A Simple & Free Accounting technique for Freelancers

July 2022 update - this method with the N26 app and CSV download no longer works because N26 have removed the category column from the CSV download and after 6 months of chasing them about this, they refuse to reinstate it. Not only that but the statement downloads are completely inaccurate and don't match the CSV download, plus you can't filter in the app for 'just 'income' category' or 'just 'expenses' category - thus making the N26 app which is aimed at sole traders pretty damn useless now.

Also I no longer use accountable because it's not of any user for married freelancers and had many other annoying errors in it. I now use zoho invoice which is excellent - https://www.zoho.com/invoice/create-send-invoices

Tax time is the worst time of year for me, but my bookkeeping is totally under control, and so are my client quotations and invoices. I can always see at a glance who hasn't paid.... This simple & free process might work for you too!

I used to spend $50 AUD a month on accounting software, plus thousands every year on an accountant because that software was so complicated (It was Xero), but I found this cool, almost effortless way to do my accounts.

It cobbles together some great apps and as long as I follow my process, I have a simple spreadsheet at the end of the year which I can enter into the free government online tax form. I've paid tax in the UK, Australia and now in Germany, and I struggle to understand tax laws. I just google to find out if an item is allowed to be entered as an expense, and I know that in Germany I can claim my healthcare as a freelancer, which is €250/month.

APPS I USE:

• A basic N26 Bank account - you need any account which allows you to mark a transaction plus the ability to download all transactions into a spreadsheet with that 'marker'

• The accountable app

• Clockify - Timekeeping and timesheets desktop widget

It's important that for this to work flawlessly, you should pay all expenses on one bank card, and use the account number of that account on all your client invoices.

THE PROCESS

1. For client quotes, I use Accountable's quick quote form, to make sure I get client acceptance before any work starts - https://www.accountable.eu/create-your-quote/ . (Note that a contract is always signed before the very first client work, but quotes are good for ongoing, smaller work)
   

2. I use the free clockify desktop widget to record my time into individual clients and projects as I work, to keep track of how long I'm spending on each project. I can then send the timesheet with the invoice to the client later.
   

3. Once the work is finished, I send an invoice using the Accountable app on my phone. It saves client data and invoices, so it's very quick and easy to create an invoice, especially if you've done one for that client before - It takes maybe 1 minute to write & send each invoice. Note that I send a PDF of the invoice to myself first. For European clients, I include my N26 Bank IBAN, and for overseas clients, I ask additionally ask them to use Wise.com, with my personal referral link*
   

4. I save the invoice in my 'Accounts > Invoices not paid' folder so I can quickly glance at how many are outstanding, but the accountable app also handles this well, marking all unpaid invoices RED, because it connects to your bank account. Then I email the invoice to the client with a nice message, and the timesheet if appropriate (especially on big invoices so the client can see where the time went).
   

5. I have an account with N26 - this account allows me to put any transaction, whether an incoming or an outgoing, into a category called "Business Expenses'. I check through my N26 banking app about once a month and quickly mark all business related items as 'Business expense' category.
   

6. Then, at any point, and once the tax year is over, I log into N26 on desktop and export a CSV of the whole of last tax year. I then save the CSV as an excel file, and use the 'filter' function to only filter in 'Business expenses' (remember this includes business expenses AND payments from clients i.e. income)
   

7. I then split the amounts column into and 'IN' and 'OUT' column, and I add a category column, and classify into: My healthcare payments All phone payments My website hosting Subscriptions Training & Education Advertising e.g. google ads Hardware e.g. New phone or laptop and whatever else I have there.
   

8. I can then open up the government online tax website, and enter it all in (this is a different kind of headache, since I don't know much German)!

So that's it! It might sound complicated, but once you get used to it, everything is flowing through this process and you can see the current status at anytime from the perspective of cash flow, late invoices, outstanding invoices and your average monthly income. If you have to report quarterly, it's easy to do this every 3 months instead of every 12 months.

If you have any suggestions, please feel free to get in touch with me.

* I recommend Wise for international transfers because they are up to 6 times cheaper than banks, plus very easy to use. You can sign up for a free account here

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A big thanks to each and every one of you who have trusted my recommendations so far! - Rachael

Photo by Estúdio Bloom on Unsplash