This is a guest post by Deborah Dera. If you want to guest post on this blog, check out the guest post guidelines.
Building a freelance business is hard work. Most freelancers work much longer than the average eight-hour day and often work seven days a week. Once you have built up a good client base and a steady flow of income, the last thing you want to see your business fall into financial ruin because of a few mistakes.
Don’t Mess With the IRS
Good financial records are always an asset you can fall back on in times of trouble. If the IRS hits you with an audit, it will make your life a lot easier if you have your paperwork in order. Likewise, make sure you declare all your income properly. Just because you don’t receive a 1099 form from a client doesn’t mean you’re not obligated to declare that income on your taxes. Playing games with the IRS is a quick way to land your business in serious trouble.
Keep Separate Accounts
Even if you decide not to form an LLC or file for a DBA license, you should still have separate personal and business accounts. Having different accounts makes it easier to track your business income and expenses. Many freelancers have a personal checking account and opt to use a system like PayPal to track their business expenses. You could also just have two different checking accounts. Either system works as long as you use your business account strictly for business related transactions.
Plan Your Time
Keep track of all your ongoing projects and completion dates. Don’t take on more work than you can reasonably handle. A freelancer who develops a reputation for missing deadlines and being unreliable will find it hard to hold onto clients and even harder to land new ones.
Keep Email Records
Freelancers should save every email they exchange with clients in case there is any dispute about a project. If you make an agreement verbally, send a follow up email confirming the agreement. In the event there is a disagreement, you can resend them the email and tactfully point out that they made a mistake or misunderstood. Many freelancers have lost payments or received less than they should have because they didn’t have anything in writing.
Don’t Spend Money You Don’t Have
When planning your expense budget, only count on the money you have on hand. Don’t count on future payments or projected income to make up for. Do not overspend with the idea, “I’ll just take on more work to make up for it.” Clients come and go; the work may or may not be there when you need the money.
Successful freelancers are ones who run their freelance business just like any other type of business. For a freelancer working without the benefit of an office staff, organization and self-management is critical. Not having a solid approach to managing your freelance business is the quickest way to see all your hard work go up in smoke.
Deborah Dera us a full-time professional writer specializing in personal finance, SEO, education, and more. She currently contributes to a number of sites involving education and careers in surgical technology, medical billing, sonography, and more.