Freelance bookkeeping basics, in one sitting

Bookkeeping for a solo freelancer is not accounting. It is a small set of habits that keep your records honest enough to file a return, price your work, and answer questions from a tax authority three years from now. It takes about twenty minutes a month once set up.

General guidance rather than tax advice. Specific rules vary by country.

Cash basis or accrual

• Cash basis. Income counts when the money arrives, expenses when they leave. Simple, matches your bank account, and is what most small freelancers are allowed and advised to use.
• Accrual basis. Income counts when invoiced, expenses when incurred. More accurate as a picture of the business, required above certain thresholds or entity types in many countries, and more work.

Pick one, confirm it is permitted for your situation, and stay consistent. Switching mid stream creates a year where the same money is counted twice or not at all.

The records you actually need

• Sales. Every invoice issued, with number, date, client, amount, currency, and payment date.
• Purchases. Every business expense with the receipt attached, categorised, with the original currency preserved.
• Bank statements for every business account.
• Contracts and proposals, which establish what was agreed if a transaction is ever questioned.
• Mileage and travel logs, if you claim them.
• Asset records, for equipment being depreciated rather than expensed.

Retention periods vary, commonly five to seven years. Digital copies are generally acceptable in most jurisdictions, and are far more likely to still exist when needed.

The monthly routine

Same day each month, twenty minutes:

• Reconcile. Every line on the bank statement matches a record. Anything unmatched gets investigated now, while you still remember it.
• Chase. Any invoice past due gets a reminder today.
• Capture stragglers. Search your email for receipts you never filed. Software subscriptions are the usual offenders.
• Move the tax percentage for the month's income into the tax account, if you are not doing it per payment.
• Look at three numbers. Revenue this month, expenses this month, and cash on hand minus tax set aside.

The quarterly routine

Ten extra minutes, four times a year:

• Check your effective tax rate assumption against actual profit so far.
• Make any required instalment payment.
• File sales tax if you are registered.
• Review your subscription list for things you no longer use.

The annual routine

• Produce an income and expense summary for the year, categorised.
• Bundle the invoices and receipts your accountant will ask for.
• Compare actual profit against last year, and effective hourly rate against target.
• Decide one thing to change about pricing or client mix based on what the numbers show.

What to automate and what to keep manual

Automate capture, categorisation, invoice status, and reminders, because those fail through forgetting and forgetting is not fixable with intent. Keep the review manual, because looking at the numbers is the part that changes decisions and it only takes fifteen minutes.

The Durvy suite covers the capture and status side: Receiptly for expenses, Invoicy for sales, and a tax export that produces the categorised year end summary an accountant asks for.

TL;DR

• Choose cash or accrual deliberately and never switch mid year.
• Keep sales records, receipts, statements, contracts, logs, and asset records for five to seven years.
• Twenty minutes monthly: reconcile, chase, capture stragglers, move tax money, check three numbers.
• Automate capture and status. Keep the review manual, because that is the part that changes decisions.