As a freelancer, you're likely wearing multiple hats — you're the boss, the employee, the marketer, and yes, the accountant. Keeping track of your business's financial health is vital. This is where effective accounting tools for freelancers come in.
To streamline your financial management, it's crucial to invest in software with features tailored to meet your specific needs. Today, we'll explore the key features you should look for in your accounting software. Or, you can try out Moxie today and see for yourself.
Expense tracking is the backbone of financial management. In its most basic form, it involves recording all your outgoing payments — everything from your Canvas subscription to the costs of running your website. However, when considering accounting software, the expense tracking feature needs to be more comprehensive.
A common but needed feature is the ability to attach receipts or other relevant documentation so that everything is in one convenient place when tax season rolls around. This is especially important for freelancers as you are on the hook for your own finances, especially your taxes.
As a freelancer, you are responsible for both your own business operating expenses and 100 percent of your taxes (unlike W-2 employees in the U.S. who only pay 50%), plus all of your own bookkeeping and tax prep too. That can be a tall order for freelancers and solopreneurs who don't have an accounting background.
Detailed record-keeping will give you a comprehensive understanding of your business costs, and regular reviews of your tracked expenses can help you identify trends and opportunities for savings. The side benefit of well-maintained records is less stress at tax time, lower tax liability, and fewer headaches if you were ever to get audited.
As a freelancer, vendor-related expenses are an integral part of your business operations. These can include subscriptions for project management tools, design software, or fees for online platforms where you offer your services. As such expenses are usually recurrent, they can add up quickly and impact your bottom line.
Reliable accounting software should help you effectively manage these costs. Software like Moxie allows you to record, categorize, and track vendor expenses, and factor them into your monthly financial reports.
This ensures you have an accurate picture of your business's financial health, helping you make informed decisions about maintaining, increasing, and reducing certain expenses, or even just adjusting your rates to compensate for higher operating costs.
Invoicing is not just about getting paid; it's about professionalism, efficiency, and financial visibility. Your chosen accounting software should simplify the invoicing process, offering simple invoice templates that reflect your brand. It should allow you to quickly generate invoices, send them to clients, track their status, and send reminders for overdue payments.
Additionally, a clear view of your incoming funds is needed, not only for your well-being but for your planning as well. Your software should provide an overview of your income streams, ideally breaking them down by clients or projects.
This feature helps you understand where your income comes from, enabling you to identify your most profitable clients or projects. This is especially helpful when looking to specialize your work or adjust your rates.
When it comes to understanding your business's financial health, it's important to see the bigger picture. That's where a Profit and Loss (P&L) report comes in. This comprehensive document compares your income to your expenses, showing your net profit or loss over a specific period. It's not just a summary of your finances — it's a narrative of your business's performance.
“I love accounting!” said no freelancer ever. And unsurprisingly, 40% of businesses say bookkeeping is the worst part of having a business. However, robust accounting software should make this a less tedious task.
A detailed P&L report should break down your income and expenses by category, enabling you to see at a glance what's bringing in money and what's costing you the most. This way, you can identify areas for improvement and strategies that are not working out so well. For example, you can compile your expenses and analyze which can be written off as business expenses. Or you can do an in-depth analyses of which advertising streams are most profitable and cut or roll back those that do not yield as much results.
An ideal P&L report should allow you to analyze trends over time. This could mean examining how your income or expenses have changed from month to month or comparing your current financial performance to previous years. For example, summer is often a bit slower for freelancers, and so is late November/early December. If you notice a pattern like that, then you can better plan for slower months by ramping up marketing weeks or months in advance.
This kind of longitudinal analysis can help you spot patterns, predict future trends, and make strategic decisions for the growth of your freelance business. Visit some of our Workshops to learn more, especially when it comes to taxes.
In the digital age, freelancers use a wide variety of tools and platforms to manage their businesses. From project management software like Trello or Asana, to payment platforms like PayPal or Stripe, these tools help streamline your operations. Therefore, it's critical that your accounting software can integrate with these third-party platforms seamlessly.
Third-party compatibility adds versatility to your accounting software. It allows for automatic data import and export between platforms, which can save you time and reduce the risk of errors from manual data entry. For instance, integrating with a platform like PayPal would mean all your payment transactions are automatically reflected in your accounting software.
In addition, software that is compatible with popular bookkeeping tools like Xero and Quickbooks adds flexibility. This means you can easily transfer financial data if you change your accounting systems or need to share information with an accountant or financial advisor.
Enter Moxie, the freelancing accounting and planning software that brings together these essential features into one user-friendly platform to make it all a little easier. By unifying the necessary accounting tools, Moxie makes financial management for freelancers smoother and more efficient, if not all-encompassing.
To sum up, the key features to look for in accounting software are:
Freelancing is rewarding, but it also brings unique financial management challenges. Choosing the right accounting tools can make this aspect of your business much more manageable, freeing up more of your time to do the work you love.
Likewise, it's often not a bad idea to reach out to a bookkeeper or tax specialist. Just as you do what you do best, they can do what they do best, giving you more time to focus on your own projects.
Trust Moxie to support you every step of the way, ensuring that your financial future is as bright as your freelance career. Contact us today!