1
00:00:00,000 --> 00:00:04,230
When you run a business, you should always keep an eye on your financial health.

2
00:00:04,230 --> 00:00:07,740
Not doing so can lead to the end of your freelance career.

3
00:00:07,740 --> 00:00:10,040
The topic of accounting is vast,

4
00:00:10,040 --> 00:00:12,270
but there are only a few things you need to know

5
00:00:12,270 --> 00:00:15,120
to make sure your company is healthy and on the right track.

6
00:00:16,140 --> 00:00:17,720
You need to know how much you're spending,

7
00:00:17,720 --> 00:00:20,150
and where you're spending it,

8
00:00:20,150 --> 00:00:23,440
and you need to know if you're making enough money to cover your expenses.

9
00:00:23,440 --> 00:00:26,620
An easy way to keep an eye on how much you're spending

10
00:00:26,620 --> 00:00:28,650
is to look at your expense reports.

11
00:00:29,740 --> 00:00:32,119
Expense reports are a fancy document

12
00:00:32,119 --> 00:00:34,550
that just keeps track of all the money you spend

13
00:00:34,550 --> 00:00:37,670
to make sure what you're spending is accounted for.

14
00:00:37,670 --> 00:00:40,220
That is, you're not spending more money than you make.

15
00:00:41,870 --> 00:00:45,570
Earlier we used FreshBooks to create and send invoices.

16
00:00:46,300 --> 00:00:49,730
The software also helps you keep an eye on your money.

17
00:00:49,730 --> 00:00:53,520
Freelance designers use a host of services to keep their businesses running.

18
00:00:53,520 --> 00:00:56,940
They pay for web hosting, storage services like Dropbox,

19
00:00:56,940 --> 00:01:00,320
Adobe Creative Cloud accounts, and many, many more.

20
00:01:01,170 --> 00:01:05,099
Keeping track of these expenses serves multiple useful purposes.

21
00:01:05,099 --> 00:01:08,960
Let's go ahead and add a few to our FreshBooks account.

22
00:01:15,680 --> 00:01:20,920
You add the amount, date of transaction,

23
00:01:20,920 --> 00:01:25,310
vendor,

24
00:01:25,310 --> 00:01:28,740
the category, and any notes you want to associate with the expense.

25
00:01:28,740 --> 00:01:32,310
It's important to categorize your expenses,

26
00:01:32,310 --> 00:01:34,920
and any good accounting software should provide you

27
00:01:34,920 --> 00:01:37,060
with some categories to start.

28
00:01:37,060 --> 00:01:40,820
We're going to add a hosting expense from the past month.

29
00:01:40,820 --> 00:01:42,580
Your expenses won't always fit

30
00:01:42,580 --> 00:01:44,950
into the provided categories, and that's fine.

31
00:01:44,950 --> 00:01:47,410
You can always create your own categories

32
00:01:47,410 --> 00:01:50,070
to help you understand your expenses better.

33
00:01:50,070 --> 00:01:53,770
We're going to add a hosting category under Professional Services

34
00:01:53,770 --> 00:01:56,130
to help us keep track of this expense.

35
00:01:57,000 --> 00:02:00,930
FreshBooks also helps you add in all the little nuances.

36
00:02:00,930 --> 00:02:03,880
You can specify how much of your total was tax,

37
00:02:03,880 --> 00:02:07,060
whether the expense is a recurring one,

38
00:02:07,060 --> 00:02:10,020
and you can attach a receipt if you have one.

39
00:02:10,759 --> 00:02:13,970
All accounting software should let you do this.

40
00:02:13,970 --> 00:02:18,510
In our example, our web hosting could be a service that we provide for our clients,

41
00:02:18,510 --> 00:02:20,850
so we have to bill them for it.

42
00:02:20,850 --> 00:02:24,880
FreshBooks allows you to associate an expense with a client.

43
00:02:24,880 --> 00:02:27,080
Let's go ahead and do this as well,

44
00:02:27,080 --> 00:02:30,580
and since our expense is recurring, we'll check that box too.

45
00:02:39,060 --> 00:02:41,460
Okay, so now that we have recorded this expense,

46
00:02:41,460 --> 00:02:44,000
FreshBooks allows us to convert it to an invoice

47
00:02:44,000 --> 00:02:45,880
with the click of a button.

48
00:02:47,320 --> 00:02:49,160
See how simple that is?

49
00:02:49,160 --> 00:02:51,700
No more trying to remember whether you charged them for hosting

50
00:02:51,700 --> 00:02:53,990
and whether they followed up on it.

