Accounting 101: For Freelancers and Self-Employed

Last Updated:

We may receive compensation from the below providers if you purchase through the links provided. 
 Read more here

Being a freelance professional and going into business on your own is challenging but also extremely rewarding. You are free to work the hours you want, seek clients who are important to you and earn money instantly for your effort.

However, there are a few challenges to freelancing in addition to all of its advantages. When you are employed by another person, the accounting department handles billing and expenses and ensures that the company is tax compliant. As a freelancer, you are in charge of that obligation. Indeed, running your own business does not require you to have an accounting degree; however, you will be an accountant for self-employed individuals. 

However, having a basic understanding of accounting may help you communicate with your bookkeeper, keep track of your finances, and maintain tax compliance. A few important factors directly impact your business, including the significance of managing funds in the company. 

That’s why there are several things to consider when it comes to bookkeeping for self-employed individuals. Keep reading to find out more. 

Learn all the Basic of Finance 

The financial accounts of a company are the best place to start when evaluating its financial health, whether it be your own, your employer, or possible investment. These materials provide a wealth of knowledge that may assist with decision-making, budgeting, and product creation. In other words, being able to understand financial accounts is essential.

But it’s even more important for freelancers. You may succeed professionally and have a better effect on your overall organization as a freelancer by improving your financial literacy and trying self-employed accounting.

Every aspect of your freelance business is impacted by finance. It is what enables you to effectively assess the success of your business while balancing short-term costs with long-term objectives. To put it bluntly, it keeps you afloat; and just like a company cannot succeed without its strong finances, a freelancer can’t either.

You may advance as a freelancer by being aware of the economic effects of your actions and effectively conveying those decisions to the stakeholders involved. However, you must first understand the vocabulary. 

There are several types of financial statements that you have to become familiar with. Some of the most crucial are: Accounts payable, Accounts receivable, Cash flow, Revenue, Equity, Balance sheets, Income statements, etc.

Knowing these basic terms will benefit your business and help you become more familiar with its operations and status.

Stay on Track

When it comes to keeping track of your funds, knowledge is more important than effort. If implemented correctly, keeping track of funds may be more simple than it initially appears.

Businesses all around the world suffer significant financial losses as a result of non-compliance with laws and regulations. Freelancers aren’t exempt from this either. Not only is it necessary by law to keep track of your finances, but it also benefits your freelancer’s growth.

There are techniques to break the process down into manageable pieces that may be incorporated into your daily routine and have a significant impact at the conclusion of the fiscal year.

These techniques include establishing a separate business bank account, storing and organizing recipes from clients, preparing and maintaining a spreadsheet, issuing digital invoices, etc. 

Being financially aware and tracking every possible thing in your business will help you to make better business decisions; you will be prepared for the tax period and know the profitability of your freelancing jobs.  

Use Accounting Software

It is definitely worth getting an accounting software if you like to optimize financial operations and use the techniques mentioned earlier in managing your finances. There are several accounting software solutions that can provide you with the needed tools and still stay within your budget. 

Nevertheless, as long as it does not jeopardize the viability of your finances, it’s worth the investment. Your transactions and costs may be categorized when you implement accounting software.  You can then use those reports to know exactly where you stand financially and guide your decision-making.

Additionally, the majority of contemporary accounting software is cloud-based, providing you with constant access to your accounts. Look for software with excellent mobile app capability if working on the move using your smartphone is crucial to you.

When it comes to tax season, accounting software that offers bookkeeping for freelancers or accounting services for an extra price is frequently available if you do your homework. If expanding your clientele is a priority, consider how scalable the software is and if it will enable you to do so. 

When shopping for software, it’s crucial to take into account both the functionality you want today and any potential future requirements.

Don’t Mix Personal and Professional Funds

Having a separate bank account for freelancing jobs helps make tracking, classifying, and managing your bookkeeping more simpler and quicker. Use a different personal bank account to receive payment from your clients. This makes accounting for freelancers a breeze, as you will have a clear distinction between your personal and professional funds. 

If you have multiple credit cards, reserve one for business use only. By doing this, you’ll never have to distinguish between personal and business spending on the same receipt, which can be annoying and increase your likelihood of putting off classifying your expenses.

