money on Taxes
First and foremost for many freelancers — software cuts down on the time it takes to do your taxes, but it also saves you money. You can categorize items as business or personal spending and generate reports, helping you claim more in deductions. You can also generate reports to make sure you did the math correctly on your tax return. Quickbooks is an excellent example of a solution that saves time on taxes. In fact, it offers a self-employed plan specifically for sole proprietors.
This plan helps you identify all sorts of deductions, even less common ones you might miss. You can classify these as business expenses with the click of a button. Quickbooks also lets you import all your bookkeeping data to TurboTax (since Intuit owns both), accelerating the business income/expenses portion of your taxes. In fact, the Quickbooks Self-Employed/TurboTax bundle gives you both programs for a bundle discount.
2. You Can Send Professional Invoices From Anywhere
Getting paid is perhaps the most critical portion of your business. You should make it as easy as humanly possible for your clients to send you money. Accounting software solutions offer customizable invoices that take just seconds to generate and send. Some, like Freshbooks, are designed with freelancers in mind. Others, like Vcita, give clients an intuitive client portal where they can view and pay bills with ease, as well as ensure you’re billing them correctly. All of this can be done from anywhere you can access the Internet if you use cloud accounting software, too. That way, you can keep tabs on your client payments and cash flows.
3. Helps You Cut Expenses
Freelancers don’t often have as many business expenses (nor as complicated of expenses), but you should still seek ways to keep costs low to create more profits. Your accounting software offers a place to store all your spending data. But cloud accounting software makes it easy to update spending from anywhere.
You can link your business bank accounts and credit cards to cover most of your expenses. If you have any one-off expenses that software can’t automatically sync for some reason, some accounting applications let you snap a photo of your receipt. This enables you to save documentation and log the expense with ease. Then, using reporting features, you can sift through your expenses and find areas you can cut. For example, maybe you forgot you subscribed to business software you no longer need. Your accounting software helps you find that bill and unsubscribe.
4. Helps You Boost Your Revenues
Some cloud accounting software programs make it easy to sift through your clients and see which ones are the most profitable and provide the highest ROI. Weigh these against any time tracking features or integrations, and you can identify which clients get you the most money for your billable hours. With this information, you know which clients to drop, which types of clients to pursue maximum ROI.
5. Assists With Business Planning
Building off the last two benefits, accounting software helps you plan the short-term and long-term moves you’ll make next in your business. For example, imagine you want to hire a business coach to take your freelance career to the next level. Business coaches are expensive, though. You need to earn enough revenue to justify spending thousands per month on personalized coaching.
Using your accounting software, you can evaluate trends in your revenues. You can then set a monthly revenue goal at which you’ll invest in business coaching — then create a plan for achieving those revenues. Another example that harkens back to the first benefit: perhaps you want to do some tax planning to cut next year’s tax bill.
Perhaps, in this scenario, you need to keep your profits below a certain amount to qualify for certain deductions or credits. With accounting software, you can see where you stand revenue-wise, then determine if you should invest in your business (therefore generating tax-deductible business expenses) or saving more in a pretax retirement account to reduce your profits.
6. Makes Your Accountant’s Life Easier
Some freelancers opt to work with accountants for bookkeeping, tax, and some finance-related legal issues. Having everything accessible in one place — your software application — makes them happier to work with you. They can get work done for you faster. This inadvertently saves you more money because your accountant doesn’t have to bill you for as much time.
Many accountants and bookkeepers will even ask their clients (aka you) to switch to a cloud accounting solution at some point. If they know your business well, they could make a reliable recommendation for which product to invest in.
Streamline the Tedious Accounting Tasks With Software
Like with any business investment, the fee you pay for accounting software pays off through overall increased business efficiencies. You save time and money while finding ways to earn more revenue. No accounting software is the best, though. To get the most out of yours, you’ll need to spend some time doing research and perhaps signing up for a couple of free trials. The time investment is worth it in the end.