51
00:02:53,990 --> 00:02:57,920
FreshBooks also attaches a status to the expense item,

52
00:02:57,920 --> 00:03:02,850
indicating whether it has been invoiced and whether the invoice has been paid off.

53
00:03:06,750 --> 00:03:08,530
If you go back to our home page,

54
00:03:08,530 --> 00:03:13,790
FreshBooks also gives us a comprehensive summary of our invoices and expenses.

55
00:03:13,790 --> 00:03:16,640
Hovering over each month, we can get a quick summary

56
00:03:16,640 --> 00:03:20,720
of any outstanding invoices and any unbilled expenses.

57
00:03:20,720 --> 00:03:23,810
This is really helpful and can help us keep track

58
00:03:23,810 --> 00:03:26,220
of how much money we're owed.

59
00:03:27,130 --> 00:03:29,880
Apart from the very useful function of keeping track

60
00:03:29,880 --> 00:03:32,280
of how our money is being spent,

61
00:03:32,280 --> 00:03:34,410
why bother tracking every single expense?

62
00:03:34,410 --> 00:03:37,010
The main reason is for taxes.

63
00:03:37,010 --> 00:03:40,980
Come tax time, having our expenses categorized and documented

64
00:03:40,980 --> 00:03:43,890
means we can obtain certain deductions.

65
00:03:43,890 --> 00:03:46,550
If you pay for your own health insurance,

66
00:03:46,550 --> 00:03:48,530
then it can be deducted from your tax returns.

67
00:03:48,530 --> 00:03:52,670
If you work out of your home, you can claim certain expenses  for the home office.

68
00:03:52,670 --> 00:03:55,750
And even if your business ends up not making money,

69
00:03:55,750 --> 00:03:58,330
you can deduct that from your taxes.

70
00:03:58,330 --> 00:03:59,780
But to be able to do any of this,

71
00:03:59,780 --> 00:04:03,140
you have to track your expenses meticulously as proof.

72
00:04:03,140 --> 00:04:08,350
As with anything tax-related, regulations vary across states and countries.

73
00:04:08,350 --> 00:04:10,750
So be sure to check with a tax professional

74
00:04:10,750 --> 00:04:13,000
for the deductions that are available to you.

75
00:04:13,720 --> 00:04:17,329
Which brings me to the always wonderful topic of taxes.

76
00:04:17,329 --> 00:04:19,420
As a freelancer, it's your duty

77
00:04:19,420 --> 00:04:21,519
to keep track of all your income earned

78
00:04:21,519 --> 00:04:24,900
so that you can send a bit of it away to the government as taxes.

79
00:04:24,900 --> 00:04:26,580
That's fun, right?

80
00:04:26,580 --> 00:04:29,230
When you work for someone, your income taxes

81
00:04:29,230 --> 00:04:31,340
are already taken out of your paycheck,

82
00:04:31,340 --> 00:04:33,360
so you don't have to think about it.

83
00:04:33,360 --> 00:04:36,450
As a freelancer, however, that's something you have to take care of.

84
00:04:36,450 --> 00:04:39,330
Keep detailed track of all your income receipts

85
00:04:39,330 --> 00:04:43,070
so that you won't be accused of doing anything wrong come tax time.

86
00:04:43,480 --> 00:04:45,940
Aside from keeping track of your income,

87
00:04:45,940 --> 00:04:49,100
you'll also have to pay your income taxes at the end of the year.

88
00:04:49,100 --> 00:04:54,500
This is another area that, if you forget, can essentially ruin your business.

89
00:04:54,500 --> 00:04:58,100
Make it a point to keep an estimate of the amount of taxes you owe,

90
00:04:58,100 --> 00:05:00,700
and then put that money aside so that you are prepared

91
00:05:00,700 --> 00:05:04,250
to pay your taxes and not scrambling to get money together.

92
00:05:04,250 --> 00:05:06,200
This is really important.

93
00:05:06,200 --> 00:05:09,170
Because people are so used to having taxes taken out of their paycheck,

94
00:05:09,170 --> 00:05:13,200
when they're self-employed they forget all about income taxes.

95
00:05:13,200 --> 00:05:17,010
Not being prepared and having to pay such a large amount at the end of the year

96
00:05:17,010 --> 00:05:20,400
can really put your company behind in terms of cash flow.

97
00:05:21,060 --> 00:05:23,070
Rather than paying all at once,

98
00:05:23,070 --> 00:05:26,900
you can pay estimated tax payments quarterly towards your taxes.