Don’t Hesitate to do Invoice Reminders

It may seem as if you are spending all of your valuable time working on projects when you are a freelancer. This might lead to you overlooking your finished projects and the bills that pay for all of your work, which can be detrimental to the development of your business.

It’s critical that you stay on schedule with the job you’ve done and keep a healthy income flow in addition to promoting yourself. Invoicing late or not getting paid on time can seriously hurt your business and lead to both short-term and long-term financial difficulties.

Even if you may be entirely focused on providing for your clients, it is crucial to carve out time for your company by putting in place a system to keep track of everything. You can produce and send professional invoices with the use of a variety of software and invoicing solutions. Additionally, if customers don’t make payments by the deadline you set, certain applications can send reminders on your behalf. 

For your records, you may also email a copy of the invoice to yourself. It is also good for your business when you send an automatic thank-you email to a client after they have paid to express your gratitude. To keep all of your freelancing work, costs, and outgoing payments organized and on time, utilize a dependable and user-friendly accounting application.

Advantages of Bookkeeping for Freelancers

Being paid and prepared for tax season are essential components of your career as a freelancer. It is crucial to know the fundamentals of bookkeeping for self-employed individuals for this reason.

Keeping track of your clients’ payments—when and how much they owe you—can be challenging. You can keep on top of unpaid bills and recover money from customers who owe you by knowing how to handle your accounting and the tools you may utilize.

You can better understand your company and have an easy perspective of your cash flow when you maintain a continuous and accurate log of your business operations. You’ll also be prepared for tax time and an audit.

The advantages of bookkeeping in accounting are the following: 

  • Permanent and Reliable Record – Bookkeeping replaces the memory, which is unable to recall every single transaction, by providing a permanent record of each one.
  • Time-saving – Bookkeeping services offer the skills and knowledge necessary to examine and evaluate your accounts. 
  • Establishing Financial Position The freelancer should have a complete understanding of their financial status in order to run his business successfully. 
  • Legal conditions – The data can be used as evidence in court to corroborate and verify claims made for or against the company about third parties.

Final Thoughts

When you work for yourself, you have to take on greater financial responsibility, but if you keep a few best business practices in mind, you can succeed. When your accounting and bookkeeping are in order, you can foresee any issues you could have in the future.

You may spot significant financial discrepancies before they become an issue by routinely reviewing your books. You may notice significant problems that will have an adverse effect on your bottom line. When you plan your spending and keep your finances in order, you can concentrate on attracting clients and offering superior service that will keep your client list expanding.


Do I need an accountant or can I do it myself?

To make a decision, it is best to simplify it into three main aspects: the need for an accountant, the time you have and the cost. You should monitor your bottom line if the main objective of your business is to generate a profit. Setting up systems early and maintaining frequent updates and monitoring of everything is the simplest method to do this.
The fact that most small firms are reluctant to hire an accountant is mostly due to their lack of understanding of the accountant’s function and potential value. An accountant can do much more than just organise your accounts and prepare your tax forms. 
You should be aware that not all small businesses will require an accountant, and thus you, as a freelancer, don’t require one. Since the revenue and costs are typically clear-cut and they hardly ever hire extra workers, freelancers or artists can usually get by without an accountant. 

Can you be a self-employed accountant?

Self-employed people, especially freelancers, can typically manage their own books and accounts without issue. You generally do not need to bother about an accountant if the goal of your business is to maintain a good income to sustain yourself. 
However, an accountant can assist you if your objective is to create a business that will expand and be profitable. Even if you want to conduct your own accounting, consider hiring a professional to assist you in setting up your accounts and any accounting software you use in the beginning. 
You may make planning decisions that could guide your small company decisions for the following few years with the assistance of an initial consultation.

How can an accountant help a small business owner?

Accountants can offer assistance while you are just getting started or offer guidance as your company expands and changes. Small company owners often miss out on a significant competitive edge when they undervalue or just do not recognize the importance of an accountant.
An accountant will guide you on a variety of topics, including your company’s structure, financial statement creation, acquiring required licenses and permissions, and even preparing a business strategy.

How do I set up a self-employed accountant?

If you are an experienced accountant who wants to work for yourself or as a freelancer, you must choose the company and specialty you want to operate.
Numerous specialties fall within this broad category, including tax accounting, public accounting, auditing, and others.
For the process of setting up as a self-employed accountant, first, you must get qualified and obtain certifications from recognized professional organizations, then register as self-employed and pick a niche that you will operate in, and choose the right software. You will also need to open a business account and get business insurance. 

