When you\u2019re a freelancer, it\u2019s easy to get so lost in the pursuit of making money that you neglect your finance documents.<\/p>\n
Yes, believe it or not,\u00a0anyone earning money for services or products needs certain finance documents, even freelancers.<\/p>\n
While you\u2019re focusing on surviving the market, trying to find new clients, making sure they pay you on time<\/a> and increasing your brand<\/a>, you now find out you have yet another job. Keeping your finances in order.<\/p>\n That doesn\u2019t mean just paying your bills. That means knowing exactly what the financial situation of your freelance business is. Because if you think what you\u2019re doing is not a business, you\u2019re in for a surprise when tax time rolls around.<\/p>\n Beyond that, these finance documents will help you keep a watchful eye on your financial situation to take your business to the next level. They will help you determine whether your goods and services are priced accurately, identify your margins, and help with your cash flow.<\/p>\n We\u2019ve already talked about the importance of tracking your expenses<\/a>, so today we\u2019ll focus on your finance documents. Although there are many that are important and beneficial to have, we\u2019re going to list the four most important finance documents for your freelance business.<\/p>\n This helps you to realize whether your business is making money or bleeding it. It\u2019s impossible to determine that just from memory alone and the occasional glance at your bank account.<\/p>\n Also known as the P&L or income statement, this document allows you to review your income and expenses. It usually covers anything from a few months to a full year. This period is up to you to determine.<\/p>\n Your income statement will have two parts: revenue and expenses.<\/p>\n Revenue includes<\/p>\n Expenses include<\/p>\n For the most part, freelancer revenue will only include operating revenue, and the expenses will probably just span operating expenses (and perhaps non-operating expenses if you’ve taken a loan for your business).<\/p>\n These are important terms to remember when creating your income statement. To make your life a little bit easier, we\u2019ve created a free Profit & Loss Statement that you can download here<\/a>.<\/p>\n Your balance sheet gives a nice snapshot of your business at any time. Many businesses do it at the end of the year, but it can be at any time of your choosing.<\/p>\n Pretty much, a balance sheet comes down to the following equation:<\/p>\n Liabilities + Owner\u2019s Equity = Assets<\/em><\/p>\n The equation should be balanced, meaning your assets should be equal to your liabilities and owner\u2019s equity.<\/p>\n Your assets include:<\/p>\n For liabilities, there are:<\/p>\n Mathematically, liabilities = assets \u2013 owner\u2019s equity<\/strong><\/p>\n Your owner\u2019s equity includes any money you\u2019ve invested in the business – the money you’ve withdrawn + net income since the business began.<\/p>\n Mathematically, owner’s equity = assets – liabilities<\/strong><\/p>\n Again, we\u2019ve got your back, and have created a balance sheet here<\/a> that you can download to help you get started.<\/p>\n This is perhaps the easiest of the finance documents to understand, because it basically is a measurement of how much cash is flowing into and out of your business. This document is important because it helps you to understand trends in your cash management and helps to keep your business solvent (meaning you can meet your financial obligations). It can be calculated as often as necessary, but usually monthly or even quarterly.<\/p>\n Your cash flow includes:<\/p>\n It is mathematically quite simple to calculate your ending cash balance:<\/p>\n Ending cash balance = beginning cash balance + cash inflows \u2013 cash outflows<\/em><\/p>\n This means that, if you\u2019ve had a cash balance of $375 at the beginning of the month, earned $425 and spent $650, your ending cash balance would be $150.<\/p>\n We\u2019ve got you covered with calculating your cash flow. Download our cash flow statement template here<\/a>.<\/p>\n Although this isn\u2019t usually included in important finance documents for businesses, it is crucial for freelancers.<\/p>\n Invoices are the finance documents you use to make sure you get paid for your goods and services. They are the tools you need to get your money. They are also a record of your financial activity and a legally binding document once both parties have signed and agreed.<\/p>\n Invoices act as culturally acceptable versions of \u201cYou owe me money. Give me money.\u201d You can\u2019t exactly write that in an email and send it to your customers as, for one, it might come off as rude, and two, it doesn\u2019t detail what the payment request is for.<\/p>\n Invoices list your goods and services utilized or purchased by your customer. They can also include many other things, such as payment terms for when the customer should provide your payment.<\/p>\n Invoices are crucial for your cash flow, and often lapses in getting your invoices paid can be the difference between positive cash flow and negative cash flow.<\/p>\n We\u2019ve got quite a lot of invoice templates for you to download in different formats (such as Word, Excel, OpenOffice<\/a>, InDesign<\/a>, PDF<\/a>, Photoshop<\/a> and GIMP<\/a>). But we\u2019ve also got a few reasons why online invoicing software is better than just using invoice templates<\/a> over and over again. In order to properly manage your finances and keep track of your expenses, you\u2019ll need a good, easy system in place and InvoiceBerry\u2019s software<\/a> meets that mark.<\/p>\n In order to really succeed as a business person (yes, freelancer, you are a business person), you\u2019ll really need to take charge of your finances.<\/p>\n In order to take charge of your finances, you\u2019ll need these four crucial finance documents as a basis. There are many others, as I\u2019ve said before, that would be helpful for your business, but these are a great starting point.<\/p>\n Good luck!<\/p>\n","protected":false},"excerpt":{"rendered":" When you\u2019re a freelancer, it\u2019s easy to get so lost in the pursuit of making money that you neglect your finance documents. Yes, believe it or not,\u00a0anyone earning money for services or products needs certain finance documents, even freelancers. While you\u2019re focusing on surviving the market, trying to find new clients, making sure they pay […]<\/p>\n","protected":false},"author":9,"featured_media":6865,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":"","jetpack_publicize_message":""},"categories":[91],"tags":[265,230,325,271],"jetpack_featured_media_url":"https:\/\/i1.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2016\/11\/feature-4-documents-freelancers.jpg?fit=1380%2C580&ssl=1","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p5m6q6-1KY","amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/6756"}],"collection":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/comments?post=6756"}],"version-history":[{"count":5,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/6756\/revisions"}],"predecessor-version":[{"id":6887,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/posts\/6756\/revisions\/6887"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/media\/6865"}],"wp:attachment":[{"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/media?parent=6756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/categories?post=6756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invoiceberry.com\/blog\/wp-json\/wp\/v2\/tags?post=6756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Profit & Loss Statement<\/strong><\/h2>\n
\n
\n
Balance Sheet<\/strong><\/h2>\n
\n
\n
Cash Flow Statement<\/strong><\/h2>\n
\n
Invoices<\/strong><\/h2>\n
Get your finance documents in order<\/h2>\n