In this post, I’m going to share my own journey in organizing and systematizing my bookkeeping and accounting.

A Brief History

When I started freelancing, I tracked my income and expenses on a Google Docs spreadsheet. It worked well enough — until I inadevertently deleted a whole chunk of cells!

After that, I moved onto a $12 account in LessAccounting.com. It was great. I could create invoices, and track income and expenses. I liked being able to email invoices to my clients, with a PayPal button embedded right into the email. However, the reports were limited.

So after a few months, I moved up to LessAccounting’s $20 package. With that, I can create professional-looking proposals and turn them into invoices instantly. More importantly, I can generate the reports I need to prepare my taxes.

Choices, Choices

While I’ve been happy with LessAccounting, I’ve been wanting to use an application I can install in my computer and not have to keep paying a monthly fee.

I’ve spent many hours going over the many solutions available for Macs. Unfortunately, I couldn’t find many to replace LessAccounting. Some solutions do invoicing but don’t track expenses. Others do accounting, but won’t let you do invoicing.

• Tinybooks

There is one application I found, which does everything I’m looking for: proposals, income and expense recording, reporting, and invoicing. It’s called Tinybooks.

I downloaded the trial version of Tinybooks, but didn’t really use it. You see, it didn’t have a “pretty” interface that’s common among Mac applications.

However, I just checked the Tinybooks site as I was writing this post and discovered that Tinybooks Pro version 7 was just recently launched. This version is much prettier and has some additional features compared to its predecessor.

An individual license for Tinybooks 7 is only $49 so this is an excellent option for freelancers.

• Quickbooks

After asking several Canada-based freelancers, small business owners and even a professional bookkeeper (Monica Ross of virtualbookkeeping.ca, who is amazing, by the way), I’ve come to the conclusion that Quickbooks is the way to go.

Other applications can probably do pretty much the same thing, but if you’re planning to work with an accountant, bookkeeper or other professional, most of them would be familiar with Quickbooks and will probably prefer it.

I’ve heard many complaints about how hard it is to use Quickbooks. However, after using the UN’s financial management software for years, I’m confident that I can handle Quickbooks.

The good thing about Quickbooks is that it can do everything I need to do right now. At the same time, it can accommodate my home business as it grows.

Conclusion

I thought I had made up my mind to get Quickbooks. But after seeing the update on Tinybooks, I’m having second thoughts again.

I’ll have another consultation with Monica before I make my final decision (even though I’m pretty sure I know what she will say).

Your Thoughts?

How do you handle your bookkeeping and accounting? What software do you use? Do you work with bookkeepers and accountants?

Maybe your comments can help me decide, so do share!

photo credit: word_dancer51

This is Day 19 of 31 Days to Start a Freelancing Business (or Make Yours a Better One). If you want to catch up, click here to read Day 1.

Did you finish your client communication templates yesterday? If not, you’ll have time to continue making them today. As soon as you complete today’s task, which is to create a spreadsheet for tracking your income and expenses in your freelancing business.

Why Track Your Income and Expenses

Even if you’re only freelancing part-time or as a sideline, you’ll see many benefits from tracking your income and expenses, such as:

• You’ll be able to see at a glance if you’re really making money. You can easily tell how much money you’re making, how much you’re spending, and how much is left over.
• You’ll be able to track the growth of your freelancing biz.
• You can see which clients or types of services are bringing in most of your earnings.
• You and/or your accountant will have a much easier time when you file your income tax.

A Spreadsheet

If you’re just starting out, I suggest that you create a simple spreadsheet using Microsoft Excel, Apple Numbers, Google Docs, or OpenOffice.

Your income spreadsheet could be as simple as this:

And your expense spreadsheet could look like this:

You can also combine both income and expenses on one spreadsheet, such as this monthly budget tracking spreadsheet you can download here for free.

Don’t stress about creating a perfect system now. In the end, what matters is that you have a financial tracking system in place, even if it’s still imperfect.

Financial/Accounting Software

As you start making more money, it makes sense to invest in financial software. As I mentioned previously, I use Less Accounting. It’s an online service for individuals and small businesses, which lets you:

• track income and expenses
• create proposals
• turn proposals into invoices or create them from scratch
• generate receipts
• Email proposals, invoices and receipts to your clients
• create reports for your own monitoring or for your accountant

Oh, and did I mention my clients can click a PayPal button on the invoice, to pay me instantly?

I like Less Accounting because I can do all these things for a small subscription fee every month. Other online services only let you do billing and invoicing, but doesn’t track your expenses. That just doesn’t make sense to me. For example, if you use Freshbooks for billing/invoicing, you’ll need a separate accounting software or service, such as IAC-EZ for bookkeeping. That adds up to costing much more than Less Accounting by itself.

That said, eventually, I would like a solution that doesn’t require me to pay a monthly fee. I may bite the bullet and buy Quickbooks, FirstEdge or similar software that’s Mac compatible.

Outsourcing

Other home-based and small businesses outsource their bookkeeping tasks. I myself am not comfortable with this. But then I’m a control freak and numbers don’t intimidate me (after all, I was a computer engineering and physics major at one time, many years ago).

However, if you can afford to outsource your bookkeeping and find somebody you’re completely comfortable with – and if this is the only way you can keep your bookkeeping up to date – then go for it! That’s much better than neglecting it altogether.

Further Reading:

1. Online Bookkeeping for Freelancers that Won’t Cost an Arm and Leg (FreelanceSwitch) – Suggests a solution which combines three separate online services. I don’t like it, but hey, it might just work for you.

2. Money Matters: 13 Resources for Freelancer Writers (Men with Pens) – Other freelancers can use these resources too. I like the Canada-specific resources

3. Top 5 Accounting Software for Small Business (About.com) – Brief description of five accounting software for small businesses

If you know of other accounting or bookkeeping solutions for freelancers, do share by posting a comment below, ok?

Lexi

photo credit: jekert gwapo

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