Keeping Accounts
There are numerous articles written on why and how freelancers should keep accurate records. First of all, he needs them in order to satisfy the tax man, both Federal and State. My business has been going slowly enough that I thought my learning curve was keeping up with it. However, I have experienced a few glitches along the way, and being a responsibly intelligent person, I assume that others have experienced similar problems, our tax system being as obfuscated as it is.
One thing I have found is that the Federal IRS can be more forgiving than some of the state tax systems, in terms of accepting the numbers you claim to have earned and spent. This is no doubt due to the fact that the federal system receives moneys from all of us, while the state systems receive moneys only from the people who live there.
As far as record keeping goes, the first thing the good freelancer needs to have for each of his clients is a contract. I prefer to keep them short and to the point, as I would hate to lose a good client because he cannot understand the contract that I send him to sign. The three most important elements to the contracts I use are:
Define the job I will be doing for my client.
Define the funds my client is expected to pay for this job.
Define the sort of communication my client and I should expect from each other.
Define who owns the work when I have finished writing it. My contract states that my client does not own the work, and therefore cannot sell it, until he has paid for it in full.
Simple as these points may be, it is always best to sit down with a lawyer and have him help you draw up something that is neat and professional. He or she will know what laws pertain to the state where you live and how those laws should be represented in your contract.
The next most important item is invoices. Every single time there is an exchange of money between my client and me, I put that exchange in the invoice that I keep for my client. Each of my clients has a running invoice showing all the moneys that he paid, when he paid them, for what services he paid them, and of course everything that is still due. Ideally, these invoices should be sent out once a month, or on a regular basis that suits the time frame of the work I am doing for my client.
I keep these invoices in two places on my computer. First in the individual files that I have for each of my clients, and second in a file labeled Finances, where these invoices are dated and separated out for each quarter of the year. Plus, I keep a file of all the printed invoices and receipts pertaining to my business, divided into months and quarters. However, I am not an accountant, so if you have any questions, you are probably better off going to one, but from my own experience, I have found that these are the most rudimentary forms we need to keep our businesses going.