Organizing Your Business Expenses: The Freelancer’s Guide

It’s tax time—and after months spent ignoring your business receipts and bank statements, you know it’s time to get organized. It’s not long before you’re kicking yourself as you try to sort through all of your transactions and tax forms without pulling your hair out.

There’s a better way. Rather than saving all of your bookkeeping for an end-of-year mad dash, there are several tips you can use to stay on top of your finances all year long. And the best part? It doesn’t have to be a complete eye-glazing nightmare (seriously, we promise).

This guide covers a few practical tips and tools you can use to make organizing your business finances more of a breeze than a burden.

Choose the Best Accounting Software

Gone are the days when you’d run your business with a paper ledger and a shoebox full of receipts. Today, there are plenty of accounting software options and tools geared toward helping solopreneurs just like you.

Ultimately, you want this solution to save time—not add complexity. So, look for an AI bookkeeping solution that automates tedious and time-consuming tasks like expense categorization and even your tax prep (hey, Lettuce does this and more).

If you’re not sure how to weed through your choices, here are a few things to prioritize as you find the right accounting software for your business:

• Integration with your bank account: Bank reconciliation is a pain. Skip this elbow grease by looking for software that connects directly to your bank account. For example, Lettuce opens a dedicated bank account for your business and then automatically monitors and categorizes every transaction for you.
• Reporting tools: Your finances are one of the most important aspects of your solo business, so they shouldn’t be a mystery. Your accounting software should give you a clear overview of your income, expenses, and even your estimated taxes.
• Cloud-based access: The ability to work from anywhere is one of the biggest perks of being self-employed. So, you don’t want to be limited by your bookkeeping platform. Choose one that allows you to access your financial data wherever you choose to work that day—whether it’s your couch or a coffee shop.

Keep Your Business and Personal Finances Separate

Your business expenses shouldn’t come out of the same bank account as your toothpaste. While you’re not required to set up a business bank account, it’s a strongly recommended best practice. It makes all of your bookkeeping way easier, makes your business feel far more legitimate, and ensures you benefit from the full protections of your business entity (like your LLC or S Corp).

When you separate your business transactions from your personal stuff, it’s easier to track your deductible expenses and maintain accurate financial records. Plus, it helps with your tax reporting too.

Opening a business bank account doesn’t have to mean an appointment at a stuffy bank or a pile of paperwork. Lettuce opens a dedicated business bank account for you and then connects directly to it. This automates all of the groan-worthy bookkeeping tasks you’d otherwise avoid.

Get Expert Advice and Guidance

Listen, even with the best accounting software in your corner, bookkeeping (and especially taxes) can be complicated and overwhelming. The complexity is a feature—not a bug.

That’s why it’s so helpful to have an expert to turn to when you need advice or just some peace of mind that the IRS isn’t outside of your house in an unmarked car.

If you think that means stomaching the cost of a CPA or virtual bookkeeping service, that doesn’t have to be the case. AI-powered bookkeeping can be an efficient, cost-effective alternative to a traditional, human accountant.

Curious about the pros and cons of setting up an S Corporation? Want some easy tips to save money on your taxes? You can ask LettuceHeadAI, a chatbot that was built to help solopreneurs like you access practical, easy-to-understand information about accounting and taxes.

Think of it as having a friendly, knowledgeable accountant in your back pocket—without having to pay them a retainer. 

Take Control of Your Cash Flow Management

Cash flow is the movement of money in and out of your business. So, it makes sense that this is an important aspect to keep an eye on as a business-of-one. Ideally, you want more money coming in and then going out.

Unfortunately, it’s way too easy to take a passive approach to cash flow management when you’re a freelancer. You just ride the waves, rather than being strategic about controlling your money, investments, and growth strategies.

If you’re going to manage your cash flow, you need to understand it. So, commit to:

• Creating (and sticking to) a budget: A clear budget will help you be strategic about your money and avoid spending more than you earn.
• Tracking all of your income and expenses: At any given time, 58% of freelancers are waiting on money that’s tied up in unpaid invoices. It’s one of many reasons why it’s so important to stay on top of your income and expenses. You can keep your spending in check while also following up with clients who haven’t paid yet.
• Setting up payment schedules: Whether you need to pay vendors, contractors, or even yourself (as an employee of your S Corp), you need to run payment on time. Creating payment schedules ensures it’s never missed.
• Forecasting future cash flow: Every self-employed person is familiar with the “feast or famine” cycle when running a business. Reviewing your data to spot trends can help you predict future cash flow and plan accordingly.

Lettuce does all of this for you, so you can put yourself in the driver’s seat of your cash flow—without having to obsess over the numbers yourself.

Prioritize Regular Bank Reconciliation

There are a lot of moving parts in bookkeeping for your business-of-one. It’s easy to forget to log an invoice payment or categorize a random expense. Before you know it, your financial records and your bank transactions have a lot of discrepancies and you need to sink valuable time and energy into untangling that knot.

You can save yourself a lot of trouble (and time) by making bank reconciliation a priority in your business. This means:

• Reconciling regularly: Set yourself a weekly or bi-weekly reminder to identify and fix any mismatches.
• Categorizing unfamiliar transactions: If and when you spot an unknown charge, dig in so you can categorize it correctly in your accounting tool.
• Clear your outstanding transactions: Review your pending transactions to ensure they all get fully settled the way you expect.

Sound like a lot of time away from billable client work? You don’t need to do all of this yourself. Lettuce sets up and connects to your business bank account so that all of the above happens automatically. Your bank account and your financial records are always on the same page—without any intervention from you.

Your Finances Are Crucial—But They Don’t Need to Be Complicated

Let’s face it: You didn’t get into business for yourself because you were excited about bookkeeping. That means it’s easy to let your business finances turn into a disorganized mess until you have no choice but to deal with them.

The good news is that you can stay on top of your finances without it feeling like yet another task on your towering to-do list. With Lettuce, you can:

• Quickly set up your business as an LLC and file your S Corp election (it only takes five minutes!)
• Open a dedicated bank account (Lettuce does all of the work for you!)
• Connect to your bank account for automatic bank reconciliation
• Effortlessly manage your payroll
• Automatically pay your quarterly estimated tax payments with money Lettuce proactively sets aside

And on top of it all, you’ll save money. Lettuce users who earn $100,000 or more per year save over $10,000 annually in taxes.

With Lettuce, you’re not just managing finances—you’re transforming your approach to your business. Give Lettuce a try and see how you can spend less time bookkeeping and more time doing the work you’re actually excited about.