Money Matters
In order to develop your home business it is not enough merely to provide good quality work at a reasonable price. You have to know how to manage every aspect of your business.
Keeping Account
One important area is keeping good accounts. This does not simply mean knowing how much you have earned, and how much you need to give to the IRS every April, or even whether or not your clients have paid you. You need to keep a track of all kinds of financial matters that only affect the self employed.
Since part of the point of your business is to make you some money, you need to know how much of it you are making. Keep spreadsheets that detail how much work you do each day, and file them so you know how much you are earning every week, month and year.
Expenses
You then need to subtract expenses. The costs of computers, USB drives, printers or an extra office phone line need to be deducted from your income as expenses. That way you know how much your business is really making you. And, of course it is essential to keep and file all your receipts properly, with enough information, so that at tax return time you know exactly what you spent the money on.
Training Costs
If you spend time learning new skills, or attending training sessions of one kind or another, this too needs to be deducted from your income. Even if you spend an hour reading a book to teach you how to use your new software, write it down and factor in how much money that time was worth and how much knowing about the new software will bring you.
Doing all of this helps you keep a track of what helps your business, and what is an unnecessary expense. If you find that it costs you $200 a week to learn a new skill but that skill set only increases your earnings by $150, you are losing money, however interesting the course. You may then decide that you would be better off learning something which would be more profitable.
Predicting Income
Once you know exactly how much profit you are making, you will more able to accurately predict future earnings. The benefits to this are obvious, as working freelance often means a very unreliable source of income.
Additionally, all that data you are collecting will help you analyze where improvements can be made. If one particular type of work seems to be earning you more, you may decide to specialize in that area.
By setting aside as little as 15 minutes a day, you can keep your accounts in order, without the record keeping turning into a chore, as long as you keep your filing system properly organized.
Review
The wonders of modern technology mean that you can check things easily and you don't need huge paper records to find out the information. Organize your computer files and folders properly, labeling each section clearly with dates and content and don't forget to make the most of your accounting software program's tracking features.
Short reviews at the end of every week and month will help you know where your business is going, how it is growing, and what new directions you can take it in. Keeping up to date with the latest requirements from the IRS will make filing your tax returns that much easier.