Freelancer Bookkeeping Template (Monthly Close, Tax Set-Aside)

Freelancer Bookkeeping: [Business or trading name]

A monthly bookkeeping and cash flow routine for freelancers, sole traders and very small businesses run by one person. It covers the accounting basis, a simple chart of accounts, separate business and personal money, an income and invoice log, an expense and receipt log, a tax set-aside rule, owner pay, bank reconciliation, a monthly close checklist, a 13-week cash flow forecast, a year-end pack for an accountant and record retention. It is based on public tax authority guidance (US IRS Publication 583, revised December 2024, and UK HMRC guidance for the self-employed) and written in plain language for any country. Replace every [bracketed] value and every row marked Example. This is a document format, not financial, tax, legal or accounting advice. Tax rules, thresholds and forms differ by country and change often; obtain the law or official guidance for the normative text and check with a qualified adviser.

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Contents

• 1. Business profile and accounting basis
• 2. Accounts and money flow
• 3. Chart of accounts
• 4. Income and invoice log
• 5. Expense and receipt log
• 6. Tax set-aside rule
• 7. Owner pay
• 8. Bank reconciliation
• 9. Monthly close checklist
• 10. 13-week cash flow forecast
• 11. Quarterly and year-end tasks
• 12. Record retention and storage
• 13. Local equivalents
• 14. Glossary
• 15. References
• Standard and licence note

1. Business profile and accounting basis

There are two ways to decide when income and expenses are counted:

• Cash basis: income is recorded when money arrives and expenses when money leaves. It is simple and matches the bank account. Many small sole traders are allowed to use it (in the UK it has been the default for most sole traders since the 2024-25 tax year, with an option to elect accruals; check gov.uk).
• Accrual basis: income is recorded when it is earned (usually when the invoice is issued) and expenses when they are incurred, even if payment happens later. It gives a truer picture of profit for a period but needs a list of unpaid invoices and unpaid bills.

Whichever basis you choose, use it consistently for the whole year and tell your accountant which one you use. Some tax systems limit who may use the cash basis or require permission to change basis; check with the tax authority.

The self-employment tax facts above are a US example only, as published on irs.gov in October 2026; check the current IRS page and your own country's rules.

2. Accounts and money flow

Use a dedicated account for the business. IRS Publication 583 advises keeping the business account separate from the personal account and using it only for business purposes; most tax authorities give similar advice. Then add a second account just for tax money, so that it is never spent by mistake.

Rules for mixed-use costs: when something is used both for business and privately (a phone, a home internet line, a car), record only the business share as a business expense and write down how the share was worked out. Keep the method the same all year.

3. Chart of accounts

Match the expense categories to the categories your tax return or your accountant uses; this saves work at year end. The codes below are an Example structure; any consistent numbering works.

Large purchases such as a computer may have to be spread over several years (depreciation) instead of being expensed at once, depending on local rules and elections. Mark such items in the expense log and ask your accountant.

4. Income and invoice log

Create invoices with Invoice (business/invoice) and log each one here. Use one continuous numbering sequence (INV-YYYY-NNN). On a cash basis, income counts in the month the money arrives; on an accrual basis, in the month the invoice is issued.

Monthly income summary:

Follow-up rule for unpaid invoices: send a friendly reminder on the due date, a second reminder 7 days later, and a call or formal notice at 21 days. Record each contact.

5. Expense and receipt log

Photograph or download every receipt on the day of purchase and name the file with the expense ID (for example EXP-2026-101.pdf). Write the business purpose in a few words; months later it will not be obvious.

Expense check for October: 60 + 250 + 45 + 35 + 10 + 32 = 432.

Category totals for the month feed the profit figure in section 6:

6. Tax set-aside rule

Self-employed people usually pay tax later than the money arrives, and sometimes in advance instalments. A simple rule protects the household: move a fixed percentage of every receipt into the tax reserve account on the day it arrives.

Two ways to set the rule:

1. Percentage of receipts (simple, more cautious): with rate $r$ and receipts $R$, the transfer is $r \times R$.
2. Percentage of profit (closer to the real tax): with receipts $R$ and allowable expenses $E$, the set-aside $S$ is:

Set $r$ from last year's actual tax and contributions divided by last year's profit, plus a margin if income is growing. Ask an accountant or use the tax authority's own estimator for the first year. The rate is a household planning rule; it is not a tax calculation.

Worked check for October (Example):

The difference is a cushion, not lost money. At each quarterly check, compare the reserve balance with an estimate of tax owed so far; move any clear excess back to the business account only after the year's return is filed or the accountant agrees.