99
00:05:26,900 --> 00:05:30,870
These smaller amounts can make it easier to stay on top of your payments.

100
00:05:30,870 --> 00:05:35,030
Aside from your income tax, you will also have to pay self-employment taxes

101
00:05:35,030 --> 00:05:38,110
such as Social Security or healthcare.

102
00:05:38,110 --> 00:05:40,400
These rates change from time to time,

103
00:05:40,400 --> 00:05:42,860
and the amount you pay depends on all sorts of things,

104
00:05:42,860 --> 00:05:45,350
including your company's structure.

105
00:05:45,350 --> 00:05:47,430
You could try and do it all on your own,

106
00:05:47,430 --> 00:05:49,620
but making a mistake when it comes to taxes

107
00:05:49,620 --> 00:05:52,090
is the worst kind of mistake you can make.

108
00:05:52,090 --> 00:05:54,700
It's definitely not easy to solve.

109
00:05:54,700 --> 00:05:58,860
I recommend finding a tax professional who can help you with all these issues.

110
00:05:59,690 --> 00:06:02,350
When looking for an accountant who can guide you on these matters

111
00:06:02,350 --> 00:06:05,380
and do your taxes for you, take your time.

112
00:06:05,380 --> 00:06:07,900
The best way to go about it is to be as picky

113
00:06:07,900 --> 00:06:11,570
as you would be when deciding whether you want to work for a client or not.

114
00:06:12,160 --> 00:06:14,580
Take your time and talk to a bunch of people.

115
00:06:14,580 --> 00:06:17,040
Treat it like an interview process.

116
00:06:17,040 --> 00:06:19,870
You are the client in this situation, and you want to find someone

117
00:06:19,870 --> 00:06:22,370
who can do the best job for you.

118
00:06:22,370 --> 00:06:25,950
When selecting an accountant, they should have the following traits.

119
00:06:25,950 --> 00:06:28,820
First, a good reputation.

120
00:06:28,820 --> 00:06:32,590
Talk to other freelancers about an accountant or an accounting firm.

121
00:06:32,590 --> 00:06:35,290
Bad news spreads quickly, and if there's anything negative

122
00:06:35,290 --> 00:06:37,280
you will hear about it immediately.

123
00:06:37,280 --> 00:06:40,630
Your accountant should also be a great communicator.

124
00:06:40,630 --> 00:06:45,360
Just like a good client, a good accountant should be well-rounded in communication.

125
00:06:45,360 --> 00:06:48,790
They should get back on time with any questions you have,

126
00:06:48,790 --> 00:06:51,630
and they should be able to explain any actions they are taking.

127
00:06:51,630 --> 00:06:54,650
They should also be an educator.

128
00:06:54,650 --> 00:06:57,640
You want an accountant who's going to help you run your business

129
00:06:57,640 --> 00:07:00,020
and not just be a number cruncher.

130
00:07:00,020 --> 00:07:03,360
Find someone who is willing to take the time to explain things to you

131
00:07:03,360 --> 00:07:06,080
and guide you through the murky areas.

132
00:07:06,080 --> 00:07:08,220
When you're interviewing accountants,

133
00:07:08,220 --> 00:07:10,910
make sure they have experience dealing with your industry

134
00:07:10,910 --> 00:07:13,300
and have worked with some of your peers.

135
00:07:13,300 --> 00:07:15,440
The last thing you want is an accountant who is

136
00:07:15,440 --> 00:07:19,990
as unfamiliar about the business aspect of your industry as you are.

137
00:07:19,990 --> 00:07:22,260
Finally, you want them to be available.

138
00:07:22,260 --> 00:07:25,600
You should be able to reach them in your time of need.

139
00:07:25,600 --> 00:07:27,470
Just as you set rules with your clients,

140
00:07:27,470 --> 00:07:30,420
you shouldn't expect your accountant to be available on the weekends.

141
00:07:30,420 --> 00:07:33,880
But they shouldn't be more than a phone call or e-mail away.

142
00:07:33,880 --> 00:07:35,860
Remember, at the end of the day,

143
00:07:35,860 --> 00:07:38,220
accounting will help you watch over your money

144
00:07:38,220 --> 00:07:40,180
but it won't make you any money.

145
00:07:40,180 --> 00:07:43,010
Learn the essentials you need to run your business,

146
00:07:43,010 --> 00:07:45,890
but don't spend a lot of time managing your books.

147
00:07:45,890 --> 00:07:48,430
Invoice effectively, track your expenses,

148
00:07:48,430 --> 00:07:51,190
and log your income, and let your accountant do the rest.