No matter which of the three bookkeeping systems you choose—simple checkbook, single-entry journal, or the more complicated cash-disbursements journal—you’ll also need to have an easy way of filing backup receipts. You should have something—receipt, invoice, canceled check or petty cash ticket—for every expense. Make sure before filing these receipts that they indicate all of the important information—date and amount paid, to whom paid, check number or cash payment. Keep these receipts for business expenses filed separately from any personal expenses. You can use one of those accordion files divided into 12 compartments—one for each month—or 12 envelopes or a box in which you store receipts in monthly bundles. Whichever way you choose, be consistent.
The first step in recording your expense receipts is a program like Expense Director from Iambic.com. This program allows you to record your expenses on your smartphone or personal assistant. Then you can sync the device you’re using to your computer to save and store your expense notations. After you record your expense amounts, place the receipts for that month in a box. Make sure to put a check mark on each receipt after you record it. At the end of the month, bundle that month’s receipts for storage.
A program like Expense Director allows you to create spreadsheets of monthly expenses easily and quickly. You can also sort your expenses so that you have all like expenses together. If you don’t have a spreadsheet program, get one. It comes in handy for lots of other records, too.
All funds received or disbursed from your freelancing business should pass through your business checkbook. Your monthly bank statement should be balanced against your receipts/disbursements spreadsheets, as well as verifying your checkbook balance.
Record all cash receipts in the proper column by category. If you're working part-time, you can keep the data in the same spreadsheet, but keep the receipts in a separate column. If you regularly receive rent or other such income from another source, separate those receipts also.
Record gross receipts and net receipts, if you have both, at the same time for more ease in figuring your taxes. Be accurate when you record figures across the page. They need to balance both horizontally and vertically. You’ll want to balance each page monthly, then record the balances on the balance spreadsheet.
You’ll find it handy to have a calculator with a printout tape. It’s also helpful as proof of balances during any tax audit. As you balance each page of your spreadsheet, you can file the tape with your backup material—receipts, invoices, petty cash tickets, etc.
If you’re following the above procedures, you’ll be able to check your accounts receivables each week which will let you know if you have any slow payers. You’ll also be able to check you accounts payables, your bills, to see if you can pay ahead to take advantage of any discounts.
And every month, you’ll need to post your income and expenses and balance your books. You’ll also need to prepare a profit and loss statement, balance your business checking account, balance and file any petty-cash receipts, and do anything to prepare for taxes. And one last thing: You’ll need to rebill any slow payers. Doing all of this should keep you on financial track.
