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Accounting for Freelancers: 5 Tips to Master Your Business Finances

accounting-for-freelancers-5-tips-to-master-your-business-financesNote: The tips here are meant to provide an overview of best practices regarding accounting needs for freelancers. For advice specific to your situation, seek counsel from authorized financial experts.

For freelance medical writers and editors, day‑to‑day responsibilities include managing a business in addition to producing quality content. But collecting receipts, preparing for quarterly taxes, and staying on top of business accounting can be a major source of stress.

If you are a freelance medical writer overwhelmed by accounting, these tips are for you.

1. Choose the right tool

Managing your finances could feel like taking on an extra client. Following an efficient accounting workflow helps you stay focused on your freelance medical writing. The best way to set yourself up for success is to choose the right accounting tool. Small business accounting tools include software or cloud‑based platforms that allow you to access your numbers from anywhere. 

Examples include Quickbooks, Freshbooks, Xero, Wave, and more. Specific requirements will vary according to your business, but functions to consider include:

  • Real‑time connection to bank accounts
  • Invoice building capabilities
  • Tax preparation assistance
  • Payment collection
  • Time tracking
  • Scalability 

Once you have chosen an accounting tool, take the time to set it up properly. Then use it regularly. It might take a month or two for the platform to feel natural and intuitive, but the time investment will be worth it in the end. Also remember that while no system is perfect, consistently using an imperfect system is better than no system at all.

2. Separate your finances

Even at the beginning of your freelance career, it is important to disentangle business expenses from personal purchases. When in doubt about which category to use, consult a financial professional.

Keeping personal and business accounting separate is necessary for freelance medical writers who have established an S‑Corp or LLC. But even sole proprietors benefit from distinguishing the two because this provides a clearer picture of the freelance business’s financial health.

3. Plan ahead

In the short term, planning ahead means setting aside quarterly tax payments and profit distributions. But it is also important to plan for your retirement and future financial needs. 

Experienced freelance writer Cathryn D. Evans says, “What I wish I had been told but was not (or perhaps did not listen well enough) was how critical it is to set up your own 401K or other retirement plans immediately, from Day 1. Always take a percentage of all income and put it aside for retirement.”

4. Hire a professional

For freelance medical writers, contracting with a bookkeeper or accountant expands capacity for the heart of the business—medical research and writing. Many small accounting businesses are available on retainer, so start by budgeting for only a few hours of assistance per month.

Hiring an accountant or CPA also provides peace of mind. There is security in knowing your finances and taxes reflect the latest small business requirements and meet all tax regulations.

5. Schedule regular record updates

Finally, set aside regular blocks of time to update your records. It is much easier to schedule regular 15‑minute bookkeeping sessions than to cram in a year of records the week before taxes are due. 

According to the IRS small business guidelines, you should keep records documenting: 

  • Gross receipts: Income you receive from your business, such as invoices, deposit records, and forms 1099‑MISC. 
  • Expenses: Expenses incurred for your business, such as canceled checks, account statements, credit card receipts and statements, and invoices. Look ahead at the form you use for tax filing to figure out the best categories to use. It can be useful to use receipt tracking software such as Expensify, Shoeboxed, or Smart Receipts, and then export that data into your main accounting software or spreadsheet.
  • Assets: Property, such as machinery and furniture, that you own and use in your business. Records can include purchase and sales invoices, real estate closing statements, and canceled checks.
  • Employment taxes: Even if you only employ yourself, there are specific employment tax records you must keep for the period of time required by the government. Refer to the IRS Recordkeeping for Employers guide for more information.

If you’re a freelance medical writer or editor, running your business is as important as honing your medical communication skills. Streamlining your finances helps you build a strong foundation to grow your business.

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May 18, 2020 at 8:00 AM

American Medical Writers Association

AMWA is the leading resource for medical communicators. The AMWA Blog is developed in partnership with community members who work every day to create clear communications that lead to better health and well-being.