When you freelance for a living, you’re responsible for all of your accounting, records and tax prep. Everyone has their own system, but what do you do when you get paid in cash?
Since cash payments are commonplace, it’s important that you figure out how to create your own records and make sure you have proof of income.
With this in mind, use these tips to keep your business on the right track.
1. Create a PayStub
Nothing says financial records like having a paystub. You can create your own paystub for cash transactions so that you have record of the buyer and seller names, payment amount, date, and for what services rendered.
Platforms like Paystub Creator are useful in this regard.
They can be as barebones or detailed as you need. For instance, some professionals also choose to add phone numbers, physical addresses, e-mail addresses and websites to the paystub.
Just make sure that you set aside copies of your paystubs for safekeeping.
2. Maintain a ledger or spreadsheet
It’s easy to document individual cash transactions when you maintain a ledger or spreadsheet. This will help you track your income from week to week and month to month, and lets you document the date and total of each.
If you’re going to keep an accurate ledger or spreadsheet, make sure that you get disciplined about adding to it. Document transactions as soon as you’re paid, instead of tasking yourself with remembering to do it later.
Otherwise, you will run the risk of estimating and guessing to fill in the blanks, which makes your records inaccurate.
3. Plug your payment into a bookkeeping software
With technology widely available, it’s only right that you use quality bookkeeping software.
There are plenty of great bookkeeping software tools you can use to keep track of all your transactions. Many of them come with mobile apps, so you can add a transaction as soon as it happens, complete with detailed notes.
This information is stored in the cloud, so you will have years of archives that are highly accurate and detailed. Once tax time comes, it will be easy to just roll the info from your files over to create a tax return.
4. Make a deposit and keep track of your bank records
Depositing your money into the bank creates a useful paper trail for you. To get a hardcopy record, keep the receipt from the deposit and stash it away.
Otherwise, you can also use your bank account’s online record, or wait for the monthly invoice to come out. Banks create invoices in hard copies and PDFs, so you’ll be covered on both fronts.
5. Write out a letter explaining the transaction
Finally, you and the other party of the transaction can get on the same page by putting it in writing. You can jot down a simple letter that explains how much money you got paid, on what day, and for what type of service.
The two of you can also sign or initial the note and date it.
Learn how to show proof of income if paid in cash
These tips are useful to you when you’re trying to figure out how to show proof of income if paid in cash. Applying these ideas will help you document each transaction for your records.