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8 Types of Records Freelancers Should Keep for Clients & for Taxes


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Freelancing is an old practice. The term “freelance” originated in the early 1800s and referred to medieval warriors who were offering their services for hire — namely their skills in combat. Lances were a popular weapon of choice during this time, so when your lance was free from a contract and you were available to take on a new client, you were considered a free lance.

The concept of freelancing endured the test of time and is now a popular and recognized form of entrepreneurship. And it’s no longer limited to knights and mercenaries. Freelance writers, editors, software developers, designers, accountants, and many other professionals offer their services on a contract basis in an ever-expanding gig economy.

In the modern world, freelancers need to keep track of a lot more paperwork than their medieval counterparts. From quotes and contracts to invoices and receipts, here are the most important records you need to manage to ensure your small business runs smoothly.

Freelance Recordkeeping

Freelance records can be divided into two main categories: client-based and financial. Client-based records are documents that outline your relationship, communications, or work with a client, while financial records consist of paperwork you use to complete your taxes and track your income, like receipts and invoices.

Client-Based Freelance Records to Keep

Client-based freelance records are made up of materials that define your working relationship with a client. They aren’t necessarily essential for tax purposes but they’re useful to have on hand in case you need to refer back to them in the event of a dispute or miscommunication. Important client-based freelance records include:

1. Quotes and Proposals

Quotes and proposals are what you send to a client before you decide whether to sign a contract together. Basically, it’s like putting a price tag on the services a potential client has requested. It should include:

  • An outline of the services a client has asked for
  • The total cost, including whether it’s based on a one-time fee or hourly rate
  • How long the quote is valid

Keeping quotes and proposals is essential because they help you to manage and maintain client relationships. For example, if the client decides to move forward with a contract but later ask for services that are outside of your initial proposal, referring to the original quote is a good way to keep the project in scope or negotiate for an increased rate.

2. Contracts

Contracts are an important part of any freelancer’s records. They’re used to lay out the legal and financial responsibilities of both the independent contractor and the client, as well as the terms of their business relationship. Most freelance contracts include:

  • Service details
  • Rate of pay
  • Client and contractor information
  • Who is responsible for paying taxes
  • How business expenses will be handled

You should keep a record of any contract you sign with a client in order to help you both clarify and define your expectations and obligations before you take on any work together. Contracts can be used down the road to settle disputes, renegotiate terms, and end or renew working relationships.

3. Copies of Your Freelance Work

Even though a project may be complete once you send it off to a client, it’s still useful to keep your finished work. Whether it’s for a current or past client, some of your work can be used:

  • In your portfolio or on your website
  • On your professional social media accounts, like LinkedIn
  • For future updates, improvements, or remakes
  • When applying for an industry-related award or recognition
  • As proof that you completed and submitted work to a client

Keeping a record of current and past work ensures that, if you ever need to make changes to it, you won’t have to start from scratch. And it also gives you a chance to bolster your work experience by serving as an example you can show to future clients and employers. Just make sure that there’s nothing in the copyright section of your contract or nondisclosure clauses barring you from using or sharing your work in the future.

4. Client Communications

Emails, texts, and snail-mail from clients are all useful records to keep. They document changes in project scopes, rates, and expectations, creating a clear and consistent paper trail. These records ensure you and a client stay on the same page and can back you up in the event of nonpayment or a disagreement.

Even if your client prefers to review project details over the phone, take notes and email or text a recap after you hang up. Having a record of client communications keeps projects on track and smooths out any potential issues early on so you don’t have to navigate a miscommunication after you’ve already done the work.

Plus, if you ever find yourself in the middle of a legal dispute, having a comprehensive paper trail will give you documentation to fall back on.


Freelance Financial Records to Keep

Financial records come into play when tax season rolls around, but they’re also useful when assessing issues like your pricing, workload, and the viability of your freelance business. Here are some of the most important financial records you should keep as a freelance small-business owner.

5. Time and Work Tracking Sheets

Whether your clients request it or not, time tracking helps you to determine how much work you’re putting into a project versus how much you’re getting paid. As a freelancer, this information helps you to manage your rates and client expectations, improving the accuracy of the quotes and invoices you provide.

Depending on how you bill your clients, you may track your time down to the minute, or you may simply charge a certain amount per deliverable. But knowing how much time you spent on a task compared to how much you were paid for it is a great way to stay on top of your profitability and ensure that you aren’t undercutting yourself.

It can also inform any pricing sheets you make down the road. For example, the first time you take on a task, you may not know how long it will take to complete or how much to quote. But after you’ve done it a few times, you’ll have a better idea of what your price point is. You can create a simple pricing sheet based on the most common services you provide and their hourly or per-project price.