Advance payments in the US example: the IRS says individuals generally pay estimated tax if they expect to owe 1,000 USD or more when the return is filed, using Form 1040-ES, in four periods with due dates of April 15, June 15, September 15 and January 15 of the following year (moved to the next business day if the date falls on a weekend or legal holiday). Other countries use different instalment systems; see section 13 and check local rules.

7. Owner pay

For a sole trader, owner pay (often called drawings) is not a business expense; it is the owner moving profit into the household. It does not reduce taxable profit. A regular amount makes the household budget stable, which matters most when income is irregular; see the irregular income plan in Budget (personal/budget).

Check of the balance (Example): working back from the reconciled book balance of 6,000 at 2026-10-31 (section 8), the later movements were receipts of 2,700 in, tax reserve transfers of 810 out, the 10 bank fee and the 32 phone repayment, so the balance after owner pay was 6,000 - 2,700 + 810 + 10 + 32 = 4,152. The 140 of October business-card spending (EXP-2026-101, -103, -104) is repaid from the business account in November.

8. Bank reconciliation

At month end, compare each business account balance in your records with the bank statement. Differences should only be timing items (a payment sent but not yet cleared, a deposit in transit) or errors to correct. Never close the month with an unexplained difference.

Also reconcile the business card and any payment platform balance monthly, and confirm every tax reserve transfer appears in the reserve account.

9. Monthly close checklist

Month summary:

10. 13-week cash flow forecast

Roll the forecast forward every month: drop the weeks that have passed and add new weeks at the end. Base receipts on when each client usually pays, not on the due date alone. All amounts below are in the reporting currency; tax transfers follow the 30% of receipts rule. The example opens with the reconciled book balance at 2026-10-31 (section 8).

Checks for the example: 9,200 - 1,170 - 2,760 - 3,000 = 2,270, and 6,000 + 2,270 = 8,270. Tax transfers equal 30% of receipts: 0.30 x 9,200 = 2,760. The lowest closing balance is 5,690 in week 1, above the cash floor of 4,000. Note that the US estimated tax payment due on January 15 is paid from the tax reserve account, not from this business account, so it does not appear here.

11. Quarterly and year-end tasks

Year-end pack for the accountant (or for filing yourself):

Personal tax documents that sit outside the business (salary slips, interest statements, pension contributions) belong in Tax Document Checklist (personal/tax-document-checklist).

12. Record retention and storage

Keep records at least as long as the tax authority can review the return, and longer for assets you still own. Two public examples, as published in October 2026:

• United States: IRS Publication 583 (revised December 2024) says to keep records until the period of limitations for the return runs out. That is generally 3 years, 6 years if more than 25% of gross income was left off the return, 7 years for claims about worthless securities or bad debt deductions, and without limit for fraudulent returns or years with no return filed. Employment tax records are kept at least 4 years. Records for property are kept until the period of limitations expires for the year the property is disposed of.
• United Kingdom: HMRC guidance says sole traders must keep records for at least 5 years after the 31 January submission deadline of the relevant tax year.

Check the rule in your own country; some require 10 years for business records.

These records contain client names, bank details and tax numbers. Store them encrypted, never send tax numbers or bank details by unencrypted email, and keep passwords in a password manager rather than in this file.

13. Local equivalents

Names only, as of 2026-10; examples, not exhaustive, not advice. Check local rules with the official tax authority.

14. Glossary

15. References

• US Internal Revenue Service, Publication 583 (12/2024), "Starting a Business and Keeping Records" (US federal work, public domain). https://www.irs.gov/publications/p583
• US Internal Revenue Service, "Estimated taxes" and "Estimated tax" FAQs (Form 1040-ES, payment periods). https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
• US Internal Revenue Service, "Self-employment tax (Social Security and Medicare taxes)". https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
• HM Revenue and Customs, "Business records if you're self-employed: how long to keep your records" (gov.uk, Open Government Licence v3.0). https://www.gov.uk/self-employed-records/how-long-to-keep-your-records
• HM Revenue and Customs, "Check if you're eligible for Making Tax Digital for Income Tax" (gov.uk, Open Government Licence v3.0). https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax
• Related templates: Invoice (business/invoice), Budget (personal/budget), Tax Document Checklist (personal/tax-document-checklist), Emergency Fund Plan (personal/emergency-fund-plan).

Standard and licence note

Based on public tax authority guidance: US IRS Publication 583 (revised December 2024) and IRS pages on estimated and self-employment tax (US federal works, public domain), and HMRC guidance on gov.uk (Open Government Licence v3.0). Facts are cited with their source; no worksheet, form or text is reproduced, and the structure and wording are original, written for this collection. Alex Rivera and the clients named are fictional. This is a document format, not financial, tax, legal or accounting advice. Check the current official guidance and your local law before use. Template licence: MIT.