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Working as a freelancer means having the freedom to set your own hours, work from anywhere, and create a career on your own terms. However, financial management can be daunting. Many freelancers have a hard time keeping track of their income, organizing their expenses, and preparing for taxes while also trying to work for clients.
Spreadsheets are people’s go-to tools. They may be effective in the beginning, but as projects pile up, invoices escalate, and expenses stack up, they tend to become unmanageable. Manual tracking also makes it more likely that you’ll make errors, and it’s harder to tell if your business is truly profitable. Here is where freelancing accounting software comes in handy. Freelancers now can automate invoicing, track expenses, generate reports, and have a clear view of their income without the need of manually updating spreadsheets.
Independent person maintain different approaches to financial management which range from basic invoice generation systems to complete accounting software solutions. Knowing what’s out there will help them pick a solution that works for their workflow and can back them up as their business grows.
In this guide, we look at the top accounting software for small business owners, so you can find a straightforward solution to handle your finances without it being overly involved.
Table of Contents
1) Why Freelancers Need Accounting Software
2) What Freelancers Should Look for in Accounting Software
3) Best Accounting Software for Freelancers & Solopreneurs
4) Accounting Software vs Spreadsheets
5) When Freelancers Should Upgrade Their Financial Tools
6) Conclusion
1) Why Freelancers Need Accounting Software
When we run our own business, we are responsible for all aspects of our finances. Unlike traditional employees who are provided with pay stubs and tax documents, freelancers need to manage their own income, expenses, and financial performance.
Income tracking is one of the most challenging parts. Freelancers frequently have multiple clients and payment dates, and platforms on which they get paid. Without a system, it’s hard to tell which invoices have been paid and which are still outstanding, and how much money the business is making per month.
The process of tax preparation also presents a substantial challenge for us. The majority of freelancers experience time as they need to collect their receipts and organize their financial records right before their deadlines.
Lastly, we often have limited profit visibility. The financial status of a business needs more than revenue data to be evaluated. businessperson need to understand their available funds after deducting expenses to make effective business decisions.
Small business accounting software addresses these issues by automating financial tracking and consolidating financial information in a single location.
2) What Freelancers Should Look for in Accounting Software
You don’t need an advanced understanding of finance to pick the best accounting software for freelancers. Rather, freelancers should look for software that makes it easier to manage day-to-day financial chores.
Invoicing
Freelancing depend on prompt payment, and invoicing tools are a big part of that. Good accounting software should enable you to generate professional invoices, e-mail them to your clients and keep track of your payments. Certain tools also provide automated reminders for late payments.
Expense Tracking
Tracking expenses let freelancers know how much they're spending on running their business. Good accounting software also automatically classifies expenses and maintains organized records throughout the year.
Receipt Management
Tracking your receipts is crucial for tax write-offs and financial statements. Apps like Receipt Bot can automate the scanning of receipts and extracting of expenses, thus reducing manual effort. Most freelancers pair their accounting platforms with receipt automation tools, and Receipt Bot is currently offering users a 25% discount with our partnership, making it a budget-friendly solution for managing receipts. To use it and get more details, just click on the image below:
Profit Tracking
Through monitoring profit, busines person are able to know if they are running a profitable business. Rather than having to calculate your revenue and expenses, your accounting software will tell you immediately how much profit you’re making.
Simple Financial Reports
We don’t need complex enterprise reporting. Basic financial reports, like profit and loss reports, can be quite helpful when budgeting, planning, and filing taxes.
3) Best Accounting Software for Freelancers & Solopreneurs
There are many finance tools available, however not all are tailored for us. The best accounting software is simple, automated, and geared toward helping you see your financial situation, not performing complex accounting.
Here are some dependable options to explore.
ProfitBooks
ProfitBooks is a simple accounting software developed to get clear understanding of our business without complex financial systems.
Freelancers can track income and expenses and generate simple financial reports without hassle. The platform also has invoicing functionality, enabling users to create and send professional invoices directly from the dashboard.
One the best things about ProfitBooks is the visibility of profit. We don’t have to grind through cumbersome accounting processes to get a sense of how they’re doing, we can immediately tell how our income and expenses impact overall profit.
ProfitBooks provides a practical approach towards simplicity and features for those who are looking for a simple but effective accounting solution. You can use it for free by clicking on the image below:
FreeAgent
FreeAgent is popular with small business owners. The platform offers invoicing, expense management and features related to tax for self-employed users.
It enables to monitor project income, log expenses, and run financial reports; all without putting data in a spreadsheet. FreeAgent also offers helpful reminders about tax deadlines and payments on account.