Can I be my own accountant?

To obtain your bearings, you do not need a degree in accounting, but you should be familiar with the fundamental ideas and procedures. Getting some fundamental instruction can assist you in getting started and, in the big picture, save you time.
There are a number of businesses that provide training through online classes in accounting and that is a good place to start. 
Once you get the knowledge, you can set up your business using online accounting and billing software, manage your own annual tax filings, maintain a set of organized and orderly books, run your statements and manage invoices for clients. 

About the Author

Skip to


Related Articles

best project management tools featured image
Best Project Management Tools
best keyword research tools featured image
Best Keyword Research Tools
Best SEO platforms
Best SEO Platforms in 2023
Best AI Content Tools for Freelancers
The Best AI Content Tools Listed for Freelancers in 2023
rising talent badge on UpWork
How to Get The Rising Talent Badge on Upwork?
How to Become a Freelance Photographer With No Experience featured image
How to Become a Freelance Photographer With No Experience
Living on the Move: Exploring the Nomadic Lifestyle featured image
Living on the Move: Exploring the Nomadic Lifestyle
How to Effectively List Freelance Work on LinkedIn featured image
How to Effectively List Freelance Work on LinkedIn
How to Be a Freelance Social Media Manager
How and Why to Write a Cover Letter for Remote Position
How to Become a Successful Freelance HR Consultant
Guide on How to Give Prompts and Talk to GPT-3
How To Use Jasper AI Recipes
Guide on How to Use Jasper Boss Mode
How to Use GPT-3 in OpenAI Playground
5 Ways You Can Showcase Your Freelance Services Online
Freelance Pricing 101: The Ultimate Guide on How to Price Yourself
How to Negotiate as a Freelancer [3 Sample Email Templates Included]
Freelancing Red Flags
5 Most Common Client Red Flags in Freelancing
Best PayPal Alternatives for Freelance Payments
Best PayPal Alternatives For Freelance Payments
How to become successful in freelancing
How To Be Successful in Freelancing? 7 Highly Useful Tips
Easy Online Part-Time Jobs
10 Easy Online Part-Time Jobs to Enjoy Self-Earned Money
Freelancers Visa - Best Countries to Work as a Freelancer
Freelancer Visa: Best Countries to Work as A freelancer
Why Personal Branding for Freelancers Is Important
Why Is Personal Branding Important for Freelancers like You?
Best Freelance Jobs For College dropouts
The Best Freelance Jobs For College Students
Co Working Space vs Traditional Office
Coworking vs Traditional Office Spaces – Choose Perfect Option that Fits
History of CoWorking Spaces
History of Coworking Space: The Complete Timeline for New Startups
Concept of Hot Desking
Hot Desking: All You Need to Know
Canva Transparent Background Guide
How to Create a Transparent Background With Canva
How to become a content writer with no experience
How to Become a Freelance Writer with No Experience?
Images in Webflow
A Guide to Working With Images in Webflow – Webflow Images
Most Frequently Asked Questions About Canva
Canva: The Guide to Frequently Asked Questions
Tips for Better Mental Health for Remote Freelancers & Workers
How To Take Care Of Your Mental Health While Working Remotely
Can You Use Canva Pro Images for Commercial Use
Can You Use Canva Pro Images for Commercial Use? An Honest Guide
How to Use Duda for Website Building
How to Use Duda Website Builder
SemRush For Keyword Research
How to Use Semrush for Keyword Research
How To Make Money On UpWork
How to Make Money on Upwork – Complete Guide
How To Write UpWork Proposal
How to Write an Upwork Proposal To Win High Paying Clients
How To Work On Fiverr
How To Work On Fiverr To Make Six Figure Income
How To Get Jobs On UpWork
How To Get Jobs On UpWork That Value Your Time And Worth?
Duda Alternatives
The 4 Best Duda Alternatives in 2022
reasons to use clickup
10 Reasons to Use ClickUp for Team Management
Webflow Alternatives
Webflow Alternatives: Business Site Options at Your Fingertips
Effective Tips to Promote Fiverr Gigs
How to Promote Fiverr Gigs & Services?
