5 Financial Tips for Freelance Designer – Tip #1
Over the next several weeks, I will outline some financial tips to assist you and your freelance business. Note I am not a certified public accountant (CPA) or an attorney, these tips have help me to stay in business for over 10 years. I would recommend you seek professional advice, these are just tips which has help me.
Profit and Loss Statements is your best friend. What is a profit and loss statement? Per Investopedia, a profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year. The P&L statement is synonymous with the income statement. These records provide information about a company’s ability or inability to generate profit by increasing revenue, reducing costs, or both. Some refer to the P&L statement as a statement of profit and loss, income statement, statement of operations, statement of financial results or income, earnings statement or expense statement.
In laymen terms, your P&L is a report of all your revenue (amounts you have received) and expenses (bills which you have paid) and the differences between the two amounts. Hopefully you have a profit and not a loss. This is your best friend, in the since, it will let you know where you stand financial. Maybe you are spending too much with regards to services, which you do not use on a daily basis. Eliminate these services to add to your bottom line. Maybe you are paying for co-working space, and you only go in to your office to see a client once a month. It might make more sense to just purchase a place, that will charge you by the hour. You will never know unless you check out your P&L statement.
I review my P&L statement monthly. It allows me to assess the strength of my company, and make some changes to put me in a stronger financial position.
Image courtesy of Kelly Sikkema.