When I first started out as a freelancer, I thought that financial management meant I had enough money in my pocket to go out for coffee during my break from work. Those were the days when I used an oven timer to track time spent on a task, scribbled the numbers on a sheet of paper, and then added them up with a calculator. I’d manually create an invoice through Microsoft Word, email it to my client, and then receive a cheque in the mail for my Virtual Assistant services.
I can’t say I’ve ever enjoyed the financial management part of freelancing. It’s not as exciting as the work I do for clients, and it gives me the same feeling I get when I have to wash the dishes or dust the living room. But it is vital and relevant to virtually every small business owner, and with the right tools, it can be streamlined and relatively painless (if, like me, you don’t enjoy math).
Since I’ve been watching a lot of Olympic sports lately, I couldn’t help drawing an analogy between them and our approach to financial management in our Virtual Assistant businesses.
My favorite event to watch is Snowboard Slopestyle. Although the snowboarders are required to follow a particular course with various terrain park features, they’re allowed to create their own strategy and tricks to reach the end of the course.
In the same way, certain parts of financial management are essential, but you’re free to choose which tools you’d like to use to fulfil those requirements. With that in mind, here are some elements you’ll want to include in your own financial management plan:
Time Tracking: Whether or not you charge an hourly rate, time tracking is still important to measure your efficiency when performing tasks. If you charge a package or project rate, you can see whether the price is accurately reflecting the amount of time spent on the work. After all, lost time equals lost money. Also, clients may request to see a timesheet even if you are charging a package or retainer fee.
Billing and Invoicing: As Virtual Assistants, we need an efficient way to record what clients owe us and a method of communicating that charge through a professional-looking invoice. Below, we’ll discuss some popular tools that can help you do this.
Payment Management: Along with invoicing, many tools allow you to record and receive payments. Some can even send reminders to your clients in late or non-payment situations.
Expense Tracking: As a freelancer, it’s important to track your own spending. Depending on your contract, these expenses are not usually passed on to clients. However, in some cases, a client may ask you to buy a specific type of software or book for your task and allow you to include that expense on your invoice to them.
Payroll: You may not need to address this feature, but it’s good to keep in mind in case you decide one day to scale your business and expand to a multi-VA agency. Tools exist that can give you this option in the future.
Tools for Billing and Invoicing
In a previous blog post, we provided a time tracking software review of Toggl vs. MyHours. For the purposes of this blog post, we’ll take a look at few more top tools that focus mainly on billing and invoicing. Here are some great options you can choose from:
I use FreshBooks in my own business, and it’s brought me a long way from the tedium of using oven timers and calculators. It offers three paid plans designed for 5, 50, or 500 clients and a 30-day free trial.
Some of the features available in all plans are
– Customizable professional invoicing
– Ability to accept credit card payments
– Easy time tracking and timesheet creation
– Ability to import expenses and include them on invoices
– Project collaboration and budgeting
– Financial reports including tax summaries that you can easily share with your accountant
– Mobile apps so you can enjoy our laptop lifestyle and invoice clients on the go
For an additional cost, team members can be added on as you scale your business. And FreshBooks can also be integrated with a number of apps, including payment apps like Stripe and PayPal, as well as Gusto’s payroll app. The Plus plan is the most popular – it allows you to send payment reminders automatically and charge late fees when invoices are overdue.
This tool offers one free plan and two paid plans based on the number of people and projects, so you can scale it as your business grows. A free 30-day trial is available if you’d like to try it out.
Harvest’s features include
– Time tracking and timesheet creation
– Automatic or free-form invoice creation
– Stripe and PayPal integration to receive payments online
– Automatic payment reminders
– Expense tracking by taking a photo of a receipt
– Ability to review and approve team members’ timesheets
– Comparison of team members’ hours and capacity
– Project reports
– Apps and extensions for browser, phone, and desktop
– Integrations with Project Management tools, Accounting tools, etc.
A great tool for small businesses with a global reach, Xero offers three paid plans with the first month free for any number of users. The Premium plan includes the ability to handle multiple currencies.
Here are some of Xero’s notable features:
– Customized online invoices
– Flexible online payment options including third party apps like PayPal and Stripe, as well as Apple Pay
– Ability to manage expenses, full or part cash refunds and credits
– Multiple layers of security to protect your data
– Ability to collaborate with your accountant and bookkeeper in real time from any location, while controlling their level of access to your information
– Mobile accounting app for iOS and Android
– And many more useful features!
This tool’s website soothes us with the comforting phrase, “We don’t expect you to be an accounting expert.” QuickBooks has many options that can grow with your business needs, including three paid Small Business plans (for non-profits, corporations, partnerships, LLCs, sole proprietors, etc.) and one Freelancer plan (on the U.S. site). A 30-day free trial is available, and the Small Business plans offer add-ons like Enhanced or Full Service Payroll. The Plus plan also lets you track billable hours through TSheets, Google Calendar, or QuickBooks time tracking.
QuickBooks’ notable features include
– Income and expense tracking
– Custom invoicing
– Ability to accept online payments (credit cards and free bank transfers)
– Customized business reports
– Invoice status tracking and automated payment reminders
– Free mobile apps
– Integration with apps like PayPal and TSheets
This tool is unique because its invoicing, accounting, and receipt scanning software are all free. To use its credit card processing and bank payment processing, you simply pay for each transaction. For payroll, you pay a monthly base fee, plus a fee per employee (available in Canada and the U.S.). The advantage of Wave is that payroll is built in as a feature of the software, rather than relying on third party apps.
Here are some of Wave’s useful features:
– Income and expense tracking to get you “ready for tax time”
– Easy software designed for non-accountants
– Advanced security
– Free customizable invoicing
– Free “Receipts by Wave” app lets you scan your receipts by photographing them
– Ability to invoice and accept payments in a foreign currency
– Recurring billing and automatic payment reminders
– Free iOS and Android app lets you send invoices on your mobile devices
– And many more features!
Preparing for Tax Time
A common thread I see while researching these tools is the necessity to be ready for tax time. If we can keep our financial information organized along the way, it’s ready for us when we need to compile it. I have to confess that while writing this blog post, I’ve realized I’m not as organized as I should be, so I’m looking forward to taking better advantage of my accounting software’s features.
Unless you’re knowledgeable about tax returns for self-employment, I highly recommend finding a good accountant to help you file your taxes. I’ve hired the same accountant every year for the past 17 years, and he’s taken a load off my mind by preparing and filing my tax returns virtually, no matter where I live. It’s well worth the cost and allows me to skate through tax time stress-free.
So remember, financial management is your own Olympic Snowboard Slopestyle event, where you get to choose what tools and tricks you want to use to navigate the course. Except rather than sliding downhill, you’ll be heading upwards as your Virtual Assistant business scales and grows.
What financial management tools or tips have helped you in your online business? Please let us know in the comments below!