Bookkeeping

Bookkeeping is essential to running your own business. If you don't keep up with it throughout the year, you'll be scrambling come tax season. Stay on top of it as you go — it's much easier than trying to reconstruct six months of transactions in April.

What to Keep Track Of

Throughout the year, you should be categorizing your expenses so you know exactly what you can deduct as write-offs come tax time. Here are some expenses freelancers commonly track:

→ Software subscriptions — tools you use for your business (Notion, Canva, scheduling apps, etc.) → Coffee shops and restaurants — any time you work from a café or take a client to lunch → Gas and mileage — driving to anywhere you work outside your home (coffee shop, library, coworking space, client meetings) → Courses and coaching — you can write these off as "other business expenses" → Tech hardware — your laptop, external monitor, headphones, etc. → Home office deduction — if you work from home, you may be able to deduct a portion of your rent/mortgage and utilities based on the square footage of your workspace → Phone bill — if you use your phone for business, you can usually deduct a portion → Professional memberships and communities — industry groups, freelance communities, etc. → Health insurance premiums — if you're self-employed and paying your own premiums, these are often deductible → Marketing and advertising spend — anything you pay to promote your services → Payment processing fees — Stripe fees, etc. are fully deductible

Beyond write-offs, bookkeeping gives you a big-picture view of your business health. At least once per quarter, pay attention to:

→ Where your money is coming from → Whether you're setting aside enough for taxes → How much you're actually earning per hour → Whether you're on track for your income goals after taxes

Doing this quarterly check-in can reveal a lot. You might realize a service is taking twice as long as you planned and you need to raise your rates. You might notice a low-paying client is eating up a disproportionate amount of your time. Or you might catch that you've forgotten to set money aside for taxes before it becomes a crisis.

Bookkeeping Software

You don't necessarily need bookkeeping software — a spreadsheet can work when you're just starting out. But as your business grows, the time you spend manually managing a spreadsheet is almost certainly worth more than the cost of a tool that does it for you.

My recommendation: QuickBooks

QuickBooks has rebranded some of its plans since I first wrote this lesson. The plan formerly called QuickBooks Self-Employed is now called QuickBooks Solopreneur, currently starting around $20/month (pricing changes frequently and discounts are often available, so check the current rate before signing up).

Here's why I love it:

→ Automatically imports transactions from your banks and credit cards → You can create rules so it automatically categorizes recurring expenses — I have it set up so all coffee shop charges are automatically categorized as "meals" → Easy to separate business and personal expenses if they run through the same account → Exports clean reports for your own analysis or for filing taxes → Integrates with TurboTax if you file your own taxes

Fair warning: QuickBooks can be slow to load, especially during tax season. Sometimes you have to clear your cache to get it working. But the time it saves me on categorization and reporting is worth it.

Other options worth knowing about:

→ Found — this one has come a long way since I first mentioned it. Found is a business banking platform built specifically for freelancers and solopreneurs with bookkeeping, invoicing, automatic expense categorization, and real-time tax estimates all built in for free. The free plan is solid; Found Plus adds features like receipt scanning and in-app quarterly tax payments for ~$20/month. If you want banking and bookkeeping in one place without paying for a separate tool, Found is worth a serious look.

→ Wave — Wave updated its pricing model in 2024 and moved some features (like automatic bank transaction imports) behind a paywall. Basic invoicing and bookkeeping are still free on the Starter plan, but the Pro plan is $16/month for the full feature set. Still a decent free option if you're just starting out and want something simple.

→ FreshBooks — great software but on the pricier side for newer freelancers; better suited once you're more established

→ Novo — my business bank; has some basic bookkeeping built in but the automations can be glitchy (every PayPal charge gets categorized the same way and I can't get it to differentiate between them). Great as a bank, but not my go-to for bookkeeping

→ A spreadsheet — totally valid when you're just starting out. Create a tab with dropdown categories for all your tax write-off types, export your bank transactions monthly as a CSV, paste them in, and categorize. It works. It's just tedious — and once you have more than a handful of clients, the $20/month for QuickBooks is almost always worth it.

When to Hire a Bookkeeper or Accountant

A lot of newer freelancers don't realize this is an option — or think it's only for people who are making a lot of money. It's not.

If you're feeling overwhelmed by your finances, making more than $50k/year, running multiple income streams, or just really hate doing this stuff, it might be worth hiring a bookkeeper (ongoing, monthly) or an accountant (usually for tax season). A good accountant can also help you find deductions you didn't know existed and make sure you're handling quarterly taxes correctly.

You can find affordable options through the American Bar Association's referral directory (for legal questions), or search for freelancer-focused CPAs through your professional network or communities. Many freelance communities have member recommendations for accountants who specialize in self-employed clients.