This is the fifth day of our series on The Business Of Freelancing. This is the last day of the week, but don’t worry - we have another two series coming up over the next two months!

If you missed the previous posts, check out Saving For Taxes,You Are In Business To, Creating A Business Plan - How Will You Make Money, and Picking A Legal Form Of Business. For more, check out ShaneandPeter.com.

Bookkeeping, the Difference Between Profit and Loss

How do you make profit? It may sound silly – your goal is to make more then you spend. But how do you really know? You keep track, kind of like keeping score in basketball. A good business owner is constantly finessing their game. The score in business is measured primarily by two things:

• Cashflow (real cash on hand)
• Profit (how much you keep in the end)

I put enormous emphasis on bookkeeping in our business. Proper tracking and reporting allows me to measure the health of the business and make sound business decisions. For years, I truly hated bookkeeping. I’m not into details and felt the same dread about bookkeeping that I felt about cleaning my room. That was until Carla Sikand, the owner of BookkeepingPlus, during a course provided by the Small Business Development Center (an amazing free resource for all US business owners), sat me down and explained that bookkeeping wasn’t about details, it was about a system that could significantly increase my income if properly applied. I decided to try it and immediately learned a few things about what was working in business and what was not. My income doubled that year. I stopped offering a few services that I could now tell were not profitable.

Through proper bookkeeping and reports I had the knowledge to clearly test which activities were growing my income. It was like being handed firebug for business. My eyes were opened. Don’t get me wrong, I worked very hard, but I was working hard before that. Carla helped me work smart. I directly attribute a significant portion of our business growth to what I learned. We have doubled our gross revenue annually for the past 3 years and hope to accomplish it again for the 4th (on track).

So that’s my plug for bookkeeping. If you still won’t do it personally, then at least learn enough so that you can judge if you the person you hire is on the up and up.

NB. This information should augment, not replace advice from an accountant or lawyer. This information is mostly relevant to US citizens. While we would like to include information for more localities, because FreelanceSwitch readers hail from all over the world this cannot be accomplished.

So that’s it for the first week of The Business of Freelancing Series. There will be another one coming up soon, so stay tuned!!