How to track & manage freelance work

min read

Why tracking work in the freelance sector matters

As a freelancer, you're essentially a one-person company responsible for every aspect of your business – from securing clients to managing finances. And just like any successful company, you need robust systems to thrive.

Effective tracking is crucial, especially as your business grows. It provides valuable data and insights that empower you to make informed decisions and avoid common pitfalls that can derail a freelance career.

Statistics show 82% of businesses fail due to poor cash flow management.

Other major contributing factors include:

Ineffective time management
Undercharging for services
Inadequate financial planning
Insufficient tax and emergency funds
Poor expense management

By implementing a comprehensive tracking system, you can:

Gain an understanding of your financial health: Track income, expenses, and profitability to make informed business decisions.
Optimise your time: Identify time-wasting activities and streamline your workflow for maximum efficiency.
Price your services strategically: Analyse project data to ensure you're charging appropriately and maximising your earning potential.
Improve your processes: Spot inefficiencies in your workflow and implement changes for better results.
Reduce stress: Avoid missed deadlines, forgotten invoices, and financial anxieties by staying organised and in control.

Ultimately, using systems to track your work allows you to work smarter, not harder, and build a thriving freelance business.

When your systems handle the heavy lifting, you can focus on what truly matters: delivering exceptional work and building a thriving freelance career.

How to keep track of freelance income

First, we’ll explain how to keep track of freelance income. Juggling client payments, chasing invoices, and staying on top of your income can feel overwhelming. But there are simple and effective ways to track your freelance income, no matter your experience level.

Starting simple

When you're starting the journey of how to keep track of your freelance income, a basic spreadsheet or even a notebook can do the trick. You can then keep track of:

Payment dates: When did you receive each payment?
Client names: Who paid you?
Project details: What was the payment for?
Amount received: How much did you earn?

This method provides a solid foundation, but as your business grows, you'll likely need a more robust solution.

Using accounting software

Consider using dedicated accounting software to streamline your financial management. Many options connect directly with your bank account, automatically tag income and expenses, calculate taxes, and offer valuable financial insights.

A few popular choices include:

QuickBooks Self-Employed: An all-in-one tool for tracking income and expenses, sending invoices, and estimating quarterly taxes.
FreshBooks: User-friendly invoicing and accounting software designed specifically for freelancers and small businesses.
Wave Accounting: A fantastic free option with basic invoicing and accounting features, ideal for those on a tight budget.

By implementing a reliable system for tracking your income, you can gain a clear picture of your financial health, simplify tax season, and focus on what you do best: delivering exceptional freelance work.

Categorise your income

No matter how you track your income, categorisation is key. For example, let's say you're a freelance graphic designer offering a range of services:

Logo design
Custom graphics
Illustrations
Infographics

By tagging each income source by service type, you can analyse which services are most profitable. Perhaps logo design generates 90% of your income and offers the best return on your time investment. This insight might lead you to niche down and focus solely on logo design.

You can also categorise income by project type, client, or even payment method. This granular data can encourage you to make informed decisions about your services and pricing strategies.

Consistency is crucial

The key to successful financial management isn't just the system you use but your consistency in using it. That’s the trick regarding how to keep track of freelance income.

Avoid getting caught in the trap of constantly switching between apps and templates. Find a system that works well for you and commit to it. Adapt your workflow to fit the system, and stick with it consistently.

Building a consistent workflow takes time. Establish a routine for tracking your income and expenses, whether daily, weekly, or monthly. The most important thing is to be consistent and make it a habit.

How to manage freelance expenses and deductions

Income is crucial, but so is tracking what you’re spending and where the money comes out. This not only maximises tax deductions and keeps everything accurate and legal, but also provides valuable insights into your spending habits.

Whether you prefer a spreadsheet or accounting software, the principle remains the same: record every expense. Note the date, amount, vendor, and a brief description.

This meticulous tracking is crucial for two reasons:

Tax deductions: Many business expenses are tax-deductible, reducing your tax liability and increasing your take-home pay.
Financial awareness: Regularly reviewing your expenses helps identify areas where you can cut back and improve profitability.

