There is nothing enjoyable about bookkeeping, accounting, or taxes when you’re first starting out on your freelancing journey.
It can be confusing, daunting, and challenging to keep up with everything you’re supposed to collect and understand come tax time.
Personally, one of my first expenses as a freelancer was hiring a fairly priced bookkeeper just to help me make sense of everything. Come tax time I also found a reasonably priced CPA (certified public accountant) to make sure I filed my taxes correctly.
That being said, for those of you who are more DIY or your freelancing income isn’t quite there to justify spending money on professional services, there is hope.
Fortunately for freelancers and sole proprietors everywhere, there are human beings who understood how frustrating the accounting process was and decided to do something about it. They built tools that automate bookkeeping, streamline accounting tasks, generate tax reports, and even play nicely with tax professionals.
These tools are complete game changers for your freelancing business because not only do they save you time on accounting activities, they ensure that you won’t be penalized come tax season.
Best part? A good amount of them are completely free.
With that being said, here are the 8 best accounting software for freelancers:
Now that you know the top picks, let’s dive in deeper to why these tools are useful, what to look out for when selecting one for yourself, and review the features of each piece of software.
Why accounting and bookkeeping software will change your life
Sometimes humans skip over a dollar to pick up a penny. Or something similarly silly as that…
The point is that we’ll often choose to do things that we think are great decisions that actually end up being unhelpful to us.
Picture a freelancer who is 4 months into their freelancing journey. They do their best with delivering their work, sometimes friends and family hire them for design work, they work off of Upwork, and for part of the year they still worked a 9-5.
Despite their hard work, come tax time they:
- Haven’t been paying quarterly taxes
- Haven’t put aside enough money to cover taxes
- Don’t have receipts saved for purchases that could be write offs
- Aren’t sure what tax forms they need to file based on their freelance income
- Have never heard of a P&L and despite knowing roughly how much they’ve made in revenue, don’t have a good grasp on their COGS
Can you feel that anxiety building? It’s so stressful to have to spend days or even a few weeks looking backward and trying to make sense of everything yourself.
If you’re anything like me, the process was also unlikely to be done correctly and the IRS isn’t an organization to mess around with.
Let’s take a look at the main benefits.
Save time on repetitive tasks
Doing your own bookkeeping and accounting by hand takes time. If you do it anywhere near properly, it will take a lot of time.
All of this time can and should be spent on finding new clients, doing billable hours worth of work, and working on improving your business.
Accounting software exists to automate most of the manual and repetitive tasks that don’t add any value to your life and business.
These tools can’t help make you a millionaire magically overnight, but they can save you epic amounts of time and energy to be put to good use elsewhere.
Everything is in one place
I am a terribly forgetful person.
I’ve got receipts on my hard drive, in my email inbox, on my phone, and wherever the heck Waldo is.
My first year of doing my taxes while freelancing was miserable because even with the guidance of a tax professional, I had trouble remembering my tax deductible expenses and locating the related receipts.
Most accounting software address this problem by letting you upload your receipts directly through their web platform or mobile app.
As an added bonus, machine learning has enabled these tools to automatically check your bank statements for you, categorize each transaction, and suggest deductions for you.
Amazing right?
Understand the financial health of your business better
When you’re just starting out as a freelancer, you might be tempted to view your work as a hobby or focus on the deliverables and client experience.
While these are all good to focus on in their own ways, it’s crucial to keep in mind that at the end of the day you’re running a business.
A business that has fixed expenses, variable expenses, assets, revenue, profit, and losses.
Any accounting or bookkeeping software worth its salt will have features designed to give you quick and valuable insights into the financial health of your business.
You should regularly monitor these different aspects of your business and familiarize yourself with what they mean and how they affect you. Ensuring your business is healthy and profitable is a key priority.
Make sure you’re paying taxes correctly and on time
Paying taxes is non negotiable when you’re a freelancer or solopreneur.
As we’ve seen throughout history, the IRS does not mess around. You can make a mistake or two, avoid them for a while, but eventually they’ll come knocking
If for none of these other reasons, utilizing an accounting system through a reputable software ensures that you will have everything you need to either file your taxes correctly, or put a tax professional in the best (and cheapest since they’ll have less work to do) position possible to assist you.
Features to look for in a great accounting software
Not all accounting software is created equal. There are levels to the game.
Before you trust your financial wellbeing and bookkeeping to just any tool, consider the following must-have features that every great program must have.
Great dashboard
As you all know, freelancing can be a difficult and frustrating experience at times. The stress can lead to burnout if you’re not careful to balance how you spend your energy tokens.
One of the core features built into every great accounting software is a simple, intuitive, and perfectly designed dashboard.
The dashboard should be:
- Customizable to the metrics and insights that matter most to you
- Easy to select a specific view to dive deeper into the metrics you want more information on
- The first thing you see when you log in
- Attractive and visualized in a way that helps the information sink in
With this kind of dashboard, you get useful insights into your business all without the hassle of piecing together information in a spreadsheet or having to learn how to do these formulas and visualizations on your own.
A great dashboard gives you your time and sanity back.
