Let’s be honest, tracking expenses sucks. There’s no hobbyist community out there of people who love going through receipts and tagging them expense codes. Even accountants ask you to not make them do the work for you.
As an independent contractor, expenses play a huge part in the story of your income. In order to maximize your earnings, you must be thorough and methodical in your approach… or get a service to do it for you. Like with anything in this field, you won’t have a staff member to assist you with it. You’ll likely need to hang on to receipts, enter them into a tracking system, categorize and sort them. The fantastic thing about living in the age where technology can fly a car into space, is that robots can help us do this much easier than our predecessors.
When considering returning to work in the new year, start your year smart. Plan ahead for your expense tracking so it doesn’t pile up and wreck your year end when you should be enjoying some down time.
So what does expense tracking look like?
You’ll save receipts for business related expenses for things you can write off and yes, you should keep them even if you can’t.
The easiest way to do this is to have a system that allows you to take and retain a photo of the receipt. While keeping the paper copies is great, you can lose them through the year and many receipts contain ink that will fade with heat and pressure. Ask anyone who sits on their wallet with receipts in it. 3 months and some receipts look like a blank piece of paper.
You’ll manually enter or scan them then categorize them however you like. I personally prefer major categories with tags for smaller subcategories. So my expense sheet looks like this:
- Get a system for tracking your expenses.
- I use an airtable template available HERE
- The most basic expense tracking can happen in the notes app of your phone but this can be incredibly risky as human error can quickly come into play. If you choose this option you should have a regular schedule to offload these to somewhere safer in my opinion.
- Systems like Expensify, Zistemo or Quickbooks.
- Categorize them as best as possible
- Make sure that the categories have clear rules in accordance with tax code and that you understand what you are and aren’t able to write off at the end of the year. Just because you consider it a business expense doesn’t mean you can’t write it off. However, you can factor it into the cost of doing business your way, which is entirely appropriate. It’s your company after all.
- You don’t have to use a single account as a 1099
- You can use multiple credit cards to maximize your earnings. I use a combination of Chase & Amex cards to earn the most rewards, allowing me to travel cheaper. When I save on gas and subway fares through the year, I don’t need to work as much to accrue PTO for when I want to take time off.
- Double check your credit card offers every couple weeks when you’re bored to make sure you’re getting the most out of your money.
- Reduce them whenever possible
- You can sign up for gas cards that offer incredible savings. You can also maximize your credit card points for the biggest benefit when you stack them.
- Take advantage of business promo plans like with Staples, OfficeMax and Amazon subscriptions
- Review the charts in our table or your similar reporting software to compare expense categories. Are you overspending? If so, consider switching vendors, suppliers or trimming the fat.
- Make sure you’re not overspending by comparison shopping using resources like CNET and Amazon comparison shopping. These services are built to give you an edge, using it along with other retailer options like price matching can be the difference between a one week or two week vacation.
- Periodically check into new services and products in the arena you’re shopping to make sure that your comfort isn’t costing you. While the time you spend learning a new system or service is certainly valuable, a couple hours adjusting might save you hundreds in the long run. When I switched from QuickBooks to the system I use now, it took some learning of course but I’ve consistently saved hundreds every single year and I’m financially in a much better place.
- Check into rewards programs for things you’re already paying for
- The Seated app overs rewards back on meals at anytime of day. You can earn up to 50% back in some cities to use in other retailers like Amazon or Lululemon.
- American Express offers statement credits for shopping small allowing you to patronize small businesses at competitive pricing.
- Receipt apps on both iOS and Android offer rebates for specific purchases which are often in the office/business category. For the overachievers, this can be an incredibly easy way to save on purchases you’re already making.
- Many companies have rewards programs that will send you coupons and additional savings through the year just for contacting them about their products. Proctor and Gamble send out seasonal savings that offer discounts on products you’ll need for your office space. Why not save a few bucks for an email?
- Sorenson employees can save using their Perks@Work portal for larger purchases and even some smaller items necessary to keep your business moving.
- For more ways to save check out our 5 ways to save as a freelancer.
For the more advanced freelancers who would like to spend more time referring out and traveling more, there’s Founders Card. While Airtable is free, if you intend on expanding your practice and allowing access to others, you’ll need to purchase a pro-plan which is covered under Founders Card along with hundreds of other benefits like rental cars, office supplies, website hosting, business cards etc… For me, this is one of my favorite services but very specifically for scaling as a freelancer. The costs I would pay for these services without a membership are far greater than the annual fee.
Finally, schedule time in your month maybe at statement time when you can sit down to evaluate your credit card charges. If you find missing transactions, maybe consider tagging them differently, or in larger categories you can review at the end of the year.
My single biggest task every year is reviewing my expenses and check stubs at the end of the year. I used to call it hell week because I hate paperwork so much. By employing systems of tracking and reporting on the receipts I have through the year, coupled with a small investment of time per month, I’ve reduced hell week to an afternoon. It doesn’t mean I’m an less thorough in my approach but what used to take me days on end with plenty of breaks, is now a process I’m quite confident in. It’s saved me an incredible amount of money.