One of the easiest mistakes to make when you’re self-employed is looking at the money coming in and thinking, That’s what I made.
Not quite.
In basic accounting, the relationship is pretty simple:
Revenue − Expenses = Net Income
Revenue is the money your business brings in before expenses.
Expenses are the costs of running that business.
What’s left after those expenses is your net income from the business. If your expenses are higher than your revenue, you have a net loss.
So, for example, if your business brings in $30,000 over the year and you spend $12,000 operating that business, your business net income would be $18,000.
That difference matters.
For rideshare drivers, delivery workers, freelancers, and other self-employed people, it can be very easy to focus on gross earnings because that’s the number we tend to see first. But gross earnings don’t tell you the whole story.
A rideshare driver may see thousands of dollars in platform earnings, but that doesn’t account for the cost of fuel, insurance, maintenance, vehicle expenses, phone costs, platform fees, or other costs connected with doing the work.
That is where bookkeeping comes in.
Good bookkeeping is simply keeping track of what came in, what went out, and what was left after the cost of doing business.
You don’t need to turn yourself into an accountant to understand those numbers. But if you are self-employed, you should know what your business is actually earning.
That was one of the reasons I created EZ Gig Bookkeeping. I wanted a practical way for rideshare drivers, gig workers, freelancers, and other self-employed Canadians to keep their business records organized and actually see what their numbers are telling them.
Know your numbers. Keep more of your money.
EZ Gig Bookkeeping provides bookkeeping tools and organizational support only. This article is for general educational purposes and is not accounting, tax, legal, or financial advice. For advice about your individual circumstances, speak with a qualified professional.
Source: Larson, Jensen & Carroll, Fundamental Accounting Principles, Volume 1, 10th Canadian Edition, Chapter 1, p. 7.
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