4 Biggest Accounting Mistakes To Avoid

It’s possible to make accounting mistakes as a freelancer.

Freelancing might seem different from running a traditional business, but make no mistake, it is a legitimate business.

It doesn’t matter what freelance work you’re doing, be it writing, freelance translation, teaching, you name it! 

Looking for ways to become a Freelance Translator? Read this article for a step-by-step guide on How to Become a Freelance Translator.

You have to do everything you’re expected to do, like invoice clients, manage expenses, and file taxes, which are part of the package, just like any other enterprise.

Too many freelancers treat their finances as an afterthought, only to scramble when tax season rolls around, or payments don’t add up.

Now, does any of this sound familiar? Well, in that case, you’re not alone.

Many freelancers make mistakes in bookkeeping and accounting, but these mistakes can cost them time, money, and credibility with clients.

So, what are the common pitfalls you can even avoid? Well, there are a few that you really need to keep a close eye on.

1. Mixing Personal and Business Finances

This is one of the biggest slip-ups freelancers make.

But what? Well, using the same bank account for groceries, client payments, and business expenses might seem harmless, but it quickly turns into a nightmare when you’re trying to figure out what’s what.

Seriously, you’re going to have to open a separate bank account for your freelance income and expenses, it really is a simple way to fix this.

Not only does it keep your finances clean and make it much easier to track what you’ve earned and spent, but it also helps you plan for future growth and ensures you’re always in control of your business money.

Read about 4 Top Tips to Manage Business Money

Treating your work as a business helps you project professionalism, not just to your clients but also to yourself.

If you need something, like a loan, for example, banks do look into where the money is coming and going.

2. Forgetting to Track Expenses

Freelancers often don’t realise just how much they spend on running their businesses.

So, if you’re not keeping track, you’re missing out on deductions that could save you a lot of money come tax time. 

While it may cost you money, it’s definitely going to be in your best interest to look into having a good accounting software.

Having a good accounting software is one of the best ways to stay on top of expenses (plus tax authorities, finance experts like accountants, and loan officers will want to see this too).

This types of softwares allow you to scan receipts, categorise purchases, and generate reports, making the whole process far less painful.

READ: 7 Ways to Maximize Your Income Tax Returns

3. Not Saving for Taxes

Freelancers sometimes get caught up in the freedom of earning on their own terms and forget about taxes.

So, unlike traditional employees, taxes aren’t automatically deducted, so it’s on you to set aside money for them.

If you’re not prepared, the bill at the end of the year can be a harsh wake-up call (it’s incredibly stressful too).

Ideally, saving a percentage of each payment for taxes is the easiest way to avoid trouble.

It might feel like a hassle at first, but having that money ready when it’s needed saves a lot of stress.

4. Ignoring Invoices Once They’re Sent

Believe it or not, sending out an invoice is only half the battle.

If you’re not following up on unpaid invoices, you’re risking your cash flow and your peace of mind.

Clients can forget or delay payments, and it’s up to you to keep track.

Stay on top of your invoices and follow up regularly, it’s seriously as simple as that.

The Bottom Line

Freelancing is not just a way to earn a living, it’s a legitimate business that demands a professional approach, especially when it comes to finances.

By avoiding common pitfalls like mixing personal and business finances, neglecting expense tracking, failing to save for taxes, or ignoring unpaid invoices, you can set yourself up for long-term success.

Remember, treating your freelance work with the same level of care and structure as a traditional business not only enhances your professionalism but also helps you maintain financial stability and credibility.

With the right systems in place, you’ll not only survive but thrive in your freelancing journey.

READ: 8 Ways to Get Ahead of Your Finances