Tips for organised expense tracking

Keep all receipts: Whether paper or digital, store them securely in a dedicated folder or app.
Categorise expenses: Group similar expenses into categories like office supplies, software subscriptions, travel, and professional development. This simplifies tax preparation and analysis.
Use expense tracking tools: Accounting software often automates expense tracking by connecting directly to your bank account.
Separate business and personal finances: Use a dedicated business bank account to separate your business transactions from your personal spending.

By diligently tracking and categorising your expenses, you can minimise your tax burden, gain a clear understanding of your spending patterns, and boost your overall profitability.

Other top tips for keeping track of freelance finances

Managing your freelance finances doesn't have to be a burden. Here are some expert tips to help you stay in control of your money:

Set a budget (and stick to it!): A budget is essential for tracking income and expenses, preventing overspending, and making informed financial decisions. Start by listing all income sources and fixed expenses, then allocate funds for variable expenses like marketing or travel. Avoid impulse purchases and use your budget to guide investment decisions.
Use accounting software: Streamline your financial management with accounting software. These tools automate tasks like income and expense tracking, invoicing, and tax estimation, saving you time and effort.
Set money aside for taxes: As a freelancer, you're responsible for paying your own taxes. Set aside 25-30% of each payment to cover your tax liability and avoid a hefty bill come tax season.
Plan for irregular pay and downtime: Freelancing often involves income fluctuations. Prepare for lean periods by building an emergency fund or setting aside extra income during busy months.
Keep personal and business finances separate: Open a dedicated bank account for your freelance business to maintain clear financial records and avoid complications with HMRC.

By implementing these tips, you can confidently manage your freelance finances, optimise your earnings, and achieve financial stability.

How to set up freelance work for tracking

You probably have an idea of who your clients are and what work you’re doing for them, but as you scale your business, develop your skills, and onboard more work and more complex pipelines, this system becomes obsolete almost instantly.

Tracking your work, projects, clients, and tasks is crucial in this way.

It clears your mind so you can focus on the important aspects of the time at hand, keeps you in control, and prevents stress, burnout, and other things that can damage your business.

You’ll also get a ton of data you can use to make informed decision-making within your business. Like which work brings in the most money. Which client is most profitable. Which market is most lucrative and better suited to your skills.

How to set up your freelance work and track it efficiently starts with how you set up your freelance projects.

By implementing these strategies from the outset, you can streamline your workflow, improve project management, and gather valuable data for your business.

Define crystal-clear project scopes

Before starting any project, establish a clear scope of work. This includes outlining:

Project goals: What are you aiming to achieve?
Deliverables: What specific outputs will you provide?
Timelines: What are the key deadlines and milestones?
Payment terms: How and when will you be paid?

A well-defined scope prevents scope creep (unplanned additions to the project that you should really be charging for) and ensures you and your client are on the same page.

Break projects into milestones

Large projects can feel overwhelming. Break them down into smaller, more manageable milestones. This not only makes the project less daunting but also allows for better progress tracking and a sense of accomplishment along the way.

Set deadlines (and stick to them)

Deadlines are crucial for accountability and timely project completion. Be realistic when setting deadlines, factoring in potential delays or unexpected issues.

Once set, do your best to adhere to them.

Leverage project management tools

Numerous project management tools can help you stay organised and on top of your work. Consider these options:

Trello: A visual tool using boards, lists, and cards to organise and prioritise tasks.
Asana: A robust tool with features like Gantt charts and timelines for managing complex projects.
Monday.com: A versatile platform for managing projects, workflows, and teamwork.
Sunsama: A tool for planning your day, week, or month by integrating calendars and to-do lists.
Akiflow: A powerful task management tool with features like time blocking and automated scheduling.
Google Calendar: A simple and accessible tool for scheduling appointments, deadlines, and reminders.

The key is to choose a tool that fits your workflow and use it consistently. Adapt your processes to the tool's functionalities for optimal results. There’s no “golden” tool that will care for everything and make life easy.

That comes from picking a tool and then sticking with it, building up a system with that tool that works for you, not the other way around.

A guide to freelance time tracking

The most important thing you have to manage as a freelancer is your time, and developing a freelance time tracking system from the very beginning can bring so many benefits.

