I’ve been doing freelance full time for 2 years now. It’s been a lot of fun, but I’ve quickly discovered that there are certain things they don’t teach you in design school. Accounting sheets, for example. It’s no wonder, most creative type, run the opposite direction when it comes to math. In fact, I have one designer friend that chose art, simply because it was the major that required the least amount of math credits!
I’ve quickly learned, though, that accounting is essential to what I do and helps guarantee that my business stays healthy and afloat.
First things first. I keep all my business money in a separate banking account. In fact, I even keep it at a separate bank to make sure there’s absolutely no confusion. This makes it so much easier when I’m trying to keep track of business income and expenses.
I have two batches of spreadsheets. The first batch, guarantees I’m recording all the information that the IRS needs, come April. The second batch (for another day), helps me forecast business and predict how long I can keep keeping on.
My expenses sheet tracks all the purchases that I make. I use a professional accountant to prepare my taxes. Each year, he asks me to breakdown my expenses by category. On the spreadsheet, I’ve created a drop down on my options. This is far from an exhaustive list, but this list covers all of expenses.
On this sheet, I track my mileage. This can be everything from visits to a clients office to picking up office supplies, as long as it’s purely a business trip. It’s important that you fill out the purpose of the trip. It doesn’t have to be detailed, but it’s something the IRS will want to know, if you’re ever audited.
On this sheet, I track all my utilities. If you had your own office space, you can easily fill in the blanks. If you have a home office, like I do, I still fill in what all my bills are, but, I also include additional information. For example, how many square feet my home office is, the percentage of minutes I use are business calls, etc.
On the IRS Payments sheet, I keep track of all the estimated quarterly payments I make to the IRS.
Whenever I make a deposit into the bank, I automatically move at least 30% from my checking account into my savings account for these quarterly payments. This way, when that time rolls around, I know the money is there.
You can go to the IRS website and print off the 1040-ES vouchers. When you submit your payment to the IRS, you’ll include the appropriate voucher. There’s also information in the packet about where payments should be mailed to.
On this sheet, I keep track of all the income that I make. This is an important reference when I get ready to write my IRS checks.
You can read more on Accounting for Designers (Part 2), which focuses on the part of accounting that keeps your business afloat: business opportunities, cash flow, etc.
What are other things you keep track of? Do you use spreadsheets or QuickBooks to keep track of everything?