Q: I have begun doing freelance design work to supplement my income. I have a website to highlight my work, but it is only my side hustle. Do I need to do anything special accounting with the money I earn from designing since it is not what I do full-time?
A: Ah, the infamous side hustle. It has become more and more common for people of all ages, but particularly Millenials, to pick up an extra job in order to meet their expenses. For some, it’s also a way to dip their feet in the waters of entrepreneurship without having to get their hair wet.
The good news is that you are a business owner, my friend. Congratulations! Whether it is what you do as the sole means of earning a living or part-time, you have created a service, drawn customers, and gained income from the enterprise. That means that financial management of and bookkeeping for your enterprise have jumped to the top of your list of responsibilities.
A positive sign of your business acumen is the fact that you knew enough to ask whether you needed to do anything special to account for your freelance earnings. Knowing the right questions to ask is a huge part of growing a successful company. As a business owner, you are responsible for your bookkeeping and tax payments, among other responsibilities. Here are a few tips for staying on top of your financial management.
1. Have a contract with each client.
It is critical that you document the services you provide to each client, as well as the charge for your services. That contract should also outline your payment policies, including late charge assessment. There are a number of good contractor agreement templates online. If possible, have a lawyer review your contract before putting it into use. One of the biggest risk to freelancers is clients who try to skip out on payment. Protect yourself.
2. Create a business bank account.
As a business owner, you are responsible for your own bookkeeping. Keeping your business income separate from your personal accounts is essential for your records. Take advantage of free financial software like Wave to track your company’s earnings and expenses, which will help you avoid complicating your taxes down the line.
Getting organized with your side income now will present having a number of headaches in the future.
3. Take ownership of your business’ finances.
Whether you work for your business full or part-time, knowing how to manage your money is critical. Far too many entrepreneurs, particularly women, shy away from this aspect of their work. I’ve never understood why. Understanding how to make your money work for you is empowering. It enables you to affix details to your plans, bringing you closer to your goals. Once you overcome the mental hurdles surrounding money, you can grow your income and make better-informed decisions for your company.
You have embarked on a journey that some spend their lives dreaming about. That is no small achievement. The path to entrepreneurship is a challenging but rewarding one. I’m excited for you to embark on this adventure. Managing your money is a critical skill that will lead to maximized earnings and a secure future. The power is in your hands.
Photo by Pepi Stojanovski on Unsplash