The next time a client asks you for the same service, you can refer to your pricing sheet to determine a base cost and customize it to the client.

6. Client Invoices

Invoices are one of the most important freelance documents you use. They detail completed work, tell clients how much to pay, and — when added together — give you your salary. They’re useful when calculating self-employment taxes and filing your tax return with the IRS as well because a lot of the information you’ll need to complete your taxes can be found on your invoices.

Generally, invoices should include:

  • An itemized list of services
  • The total amount due
  • How to make a payment
  • A payment due date

Recording all the invoices you send to clients is one of the most important small-business accounting tasks that you need to stay on top of. Invoices are essential for documenting income within a tax year and they help you to track clients who miss payment deadlines or who don’t pay at all. When you use invoicing software from a company like Freshbooks, everything is digital making the entire process much more simple.

Keeping invoices also demonstrates your growth month-over-month and year-over-year, which shows how well your business is doing overall. This information is useful when it comes to deciding whether to take on new clients, increase your rates, or when to turn your side hustle into a full-time job.

7. Payment Receipts

Every time a client pays you, you need to document how and when the payment was made as well as the dollar amount. Payment receipts allow you to track who has paid you and who’s behind, showing you when to send a payment reminder or when to pursue legal action.

As a freelancer, you need to stay on top of payments to make sure that you have enough coming in to pay your bills and keep yourself afloat. If you don’t, you could end up accidentally doing work for free.

Knowing how much taxable income you made in a year is also necessary when completing your taxes. Invoicing will only tell you how much you should have made based on the services you provided, not how much your clients actually paid you.

8. Expense Receipts

Freelancers need to keep track of their business expenses so that they can account for them on their income tax returns. Many qualify as tax deductions, which makes them even more important to record and track. For example, if you’re self-employed, keep receipts for:

  • Work-related travel and mileage
  • Professional development expenses
  • Bookkeeping and accounting software
  • Work-related software, programs, and platforms
  • Hardware, like a laptop or phone
  • Health insurance
  • Business insurance
  • Advertising
  • Website hosting and your email client
  • Office furniture
  • Credit card and bank statements
  • Office rent

If you don’t already have one, consider opening a bank account for your business. One of our favorites is from Bluevine. That way you can track your income and expenses in one place without having to separate them from personal purchases or household income.

Freelancers who work from home can also save bills for services that help you to maintain and run your business from home, such as your utilities, Internet, and phone service.


How to Keep Track of Freelance Records

Some freelancers choose to keep track of all of these business records on their own by using a mix of different methods, while others use software to do the heavy lifting for them. Either way, it’s strongly recommended that you keep electronic records as opposed to paper records whenever possible, and consider using a backup like a cloud service or external hard drive.

Keeping Track of Freelance Records Yourself

If you decide to manage your own freelance records, you’ll still need to use some tools to do it. For example, depending on what you offer and what you track, you can use:

You can use these tools to create contracts and invoices, manually track time and expenses, and document client communications. Both Microsoft and Google offer free templates that you can use to create quotes and invoices as well as some other supporting documents.

Software for Freelance Record Keeping

If you don’t have the time or desire to manage your own records, there are a variety of software platforms for you to choose from. Here are some popular recordkeeping systems you can look into.

Wave Financial

Wave offers accounting, invoicing, payments, and receipt tracking for freelancers and small-business owners. Basic accounting, invoices, and receipts are available to use for free while additional services are billed on a per-use or monthly basis.

Quickbooks

Quickbooks offers a freelance subscription that provides expense and income tracking, invoicing, payments, and more. It’s a popular option that integrates with a variety of other platforms to help you seamlessly manage your freelance business. Pricing starts at $15 per month.

Freshbooks

Freshbooks gives freelancers an intuitive platform to manage invoices, estimates, time tracking, and expenses, and includes a variety of other features to help with recordkeeping. Freshbooks provides an all-in-one approach allowing freelancers to accept credit card payments and track mileage as well as manage clients and complete basic accounting. Pricing starts at $4.50 per month for the lite plan.

Bonsai

Bonsai is a great option for anyone who needs a product suite to manage everything from contracts and invoices to accounting and payments. It also offers time tracking, task tracking, tax payment estimation, and a variety of templates you can use for contracts, quotes, and proposals. Pricing starts at $19 per month.


Final Word

It takes a lot of work to succeed as a freelancer, but many believe the creative freedom, work-life balance, and autonomy make it worth pursuing. I’s important that you keep good records, organize your client documents, and stay on top of your paperwork. After all, part of doing business as a freelancer means taking on administrative tasks and duties that would otherwise go unfinished.

Keep your records up-to-date and in good order on your own or using software to make sure your freelance business runs smoothly.

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