Keeping on top of your expenses
As hard as we may try not to, every freelancer has to spend money from time to time. Yes, those pesky expenses. There’s always something, and you need to make a habit of keeping track of those expenses. Here’s how I do it.
What are your expenses?
For me, the first step was to figure out what my expenses actually were. My loose definition is anything that enables me to work or to find business. Of course, that’s open to interpretation and it’s important not to go crazy silly. How? For example, thinking that your weekly groceries or the morning latte that kick starts your day are business expenses.
But I do claim things like a portion of my mobile phone bill, a chunk of my transit pass, subscriptions to online applications, and my Internet use as business expenses. They all fit my definition. As do a large block of expenses that I incurred in October while attending a conference — I wasn’t just there as an attendee, I was also speaking.
Keeping track
The actual tracking, though, is easy. I use a spreadsheet in Google Docs. This allows me to edit and update my expenses no matter where I am, offers complete transparency to my business partner, and I can publish the spreadsheet for our accountant to see.
The spreadsheet itself is pretty simple. There are 12 worksheets, one for each month. Each spreadsheet is divided into six columns:
- A description of the expense
- Where the expense was incurred
- The type of expense
- The date
- The amount, in Canadian or U.S. dollars
Here’s a sample:
Receipts, receipts
They’re definitely important. Let’s face it, the receipts prove that you actually made a purchase. So, keep them. Make a note on the back outlining why your purchase is an expense.
It’s not enough just to toss the receipts in a box or an envelope, and then deal with them at the end of the year. Too much chaos to sort through, even if your expenses are modest. The simplest way that I’ve found to deal with receipts is to:
- Have a large envelope or a box for the receipts for a single year
- Have 12 envelopes, one for each month
- Collect your receipts by type and clip them together with a yellow (or whatever colour) sticky on top, which notes the type of expense
- Put the expenses for a particular month in its respective envelope, and into the box for safekeeping
One variation of this is to scan your receipts and save them as PDF, and then use a directory structure on your computer — main folder instead of the box, subfolders for each month and/or each type of expense instead of envelopes. Then, burn the lot to a CD and pass the CD to your accountant or put it somewhere for safekeeping.
Receipts for online purchases are a bit trickier. You can print hard copies, or save them as PDFs.
It’s work
Keeping track of your receipts and expenses is work. But it isn’t necessarily hard work. All you need to do is devote a few minutes each day or a half hour at the end of each month and the job is done.