With its design catering to freelancers, FreeAgent is still a popular choice for professionals who want their finances organised but don’t want to employ an accountant.
Akaunting
Akaunting functions as an open-source accounting platform which provides users with the ability to customize their accounting system according to their specific needs. Freelancers who need full control of their financial systems value the software's ability to be customized and extended according to their requirements.
The platform offers essential features like invoicing, expense monitoring, and financial statements. Since its open source, users are able to add integrations and modify workflows to suit their individual requirements.
Though Akaunting can take a little more setup than some tools, it is a good choice for those who want more customisation.
Fiskl
Fiskl is designed for service based businesses. One of its standout features is multi-currency support, which comes in handy for freelancers who have clients around the globe.
Invoicing tools, expenses feature and financial reports available on the platform help in easy maintenance of books of accounts. Fiskl is especially loved by those who invoice their clients regularly in different currencies.
With its straightforward accounting functionality and international billing options, Fiskl is ideal for people working in global markets.
Xero
Xero is one of the most well-known accounting software in the market. Although it does provide far more power than some of the freelance-centric applications, it is still usable by those without an accountancy background.
People use Xero to invoice, claim expenses and run reports on their finances. When a business grows and needs become more complex, a team can turn to Xero's other integrations and financial features.
Xero is therefore an excellent choice for freelancers who expect to grow their business.
4) Accounting Software vs Spreadsheets
We know this, in the beginning, we use spreadsheets as our first finance management tool. However, business growth impose maintenance challenges for spreadsheets which also increase their error risk.
Here is a high-level comparison between using manual spreadsheets and accounting software:
Spreadsheets can work in the short term, but specialized accounting software offers more dependable financial oversight.
5) When Freelancers Should Upgrade Their Financial Tools
The business needs proper accounting software when its operations reach higher levels.
Your Client Base Is Growing
When you'll acquire more clients, the invoices and payments process becomes a little more complicated. I mean, we aren’t just chasing a few payments per month, we’re hustling dozens of invoices with different payment terms and using multiple payment methods.
At this point, manual processes can lead to confusion as to which invoices have been paid and which remain unpaid. Upgrading to a specialized accounting application streamlines invoicing, offers real-time payment tracking, and keeps clean records of client transactions.
Expenses Are Increasing
As expenditure grows, the prospect of tracking them manually is time consuming and prone to errors. The financial tools upgrade lets freelancers automatically categorize their expenses, capture receipts and produce detailed, accurate summaries of their expenses. This not only helps with organization, but also makes preparing taxes a breeze.
Tax Preparation Becomes More Complex
Taxes are one of the most stressful parts, particularly when your financial information is spread out across spreadsheets, email, and payment platforms.
With your growing income, you, too, can take advantage of financial tools designed to keep your records organized year-round. Accounting software can prepare financial reports, summarize deductible expenses, and offer a “bottom line” view of earnings. This eases the last-minute pressure, and helps prevent the omission of any important information.
You Need Clear Profit Visibility
We tend to focus on our total revenue without understanding how much money we actually make after expenses. The total amount of money a business receives does not show its complete financial condition. Costs such as software tools, advertising, or equipment, as well as payments to contractors, can have a major impact on how much profit you make.
With better financial tools, freelancers can track profits in real time. Dashboards and automated reports also give a sense of how much money is left after expenses, letting us consider accurate financial decisions.
Financial Tasks Are Taking Too Much Time
As a freelancer, time is one of you biggest assets. When the bookkeeping takes hours a week, it can be a hint your system is broken.
Modern accounting software automates many mundane tasks, including invoicing, expense tagging, and report creation. By improving our financial tools, we can spend less time on administration and more time providing services to clients.
Your Business Is Becoming More Professional
As we build our reputation to attract better clients, we need to establish professional financial systems. Clients often expect clear invoices, organized financial records, and reliable payment processes.
Upgraded financial tools enable to look more professional and keep better financial records. It stages the company for growth, and doesn’t involve continually changing the financial workflows.
You Need Better Financial Forecasting
Tools enable to see trends in income and expenses, so we can more easily forecast cash flow and make smarter business decisions.
6) Conclusion
Freelancers encounter financial management as their primary obstacle which they need to handle. The process of invoice monitoring together with expense documentation and tax preparation becomes difficult to handle with lack of an appropriate organizational system. We can handle our finances better through accounting software which performs automated operations.
Each one of us need to select the tools based on our operational systems and specific organizational needs. Next billionaires who start with basic financial tracking systems will spend less time on accounting duties which enables to focus on business growth activities. If you want to learn how to manage your bookkeeping, I suggest reading our full guide Bookkeeping for small business here.
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