A number of years ago, you (like a lot of people around the world) might have gotten caught up in the Shark Tank craze.
It’s a TV show where millionaire and billionaire investors like Mark Cuban or Barbara Corcoran hear pitches from small businesses looking for funding.
You only had to watch a few episodes to hear this feedback repeatedly: “you have to know your numbers.”
It’s simple, sound business advice: know your numbers. Whether you’re just getting started as a freelancer or have been at it for years, numbers are critical.
For freelancers, perhaps the three most important numbers are:
- How many hours (H) do you spend on each project?
- What are the total expenses (E) on each project?
- How much revenue (R) do you receive for each project?
With those two numbers alone, you can calculate quite a few important strategies for your business such as:
What’s my average hourly rate? Should I raise my rates?
- (R – E) / H = Your average hourly rate (Y). If it’s too low, raise your prices.
Can I boost my profit margin? How much do I make on an average project?
- R – (E + (H x Y)) = Your average profit (P) on each project. If it’s too low, reduce costs or increase revenue.
These are just a couple of examples. You can dive even deeper if you want to.
Mastering Your Time as a Freelancer
When you offer a service to clients as most freelancers do, your most valuable and important resource is time.
I don’t have to tell you: time is finite. And it can be easy to lose track of time, spending far more than you should on certain projects.
That’s why you need to get meticulous about tracking your time as a freelancer.
Better time-tracking = Higher productivity
Studies show tracking your time can lead to higher productivity. If you only give yourself an hour to accomplish a task, it’s a lot harder to take all afternoon.
One study showed an increase in productivity when workers utilized time-tracking as a measuring stick.
Better time-tracking = Higher revenue
That same study explained workers who utilized time-tracking also saw more timely and accurate billing.
As a freelancer, more accurate billing can mean higher revenues for your business. It’s easy to let long meetings or other admin work slip through the cracks if you don’t have a solid time-tracking system in place.
These untracked hours can lead to a loss in revenue each month.
How to simplify (and actually succeed at) time-tracking
The benefits of time-tracking are obvious. But that doesn’t necessarily make it any easier to actually track your time each month.
To do that, you’ll need a fail-safe system in place.
For example, you might set a calendar reminder every hour to catch up on your timesheets and make sure they’re accurate—just until you get into the habit.
If you use the AND.CO time tracker, you’ll also have a list of saved activities to choose from each time you switch tasks—which will save you time and headache.
From there, the AND.CO tool can automatically include your tracked hours directly on invoices to clients so you’re sure to get paid on time, every time.
Clarifying Important Expenses as a Freelancer
The hours you work are the most important “expense” you’ll face as a freelancer. But that doesn’t mean some projects won’t also have other expenses that need to be tracked.
It’s your job to clarify and organize other business expenses. This helps you pass along project costs to clients, keep your spending in check, and can also save you tons of money on taxes.
Better expense-tracking = Covering your project costs
Remember our formulas at the beginning of this article? If you don’t know what “other” expenses you’re incurring on your client projects, you can easily eat up all your profit even if you’re charging good rates.
These expenses—the costs of completing a client project—should be worked into your proposals and be paid for by the client.
Better expense-tracking = Big savings at tax time
Not only should you protect your profit by passing along expenses to clients, but you can also save tons of money on your taxes if you categorize your expenses correctly.
There are deductions you can get for home office expenses as well as marketing, technology, software, and lots more.
Any time you drive to a client meeting, you should catalog that as an expense. When you have to buy something (physical or digital) to complete a client project, you should save the receipt and catalog that as an expense too.
But, let’s face it, that’s a lot of work. It’s tedious. And while it sounds great to save money or pass along costs, sometimes we’re just flat out too tired, lazy or busy to make it happen.
That’s why we’ve simplified the process in the AND.CO app.
When it comes to expenses when using AND.CO, it’s very straightforward. You have 3 options:
- Import your Credit Card and bank account transactions automatically.
- Forward email receipts to file them in the app.
- Use the AND.CO mobile app to take a picture of any other receipts.
From there, all your expenses can be categorized, organized, and optimized to boost your profit.
It’s all about habits
Improving your time- and expense-tracking skills really comes down to one simple thing: your habits.
Until your brain does it on autopilot, set reminders, post sticky notes, or tie a string around your finger (whatever works for you) to remember to track your time and expenses accurately.
Above all, remember that the point of time- and expense-tracking is to save you time, help you be more productive, and boost your overall revenue.
Experiment with the advice in this article and adjust our tips to meet your business’ needs.