Tracking your freelance income

After reading Jill Sommer’s post on job tracking systems for freelancers (for what it’s worth, I used to use a white board, then I switched to post-it notes, now I use a paper planner, but I agree that some sort of system is imperative), I thought I would write something about income tracking systems.

As with job tracking systems, there are various ways to track your income and outstanding invoices. I used to use a white board to write down the details of every invoice I issued. I liked this system because it kept everything in front of my eyes, and it was easy to see when invoices were overdue. There are also various programs like Translation Office 3000 that will track your invoices and income as well. TO3000 isn’t cheap (150 euros), but I think I might buy it if they produced a Linux version (yes, that’s a hint!). I’ve always used the open source accounting software GnuCash for my business accounting, and I’ve been quite happy with it.

I abandoned my white board invoice tracking system because I wanted a way to track my total outstanding invoices. Although this is obviously possible using the white board system and a calculator, it’s much easier if you use a spreadsheet, because you can just write a sum formula for the upper (or lower) cell in the column where you record the invoice amounts. My thought on this was that by tracking my total outstanding invoices (and assuming that clients pay on time, which most of mine thankfully do!), I would have an objective data point on which to base my project acceptance decisions. For example, if I want to earn a gross amount of $5,500-$6,000 a month and I see that I currently have only $4,500 in outstanding invoices, I know that I can’t be picky about accepting new work. On the other hand, if I have $7,000 outstanding, I know that I have at least a week of wiggle room and I can afford to either plan some days off or work on non-paying projects such as my blog, book and translation-related volunteer work.

I use a simple spreadsheet (like an Excel sheet) and record the invoice number in the A column, the issue date in the B column, the client in the C column, the invoice amount in the D column (and the top cell in the D column is the sum of all of the D cells below it) and the date paid in the E column. In the E column I also record follow-up to any overdue invoices i.e. “first reminder sent 6/5” or “certified letter with request for payment within 30 days sent 5/5.”

I find this system useful because it’s easy; every time I issue an invoice, I just record the details in the spreadsheet, and when I receive checks I delete the amount of that invoice so that it’s no longer included in my outstanding total. Also, this system makes it very easy to see whether I’m reaching my income goals; “no paid vacation” is one of the elements of freelancing that’s quite different from a salaried job, and often the major cost of a vacation is not the trip itself but the loss of income associated with it. I find that using an income tracking system helps me objectively decide when I need to hit the grindstone and when I can afford to spend an afternoon outdoors!

One Response to “Tracking your freelance income”
  1. jillsommer June 12, 2008

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