Tracking your time and expenses
There are a ton of tools in the market for freelancers to track their time and expenses.
Time tracking is necessary only if you’re charging clients hourly or want to track your own time to get a sense of what your hourly rate is if you’re using deliverable pricing.
Expense tracking is always important because a) some expenses may be able to be billed to client b) you want an accurate view of your profitability and c) you can write off several expenses against your gross income as a pass-through entity, which lowers the profit tax you have to pay (more to come in taxes section). If you don’t track expenses, you’re giving up one of the huge benefits of being an independent contractor — the ability to write-off expenses pre-tax.
A few popular tools include:
In general, when you’re first starting out, if you’re only tracking time, we recommend doing this in a simple Excel/ Google spreadsheet with the date, the start time, the end time, and what work was done during that period (ideally linking to a deliverable).
When it comes to tracking expenses, would recommend you use an accounting software, such as QuickBooks, Wave, Xero, or Bench.
If you have a separate bank account and credit card for expenses, a simple software like Wave or Quick Books will work best. Make sure to link your bank account and card to Wave or Quick Books which allows for easy and fast importation of expenses, so you can quickly categorize expenses. Furthermore, both Quick Books and Turbo Tax are owned by Intuit, so this integration should simplify your life when it comes time to file taxes.
If you really hate expenses or have a high volume of transactions, it may make sense for you to use a bookkeeping service, such as Bench. Bench costs $119 — $299 per month depending on your volume of expenses ($1,000 — $1,000,000 dollars).
That said, it the cash strapped early days, we recommend you keep your own books. Set aside one hour every week to catch up on expenses. If you let it go for a long time, it can become an extremely daunting task. But if you quickly categorize expenses every Friday night, it should not be an issue. For taxes, an expense on a credit card statement is sufficient, but uploading receipts can never hurt, so if you have the records, would recommend uploading them to the transaction.