6 tips for bookkeeping as a starting freelancer

The annual income tax return is already a crime for many people. As a self-employed person, this is compounded by the more extensive tax return and quarterly VAT return. You are responsible for keeping the figures up to date and providing them on time. Do you want to avoid the risk of accounting problems? We give you 6 tips to get your bookkeeping in order.

Tip 1: Work digitally

The days of folders with receipts and invoices are behind us. Not only is it better for the environment, it also makes everything a lot clearer. For example, you no longer have to go through thick folders every quarter; now you can easily find and sort everything online. Did you make a payment with your bank card? Shoot in your receipt immediately via an app. Link your invoices to your back office system for even more speed and less hassle.

How long should you keep these accounts? As a self-employed person, you are required to keep your records for 7 years, whether online or on paper. Should the Inland Revenue ask for it, you must be able to prove it.

Tip 2: Use an accounting program

Besides having everything digital, it is also important to enter it correctly. All income and expenses must be clear. This can be done with an Excel document, for example, but an online accounting program often makes it even easier.

All the invoices you enter will end up in the right place in the program. As a result, you also get a correct VAT overview and profit and loss statement. With a push of a button you have all the necessary figures for your income tax return. This saves time and reduces the risk of errors.

Tip 3: Separate private and business accounts

Separate your private and business accounts to keep a better overview. Use the right account for the right purchase. Even if, for example, you want to buy something at a store both business and private. Then make it two separate transactions. That way you don't have to account for your private purchases to the IRS and you keep things clear for yourself. That way you also have more insights into cash flow and reduce the chance of errors in accounting.

Tip 4: Keep money aside

You may generate enough revenue on paper, but keep in mind that you still have taxes to pay. You may also not get all payments in on time. Some clients will miss the payment deadline or you may even have to deal with a defaulter that involves a long process. And then when the deadline for paying your taxes arrives, you may not have enough money in your account. That is why it is always good to have money set aside in a savings account so you can cope.

Tip 5: Get advice or outsource it 

Every quarter you file your VAT return and annual income tax return. These figures must be correct. After all, you may get audited for this and it would be a shame if this gets you into trouble. It is therefore wise to have a bookkeeper or accountant check the figures and file the income tax return. They can also provide additional tips on which deductions you can use and how to save money.

You can also choose to outsource your entire bookkeeping. This saves time (and frustration when you are not good at it yourself) and you are provided with tax benefits and expert advice. This allows you to fully focus on your core business. Hiring an accountant can be costly, especially if your turnover is low. Determine for yourself whether the costs outweigh the benefits.

Tip 6: Make bookkeeping more fun

In most cases bookkeeping is not part of your core business. You may even dread it. As the IRS always says: “We can't make it more fun, we can make it easier”. Still, you can try to make it more fun (or at least less tedious) for yourself.

To keep accounting fun, you can analyze your numbers. The more insight, the less uncertainty and stress. Grab a moment in the month to look at how your business is actually doing. Set goals and targets for yourself and try to achieve them. Have you achieved your targets? Then it's okay to celebrate!

Getting started

The next time you are dreading bookkeeping, remember that doing your bookkeeping and the insights you gain will contribute to the growth of your business. It may not be your core business, but good bookkeeping contributes to the freedom you have as an independent professional. Make it as fun and easy on yourself as possible. That's what we call smart freelancer.