Here’s an example:

You charge £150 for a blog post. But what if it takes 5 hours to write, with another 4 hours lost to distractions? Your actual hourly rate plummets to £30.

Now, imagine completing that same post in one focused hour time block. Suddenly, you're earning £150 per hour, with extra time to invest in other projects or personal pursuits.

Freelance time tracking isn't about working yourself to the bone, grinding all the time, and burning out. You do become a productivity machine, but in the sense that your work time is used wisely. Your most valuable resource is used optimally and without waste.

It's about understanding where your time goes so you can make conscious choices about how to spend it, how much to charge, and, ultimately, how to run your business more effectively.

How to track freelance hours

There are several ways to track your time:

Manual freelance time tracking: Use a spreadsheet, notebook, or a simple timer to track your work hours. Techniques like the Pomodoro Technique, with its focused work intervals, can be particularly helpful.
Digital time tracking tools: Many apps offer features like project-specific tracking, reporting, and integration with other platforms. Some popular options include:
- Toggl Track: User-friendly time tracking across projects and clients.
- Harvest: A robust solution with invoicing and expense-tracking capabilities.

Some project management tools can teach and help you learn how to track freelance hours with ease, but often within their premium subscriptions. These tools provide detailed dashboards to visualise how you spend your time across days, weeks, months, or even the entire year.

Top tips for keeping track of freelance time

Regularly review your time logs: Take some time each week or month to review your time logs. This will help you identify patterns or areas where you can improve your time management.
Identify time drains: Are there specific tasks or activities that consistently take up more time than you anticipated? Once you identify these time drains, you can take steps to eliminate or minimise them.
Set realistic time estimates: When estimating project timelines, be realistic about how long tasks will actually take. It's always better to overestimate than underestimate.
Try time blocking: This time management technique involves scheduling specific blocks of time for different tasks or projects. It can help you stay focused and avoid distractions.
Use the Pomodoro technique: This technique involves working in 25-minute intervals with short breaks in between. It can be a great way to boost your productivity and avoid burnout.
Prioritise high-value tasks: Not all tasks are created equal. Focus on prioritising the tasks that will impact your business most.

So, when it comes to learning how to track freelance hours effectively, a bit of a proactive mindset can go a long way.

Common challenges and solutions when learning how to set up freelance work and track it

Even with the best intentions, tracking your freelance business can present challenges.

But don't be discouraged.

By understanding these common obstacles and their solutions, you can develop strategies to overcome them and build a more successful freelance career.

Inconsistent time tracking

Challenge: It's easy to lose track of time when engrossed in a project or juggling multiple tasks. Inaccurate time tracking can lead to underbilling and lost revenue.
Solution: Use automated time tracking tools or set reminders to log your hours regularly. This ensures accurate billing and fair compensation for your work.

Managing multiple projects simultaneously

Challenge: Juggling multiple projects with varying deadlines and deliverables can be overwhelming, potentially leading to missed tasks and increased stress.
Solution:
- Use project management tools like Asana or Trello to organise and prioritise tasks.
- Break down large projects into smaller, manageable steps with clear deadlines.
- Create separate boards or lists for each project to maintain organisation.
- Regularly review and adjust your schedule to ensure balanced time allocation across projects.

Difficulty in invoicing and payment tracking

Challenge: Creating, sending, and following up on invoices can be time-consuming and frustrating. Late payments can disrupt your cash flow and create financial instability.
Solution:
- Establish a consistent invoicing schedule and promptly follow up on overdue payments.
- Consider using invoicing software to automate the process and simplify payment tracking.
- Clearly outline payment terms in your contracts or project agreements to avoid misunderstandings.

By proactively addressing these common challenges, you can streamline your tracking processes, maintain organisation, and ensure you're fairly compensated for your valuable time and effort.

Ready to turn your freelancing dreams into a structured business?

Start Up A-Z is here to guide you through every step of your journey – from forming your company to landing your first client.

Our comprehensive support system includes business planning tools, proven tracking methods, and ongoing guidance from founders who've walked the same path.

Don't just start a business. Build a sustainable freelance career with the right foundation. Form your company with SUAZ today.