While it may be easy to think that self-employed individuals have it easy since there’s no manager to nag them every waking hour, there are some difficulties that trample this blissful life. Besides the fact that you have to find your own customers and pay for everything, you also have a tough time proving your income when it comes to taking a loan, buying a house, or even getting health insurance.
Yet, about 30% of Americans choose to take this path and face a system that’s not yet ready for a more independent worker. So, if you’re a freelancer or entrepreneur (or plan on becoming one in the future) it’s important to know there are ways to manage your payroll and prove to anyone who asks that you have a stable income and you are a reliable customer.
Use a Pay Stub Generator
Since there is no boss to generate pay stubs for you, why not be your own boss and generate your own pay stubs? All you need is a reliable platform, like the FormPros paystub generator, designed to keep track of your income and automatically complete all the details regarding earnings and income tax deductions.
The same platform can be used if you have your own employees (as an entrepreneur) and have to manage payroll.
Lastly, regardless of the situation, these pay stubs are often enough as proof of income and you don’t have to go through extra hoops when dealing with third-party institutions.
Follow a Budget
Every year, you are required to estimate your expenses in order to know your tax bracket and other similar situations. By following this example, you should also create an estimate of your income (future & existent) and, if you have employees, it’s important to include their expenses or possible raises and benefits in your estimates as well.
This way, it is easy to follow your income flow and know where each dollar goes during the year. It’s also a method to keep track of investments and monitor progress made by employees (if this is the case) and properties.
Use An Automated Tool
If you choose to pay your employees (or yourself) a set monthly amount, then payroll should not be that difficult. After all, you’ll work each month with the same amounts, so you just change a few dates and that’s it.
However, the situation changes if you have hourly contracts or if some of your employees have a different method of calculating their monthly salary. Additionally, as a freelancer, you may not be happy with a fixed amount each month, so the situation may vary.
In this case, it’s best to work with an automated payroll software tool that also takes care of taxes and notifies you about errors or deadlines.
Keep Good Records
Contracts, receipts, invoices, payroll, bank statements, anything that is business-related must be kept for at least 3 to 5 years. All these records can help you in case of an audit and can be used as proof of income or expenses.
For instance, freelancers can use contracts and invoices to prove a steady stream of income from long-term clients. This is helpful when looking to get a loan or you’re interested in buying a house.
At the end of the day, whether you’re a freelancer or an entrepreneur, good records keeping and good accounting habits will save you a lot of headache and anxiety. Moreover, you will be able to accurately monitor your income and focus on leadership and growth rather than worry about costly mistakes that will come back to bite you later.