November 23, 2021
Freelancing is a highly gratifying and liberating mode of career. But many freelancers tend to experience financial difficulties due to a lack of proper planning. As a freelancer, you are solely responsible for setting your own prices, deciding on your own income, deriving your own leads, and keeping track of all your business’s expenses, billing, and related finances. For this reason, it is important to understand your business goals and set up a compatible income and small business tax plan right from the start.
In this blog, we will discuss some effective tips and resources for income planning and tax preparation, including who to trust for small business accounting guidance in Central Indiana.
Your first step to income planning is to set up your business’s services. What are you going to offer your clients? What will the scope of your services be? For instance, if you are a photographer, you will want to choose a narrower niche. What kind of photography will you be doing? Wedding photography? Boudoir photography? Nature? New? Sports photographer?
List all of the services within your niche that you want to offer clients, then write a detailed description of each service. Within the descriptions, include the process involved, which expenses you expect to incur, and your marketing plan.
Your next step is to set a goal for an annual income. How much do you want to make every year performing your freelance work? Be realistic, but also set your goal high enough to motivate you toward success. You will want to increase your income goal every year moving forward. Once you set your income goal, you can set your business’s pricing. Divide your annual income goal by 12 to get a monthly goal. This will also help you set your pricing model.
When it comes to setting up a pricing model for your business, you must take into account your expected workload. For instance, if your income goal is $90,000 a year, that would mean that your monthly income goal is $7,500. You would then need to price your services accordingly to meet this goal every month, and ultimately, every year. For instance, if you are a freelance tutor, you would need to charge at least $325 per session and book at least 20 clients each month. If this seems unattainable, reduce your client load and/or increase your pricing.
You never want to mix your personal and business accounts. This can be incredible confusing and make tax planning and preparation a convoluted process. Open a separate business checking and saving account for all of your freelance earnings and expense. Be sure to keep track of every nickel and dime with invoice documentation, receipts, and more.
To help you with your freelance accounting, you will need to select a program or software system as a platform. One of the top-recommended accounting systems for freelance work is Freshbooks, which offers a portal for sending and receiving invoices.
Many freelancers make the mistake of not saving money for their business taxes. To avoid feeling overwhelmed come tax time, always be saving little by little for your taxes. This way, you won’t feel like you are writing a check for your entire life savings each tax quarter. Every month, put a percentage of your earnings into your business savings account.
Are you looking for a qualified small business accounting firm to help you organize and manage your company’s finances? Contact Aspire CPA at (317) 469-4500, or email our office at firstname.lastname@example.org, and speak with a licensed Certified Public Accountant to learn how our business accounting and tax services in Indianapolis, Indiana can help grow your bottom line.
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