Bookkeeping secrets for the gig economy

Managing your own books can send shivers down the spines of even the bravest of freelancers. Whether you’re spearheading your own startup, consulting on the side, selling crafts on Etsy, or delivering for UberEats, independent gig work and solopreneuring have become the norm in a digitally connected world. In 2018, self-employed individuals made up 15 percent of the total Canadian workforce, according to Statistics Canada.

But if you don’t have a successful bookkeeping system, all that hard-earned income for the year could be undermined. Gig worker or not, the Canada Revenue Agency still expects meticulous money management and that you report all income coming in the door, even if it’s from a side hustle. “Gig workers and freelancers need to be on top of their business financials—namely, tracking their income and expenses,” says Patrick Payne, accountant and founder of online tax-accounting firm, Your Modern Accountant. “The best way to save on taxes is to be as organized as possible.”

Whether you’re a freelancer, gig worker, or solopreneur, you’re usually on a tight budget. Do-it-yourself bookkeeping is quite common (unless, perhaps, you’re involved in more complex tasks like import/export or managing a large inventory) and won’t eat into your sales. If you are just starting out, here are some ways to help you organize your business from a bookkeeping perspective—and stay in the CRA’s good graces.

Block out time for bookkeeping

Sure, you’ve got a zillion things to do and bookkeeping might be the last thing on the priority list. But here’s a savvy solution: Schedule the task into your calendar! For instance, make it a recurring weekly appointment or schedule a date every month to check-in and catch up on the moolah situation. The key takeaway is you should make time to schedule in a few hours every month to stay on top of recording all your transactions.

“After dealing with a messy first year, I took the bull by the horns and instituted ‘Financial Fridays,'” says Lisa Jackson, founder of Westdale Creative, a writing and content marketing agency. “Now, the first Friday of every month is dedicated to bookkeeping, receipt-organizing, budgeting, and invoicing. That way, I’m forced to stay on top of my financials.”

After all, bookkeeping tracks the movement of money in and out of your business. This is a core function of being on your own and a task that can help you make good decisions going forward. That fact alone should be a positive motivator to put a good system in place.

Know what to do first

If you are just starting out, it can be easy to get overwhelmed. Begin with simple steps like taking stock of basic business details—HST number, business number, CRA notice of assessment, quarterly reports, and articles of incorporation or business license—and storing this information in a secure but accessible place. “I created a digital CRA folder on my laptop and email inbox that houses my financials,” says Jackson. “I save any expenses, correspondence, business licensing documents, and tax returns in those folders, organized by tax year. That way, I’m not wasting time looking for a document later.”

Another pro tip: Study up on allowable business deductions set out by the CRA. Understanding common business expenses will help with accurate categorization and tax reporting. “In my first couple of years of business, I didn’t pay much attention to the CRA categories,” says Jackson. “I had to spend time re-categorizing my expenses at tax time.”

Separate yourself from your business

When you work for yourself, drawing a boundary between your personal and professional life can be tricky—and that includes your finances. For freelancers, it may seem easier to lump all your cash into one chequing account or use the same credit card for every expense. But here’s a reality check: This laissez-faire approach can leave you prone to mistakes and dealing with financial issues later. “In my first year, I used my chequing account for all my business transactions,” says Jackson. “But when tax time rolled around, I struggled to accurately calculate my earnings and HST return.”

Luckily, there’s an easy answer: Lead a separate business life. Your business will function far more efficiently if you open a dedicated business bank account to track your income and expenses. “The benefit of having a business bank account is that all of the data is in one place,” says Payne. “You don’t have to search three or four different bank accounts and credit cards for all of your income and expenses for the year. Though the government doesn’t require self-employed people to have a dedicated business bank account, it does make it easier for sorting and tracking income and expenses.”

Opening a business account doesn’t have to cost a bundle either. Coast Capital offers business accounts starting from $6 a month, and some business savings accounts are free.

