Bookkeeping for Independent Contractors: The Essential Guide

Look for software that offers reliable customer support to help you with any problems you may encounter. Everything can be too alluring to just brush it under the rug to get paid to your own account. Even if there are some immediate advantages, like avoiding having to pay taxes on that money, getting discovered during an audit is not worthwhile. You risk receiving payment directly to your personal account if you are not careful to keep your personal and company bank accounts separate. You may create financial reports that will enable you to plan and make informed decisions for the future with the aid of proper bookkeeping. A customer is required to file and send you a copy of Form 1099-MISC whenever you accomplish work for them that costs more than $600.

Why is bookkeeping important for independent contractors?

Our mission is to equip business owners with the knowledge and confidence to make informed decisions. As part of that, we recommend products and services for their success. Take the time to sign up for some free trials of the self-employed bookkeeping software options on this list. The best bookkeeping app will save you a lot of time and headaches, while making you look like the pro that you are.

You can create tasks, set deadlines, and assign them into different projects. The app also supports team collaboration, making it easy to work with clients or other freelancers. With its user-friendly interface and powerful features, Asana helps you stay on top of your workload. The primary benefit of using independent contractor accounting software is its ability to simplify complex financial tasks. These tools reduce the time spent on bookkeeping and provide features that help users manage their finances more effectively. Security is a top priority, with robust encryption methods ensuring data protection.

The Best Accounting Software Services for Contractors in 2025

QuickBooks Online, Intuit QuickBooks’ cloud-based accounting program, has a famously low learning curve. Features like automatic bank reconciliation, receipt tracking, and expense categorization (by tax category) help freelancers maximize earnings and tax deductions. And in contrast to FreshBooks, QuickBooks doesn’t limit you to a certain amount of billable clients per month. Instead, send unlimited invoices to an unlimited number of clients with each plan (and schedule automatic payment reminders too). In today’s fast-paced world, a robust mobile app for iOS and Android is essential. Mobile support is crucial for real-time financial management and workflow continuity, so you get the benefits of accounting software no matter where you’re working.

Can I use accounting software on my mobile device?

Unlike QuickBooks Self-Employed, FreshBooks’ invoices are customizable with your business’s name, colors, and logo. You can also schedule automated recurring invoices, send late payment reminders, and set automatic late fees to accrue on overdue invoices. The best accounting software for independent contractors can increase your efficiency, save you money, protect your privacy, and come with various features that make it easy to work.

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• Being accountable for your books might help you save money while beginning your firm because cash flow can be limited in the early stages.
• These plans usually include additional features and benefits, ensuring scalability.
• Zoho’s free plan has a fair amount of third-party integrations, but they’re pretty basic (think G Suite) and limit you largely to other Zoho apps.
• Additionally, task management tools often integrate with project management software.
• She is also experienced in setting up corporations with the State Corporation Commission and the IRS.

When making your choice, be sure to evaluate the accounting system as a whole, considering the features each software offers and how it aligns with your business needs. Keep reading as we dive into what features make a great accounting software for independent contractors accounting software, so you can find the best one for your small business. Modern accounting software can help you save time, reduce errors, and paint a clear picture of your business performance. Hiring a bookkeeper will give you more time to focus on growing your business.

Mileage tracker

Moreover, the pricing, free trial, and scalability of the software should also be taken into account. Many modern solutions even come with a pre-built admin template, helping streamline setup and giving you an intuitive dashboard right out of the box. It is crucial that the software you choose is easy-to-use, has reliable support, and has the essential features for your specific needs.

Like other QuickBooks products, QuickBooks Self-Employed has a highly user-friendly dashboard and low learning curve, so you won’t struggle to dive into finances for the first time. As a contractor, you need a robust mobile app for your accounting software. These apps are how you track mileage properly, and you can create invoices during site visits from these apps too. The best accounting software for contractors includes project management and inventory tools to gauge the profitability of a job. The cash flow page has some useful details, including predictions about your financial future. It suggests actions you can take to keep your finances sharp, such as nudging clients to pay invoices, taking care of your bills, and viewing the status of your bank accounts.

What should freelancers look for in accounting software?

You certainly need interconnected estimating and quoting tools, invoicing features and time tracking software. Do you also need a solution for improving and organizing your vendor payments and inventory management? Consider only accounting software platforms that check all your boxes.

• Freelancers typically aren’t handling dozens of transactions each day.
• They will be better equipped to accurately pay their taxes to the IRS.
• QuickBooks Self-Employed can work for freelancers and solopreneurs, but its main selling point is its built-in mileage-tracking feature.
• A game-changing feature is smart receipt scanning, often powered by optical character recognition (OCR) technology.
• It was easy for us to automate recurring invoices and payment reminders while customizing our invoices to include company branding and collect deposits.

You can dump as many receipts there as you want, either via the web or mobile app. I uploaded a few and was pleasantly surprised to see that TrulySmall has OCR, meaning no manual data entry. Just tick all the transactions that look ok, and push them over to your books. If you rely on ecommerce apps like Shopify and Expandly to manage an online store or track inventory, Xero is your ideal freelancer accounting platform. With over 1,000 integrations, Xero’s third-party app syncing is second to none (not even QuickBooks, which syncs with around 800 third-party apps, beats Xero).

This means anyone who uses an independent contractor’s services doesn’t have to provide employee benefits or take out any withholding from their paychecks. According to McKiney’s, American Opportunity Survey, 36% of the workforce or 58 million Americans are independent contractors. Although independent contractors can resemble ordinary employees, they are actually separate legal entities from the companies for which they work. Paying taxes and having precise estimates of your upcoming tax obligations are quite beneficial. Putting your estimated tax payments in each month or every three months will help you avoid a tax bill that isn’t expected.