Been thinking about how messy my record keeping gets when clients don’t pay on time. I have invoices from months ago still sitting there unpaid, and I’m wondering how other solo folks handle this for tax reporting.
Currently just marking them as “outstanding” in my spreadsheet but feels like there should be a better system.
My approach is to track everything in separate tabs. Main tab has all invoices with status updates, second tab is just for the money that actually came in.
For the unpaid stuff, I created a simple aging system:
0-30 days: still fine
31-60 days: send reminder
60+ days: time to get serious
The key thing is keeping your actual income separate from what people owe you. I learned this the hard way when I almost paid taxes on money I never received.
Also started noting the reason for delays when I know it. Helps me spot patterns with certain clients who always pay late.
I use three folders on my computer desk. One for sent invoices, one for paid invoices, and one for problem accounts. When payment arrives, move the invoice from the sent folder to the paid one. The problem folder is for anything over 45 days. This method makes it clear what needs follow-up. For tax purposes, only count what’s in the paid folder. The IRS wants to know what you’ve collected, not what people promised to pay you. Keeping those folders separate helps avoid mistakes.
I keep things straightforward with two columns in my spreadsheet. One shows the invoice date and the other tracks when payment comes in. The payment date stays empty until the money is in my account.
For tax purposes, only report what you actually received that year. Unpaid invoices from previous months don’t register as income until the payment clears. Remember, sent invoices don’t count for taxes. It’s all about the money that’s in your pocket.