Self-care strategies for Freelancers
5 Practical Self-Care Strategies for Freelancers
Freelancing vs Full-time Jobs
Freelancing Vs Full-Time Job – What to Choose?
High Paying Freelancing Skills
9 High-Paying Freelancing Skills in 2021
Developer Tools for Productivity
10 Best Developer Tools To Increase Your Productivity In 2021
Tips to Manage Money as a Freelancer
How to Manage Your Money As a Freelancer
7 crucial things to know before you start freelancing
7 Crucial Things to Know Before You Start Freelancing
freelance skills that you can start learning today
Top 10 Freelance Skills You Can Start Learning Today
7 Ways to Discover Whether A Freelancing Career Is Right For You
7 Ways to Discover Whether A Freelancing Career Is Right For You?
5 Reasons Why Digital Freelancing is the Future of Work
5 Reasons Why Digital Freelancing is the Future of Work
10 Powerful Tips on How To Use LinkedIn To Earn Clients
10 Powerful Tips on How To Use LinkedIn To Earn Clients
Ahrefs Best Alternatives
Ahrefs Best Alternatives – Key Features & More
Manage Finance & Accounting of Your Remote Based Business
How to Manage Your Remote Based Business Finance & Accounting
Freelance vs Self Employed - What type of worker are you
Freelance vs Self-Employed – Which Type Of Worker Are You?
advices and tips to overcome remote work challenges
How to Overcome Remote Work Challenges – Actionable Tips
Pros and Cons of Freelancing to Consider
10 Pros and Cons of Freelancing to Consider
Cybersecurity tips for Remote Workers
Ensure Cybersecurity When Working Remotely or From Home
Becoming a Successful Remote Freelancer
How to Become a Successful Remote Freelancer?
productivity tips for working from home
8 Work from Home Productivity Tips
tips for becoming a great podcast guest
How to Be a Great Podcast Guest
Tips for Branding Yourself as SEO Freelancer
How Do I Brand Myself as SEO Freelancer
How to become a Podcast Guest
How to Become a Podcast Guest
How Much Do Freelance Video Editors Make?
How Much Do Freelance Video Editors Make
How to brand yourself as a developer
5 Effective Tips on How to Brand Yourself as a Developer
What is Freelance Video Editing
What is Freelance Video Editing & How to Earn From It
Brand Yourself As Freelancer
How Do I Brand Myself as a Freelancer? Step-by-Step Guide
How do freelancers pay tax
How to Pay Tax as a Freelancer? – Complete Guide
How much do freelancers earn
How Much Money Can Be Made From Freelancing?
In Demand Freelancing Skills in 2021
Which Freelancing Skills Are In-Demand for 2021
Which Platform is Best for Freelancers -
Which Platform is Best for Freelancers?
How to become a Freelancer with No experience
How Can I Become a Freelancer with No Experience?
Can Freelancing be a Career -
Can Freelancing be a Career?
How to get a freelancing job without experience -
9 Tips to Get Freelancing Job Without Experience as a Beginner
BEST free design tools everything freelance
5 Best Free Design Tools You’ll Ever Need
3 Core Advantages of Cloud Computing for Remote Workers
3 Major Advantages of Cloud Computing for Remote Workers
Android Apps to Improve Your Company Management
4 Android Apps To Improve Your Company Management
How to get clients for a New Business
How to Get Clients for A New Business?
How to get ecommerce clients
How to Get E-commerce Clients
How to get a client to pay their bills
How to Get a Client to Pay their Bill
Types of Difficult Clients
Types of Difficult Clients and Effective Ways to Handle Them
Best Visual Collaboration Tools for Remote Work
Best Visual Collaboration Tools for Remote Work
Best Freelance Management Platforms
Best Freelance Management Platforms for 2021
Online Collaboration Tools for Remote Workers
Best Online Collaboration Tools for Remote Workers
How to get clients as a Freelancer
How to Get Clients As A Freelancer
Create Automation in Mailchimp
How to Create Automation Using Mailchimp?
Alternatives for Toggl
What Are the Best Alternatives to Toggl
Best apps for Freelancers
Best 8 Apps for Freelancers
Health Insurance for Freelancers
Best Health Insurance for Freelancer
How to create an Invoice on PayPal
How to Create an Invoice on Paypal