Self-employed or a Freelancer? How to Prepare and Manage Invoices Like a Pro
The novel coronavirus of 2019 turned our lives upside down, and three years later, we are still reeling from its effects.
One of these is how it created a big impact on Canadian employment. At the height of COVID in May 2020, it’s said that the unemployment rate in the country reached 13.7 per cent. However, as health and safety measures were put into place and vaccinations became readily available, the number started to slide down. By December 2021, the unemployment rate was pegged at 5.7 per cent, a significant change.
Despite this improvement, however, Statistics Canada surmises that the pandemic has negatively affected the self-employment rate in the country. Before 2020, the self-employment rate was growing steadily in the country. In fact, before COVID took over our lives in February 2020, the self-employment rate was 2.9 million. As of December 2021, the number is down to over 2.6 million.
Self-employment or freelancing has advantages that a typical 9 to 5 job can’t offer. For one, you’re completely in charge of your own schedule. There’s none of those occurrences where bosses breathe down your neck and track your activity every hour or so. Your earnings are your own, and you take in projects at your own pace.
However, like with almost everything, there are disadvantages to freelancing. Most notable of which is that the pay cheque doesn’t come as regular as every two weeks. This is why it’s always a must to know a thing or two about preparing and managing your invoices. See below for tips.
Use trusty ol’ Microsoft Excel.
When self-employed, you deal with a lot of multi-tasking as you probably find yourself working on multiple projects at the same time. While it’s likely you have your memory power working overtime to know which is which, it’s always a good thing to keep a tracker of everything that you’re working on. The best way to do that is through Microsoft Excel. Yes, it’s not just for accountants! This program is a great way for you to create sheets separated by rows and columns according to Client, Project (write a two- or three-word description), Target Completion, Actual Completion, Billing Amount, and Billing Date.
Get an invoice software.
Once you’ve set up a tracking system that works for you, it’s now time to look into the software to prepare and manage your invoices. With your Excel sheet, you can easily enter the necessary data to complete your invoice and send it to the client. Well-known invoice software like Quickbooks now offers a version specifically for self-employed individuals like yourself. Of course, choosing the right application all comes that to what your exact needs are. There are also programs available that you can integrate with other software for you to easily track clients by contract or payments.
Keep track of payments.
Once you’ve sent out the invoices, the next step is to keep track of payments. These days of e-transfers and electronic fund transfers, it’s important to check your bank statements line by line. Also ensure to check your email inbox in a timely manner and take a peek in your junk mail from time to time. You never know with these email applications, as one email from a client could automatically be placed in the junk pile for one reason or another, and you certainly won’t like finding yourself following up on a payment with a client when they have clearly sent over a payment, and the email notification for it went straight to your spam email folder!
Make sure to stick to a budget.
Once the payments are in, you’d think all is done, but work has only begun. Of course, as a self-employed individual, you’re responsible for your work expenses, so it’s important to stick to a budget when you have to spend on work-related items. For example, your headset is looking worn out but it still works perfectly fine when you’re in video conferences with your clients. If you have funds to spare, it’s ideal to get a replacement. However, if money’s tight, it’s better to wait it out.
Create a goal tracker.
Financial goals are just as important for freelancers. Though it’s just you, it will be a big help if you apply a big company perspective and prepare an annual budget report. This way, you can track your progress and set realistic financial goals for yourself for the year to come.
Self-employment may offer perks like flexibility, but this doesn’t mean it’s a walk in the park. One needs to have the right tools to ensure that they bill the right amount for their work and get paid at the right time.