Take control of your receipts

It may feel time-consuming to file all those loose slips stuffed in your wallet or in your inbox, but you’ll thank yourself later. “I used to throw receipts into a shoebox, resolving that I’d deal at tax time,” says Jackson. “But it was a nightmare: printed receipts had faded, some were missing, and I couldn’t identify mystery charges on my credit card. It was a mountain of work.” Also, if you don’t organize your email receipts at the time they go to your inbox, you may not remember how to search for them later.

The learning? If you regularly organize your receipts, claiming expenses at tax time will be a cinch. Spare yourself the hassle and set up a system—such as organizing and uploading receipts once a week or as you accrue the expense. “You can save them as a hard copy or as photos on your computer,” says accountant Payne. “You can even use receipt-sorting software.” Look into what mobile apps or receipt-scanning options might be right for you.

Tap into technology

There are oodles of apps and online software systems that can make for easier bookkeeping. “The best way to stay on track of your financials is to get some sort of software, such as QuickBooks, and so forth,” says Payne. “Utilizing technology helps save time, ensure accuracy, and keep information in one place.”

While some freelancers still use file folders or a basic Excel spreadsheet, if you move your paper receipts and expense reports over to digital files you no longer have to spend hours organizing them logically. Cloud services, mobile apps, and software scanners can do this for you, which will allow you to focus on your business and achieve better financial accuracy. Here are a few upgrades to consider:

• Invoicing: Online invoicing systems, such as Freshbooks or Wave Accounting, offer endless benefits: You can store customer information, set up recurring bills to anchor clients, and create customized templates that automatically include your vital business details (name, address, business number, HST number, etc.). It takes just a click of a button to create an invoice and send an electronic bill. And, if a client is tardy paying, the system automatically sends a reminder on your behalf. Online invoicing software also offers extra protection. Since everything is stored online, you’ll never misplace or accidentally delete an invoice again. Some software, like Quickbooks, even streamlines the process by linking your bookkeeping and invoicing systems. In the case of Xero‘s software, customer support is built into each plan and it has user-friendly tutorials for every section of its services.
• Bookkeeping: Forget old-timey ledgers and journals, “online accounting software allows you to automatically pull the transactions from your bank account into the software, speeding up data entry and minimizing the risk of errors,” says Payne. It’s far more efficient and accurate than manual bookkeeping and offers real-time information about your business. For instance, with Quickbooks, you can upload receipts, analyze your cash flow, and generate customized reports (such as balance sheets or an annual HST return). Plus, the “books” are stored on a cloud system that’s accessible anywhere with a WiFi signal. “You can allow other people—such as your accountant or business partners—to connect to the same system and review and make adjustments accordingly,” says Payne. “You’re less likely to lose the data because someone else is responsible for hosting it.”

But how do you choose the right accounting software? Payne says to look for software that best aligns with your specific business needs. “You may have certain criteria you’re looking for—such as price, functionality, and user experience,” says Payne. “There is a multitude of options out there, and almost any small business or gig worker should be able to find one that fits.”

Become a pro—or reach out to one

Perhaps you take to bookkeeping pretty easily. That will be apparent if you immediately know what’s happening with your money at any given time and can easily make business decisions.

But if you feel like you are struggling with the do-it-yourself aspect, no big deal. That’s why the pros are here. Start by consulting trusted colleagues or mentors within your business community. What bookkeeping solutions work well for them? How do they deal with pitfalls? You can also contact an accountant, bookkeeper, or tax expert to provide advice and assist with your business financials. “Connect with a professional,” says Payne. Don’t underestimate the benefit of having someone to bounce questions off of and who can help you in areas of taxes and accounting where you may lack.

The Coast Capital Business Banking team is also here to help. If you run into snags, book an appointment with a Coast Capital Business Specialist to discuss your business banking matters.

Get more smart business tips and guidance on Coast Capital’s Small Business Centre hub.