Automatic bank & credit card statement connection
It’s incredibly easy to forget about a tax deductible purchase, to miscategorize a purchase in your books, or to simply forget about a small one time payment from a client.
These tools allow you to enter in your information, log into your bank accounts or credit card portals, and they automatically pull in your bank statements for you.
From there, they will go to work categorizing the information according to the requirements you’ll have to abide by when filing your taxes and in most cases, suggest tax deductions for you.
If you have to manually enter in information into the accounting tool or upload bank statements directly before any magic can happen, it’s time to keep looking.
Support when you need it
You never think you’ll need support, until you REALLY need support.
When you’re on the hunt for a bookkeeping software as a freelancer, one of the first considerations should be what kind of support it offers. This is useful to save money on traditional bookkeeping services or paying a consultant if the platform has accurate help built in.
Try to find support that includes all of the following at minimum:
- Knowledge center
- Tool documentation
- Phone support
- Chat support
- Email support
Financial statements and tax document preparation
Before you can file your taxes or understand the full picture of your business, you’ll need to have certain reports generated.
Some of these are more necessary than others but it’s always good to have more than you need in these cases.
Here are the most useful statements you’ll want the tool to take care of for you:
- sales tax
- profit and loss
- Expenses
- balance sheet
- Schedule C (Form 1040)
The best of these apps will have all of your year end or quarterly documents ready to hand off to your tax professional or to file yourself come year’s end.
Add accountant or bookkeeper
No top notch accounting software would be complete without the ability to add a tax professional or a bookkeeper.
At a basic level, you should be able to invite at least one user to your account who can easily access all of your statements and financial reports in the ways that they need to best to do their job.
Mobile app
This last one is for the millennials and zoomers only…
Just kidding. Who doesn’t use their phone for just about anything these days?
Freelancing isn’t always done at home or on a laptop. Sometimes you’ll want to send an invoice or access your business reports while on the go.
Before committing, do your research and ensure that the company you want to use has a mobile app. This reduces the dependence on wifi to get crucial information and also makes it easier to take your financials with you when you’re on the go.
Best free accounting software for freelancers
After hours of research and comparison, these are the top of the line free accounting tools designed specifically with freelancers in mind.
Each has a slight edge depending on your unique needs, but you can’t go wrong with any of these options.
1. Wave – Best free accounting software for brand new freelancers
Url: https://www.waveapps.com/accounting
Price: Free
Mobile app: Yes, Wave Invoicing and Wave Money
Top features:
- Accounting/payroll coaching services
- Track multiple businesses in one account
- Double entry accounting
2. ZipBooks – Best free accounting software for freelancers looking to scale soon
Url: https://zipbooks.com/accounting/
Price: Free
Mobile app: In development as of June 2022
Top features:
- Accept square and paypal payments for free
- Subcontractor payment tracking
- Cash and accrual based reporting
3. Hectic – Best free accounting software with built in sales, project, and client management tools
Url: https://www.hecticapp.com/product-pages/accounting-for-freelancers
Price: Free
Mobile app: Yes
Top features:
- Automated profit and loss
- Ability to filter accounting overview easily with different views based on your preferences
- Add accounting/client tasks to calendar
4. Lili – Best free accounting software with built in business banking
Url: https://lili.co/tax-optimizer
Price: Free
Mobile app: Yes for mobile banking
Top features:
- Autosave income percentage for tax season
- Get paid 2 days early
- Intuitive mobile first design
Best paid accounting software for freelancers
Sometimes, you need a little more horsepower out of a software that a free plan just can’t provide.
These paid accounting tools have all of the bells, whistles, and features you need as you scale your freelancing business and build your empire.
5. FreshBooks – Best overall accounting software for freelancers
Url: https://www.freshbooks.com/for-freelancers
Free trial: Yes – 30 days
Price: $4.50 / month
Top features:
- Get accounting statements by each individual client
- Track where potential customers are in their sales cycle
- 100 integrations
- Automated bank reconciliation
6. Bonsai – Best accounting software for freelancers that want one tool for every aspect of their business
Url: https://www.hellobonsai.com/bonsai-tax
Free trial: Yes – 14 days
Price: $24 / month (+$10/month for tax features)
Top features:
- Great resource library for pre built creative brief, proposal, and invoice templates
- Project management tools
- Estimated quarterly taxes
7. Freely – Best accounting software for freelancers with ready to file tax reports
Free trial: Yes – 15 days
Price: $15 / month
Top features:
- Automated tax document generation to make filing easier
- The software records itself as a tax write off
- Simple and easy to use interface
8. Harpoon – Best accounting software for freelancers who want great financial forecasting and planning
Free trial: Yes – 14 days
Price: $9 / month
Top features:
- Automated transaction categorization
- Automated recurring expense tracking without manual entry
- Predictive project budgeting
- Revenue goal setting
Big takeaway
Bookkeeping, accounting, and tax preparation can seem like an overwhelming task as a freelancer, but you don’t have to do it alone.
These software all have a slightly different value proposition depending on your unique situation, so take advantage of the freeness and free trials to see which one is right for you.
Accounting software saves you time, saves you money, and ensures that you’re all squared away come tax season.
Give one a try, you’ll be glad you did.
