Being a freelancer is often great, especially when it comes to freedom and flexibility, but in the case of finances, however, a vast majority of freelancers continue to suffer, with no stability whatsoever, and limited avenues for long-term wealth creation.
To secure your finances as a freelancer, it is essential to become more organized by documenting every aspect of your work, earnings, and expenditures.
Whether you’re applying for a loan, finding a place to rent, or simply computing your year-end taxes, proper documentation plays a crucial role. In this article, we list four essential items that every freelancer should document, with brief overviews on each of them.
1. Regular Invoices
Invoices are bread and butter for freelancers, they not only ensure timely payment, but are official records of the work you’ve completed, and what you are owed. Without them, it’s hard to keep track of receivables, ask payment from late clients, and even prove your income
When you’re working job to job, invoices are your bread and butter. They are your official records of the work you’ve completed and what you’re owed. Without them, how are you going to keep track of your incoming payments? Even worse, how will you chase down late clients?
Keep a clear log of every invoice you send out, noting down the date, amount, and payment terms. This way, you’ll always know what’s outstanding and when to follow up if someone ghosts you on a payment.
Make sure your invoices are consistent and professional, there are tons of invoicing tools out there like FreshBooks or QuickBooks that make it easy to create and store them in one place.
Not only will this keep your cash flow on track, but it’ll also help you keep tabs on which clients are dependable and which ones… aren’t.
2. Pay Stubs for Proof of Income
Many freelancers don’t realize they need a solid way to verify their income. It’s not just about getting paid, it’s about having proof that you are getting paid. Whether you’re applying for a loan, mortgage, or even a new rental, you’ll need proof of income, this is where pay stubs come into play.
But, wait. Freelancers don’t get pay stubs, right? Wrong. Tools like Form Pros make it super easy to generate your own check stub based on the income you’ve earned. By keeping detailed records of every payment you receive and converting them into stubs, you’ll have clear evidence of your earnings.
This is a game-changer when dealing with banks or any financial institution that needs to verify your financial stability.
Trust me, you don’t want to be left scrambling for proof when you need it most. Pay stubs also help in simplifying tax filings, which would otherwise involve extensive error checks and manual corrections.
3. Contracts & Agreements
Contracts may seem like a hassle, but they’re essential for protecting yourself financially. Before starting any new project, you should always have a clear written agreement with your client. This includes details like payment terms, deadlines, scope of work, and any other important terms you’ve agreed upon.
Why is this important? Let’s say a client decides they don’t want to pay you after you’ve completed a job. Without a written agreement, it’s just your word against theirs. A contract ensures that you have legal backing if things go sideways.
It also helps avoid confusion, ensuring both parties are on the same page from the start. Keep digital copies of all contracts and update them as necessary, this practice will save you time and money in the long run.
Wrapping It Up
Freelancing can be unpredictable, but your financial security doesn’t have to be. By consistently documenting your invoices, job rates, pay stubs, and contracts, you’ll have a rock-solid system in place that not only keeps your business running smoothly but also ensures you’re prepared for any financial situation that comes your way. Don’t wait until it’s too late, start keeping track today.
