If you’re a freelancer, independent contractor, or small business owner, you know the importance of keeping up-to-date income records and accurate accounting. When you’re self-employed, income verification is something you’ll go through more often than you think.
When you apply for a credit card, car loan, home loan, or business loan; you’ll need to verify your independent contractor income if you expect anyone to give you money. The lender will want to see that you’re consistently making the money you claim so you can be deemed a trustable lendee.
Having a pay stub generator is a great way to verify your income but pay stubs aren’t always something you get as a freelancer. The goal of this article is to help you understand the importance of pay stubs and how they help with income verification.
The Challenges of Verifying Your Income
Here are some of the challenges you likely face when trying to show proof of income when self employed.
1. Your income is always changing
In the world of freelance work, your income can change dramatically from quarter to quarter. The goal of every independent contractor is to develop an income you can rely on but that doesn’t mean you’re not going to experience fluctuations based on the time of year, season, and economic conditions.
Being able to verify that, anticipate it, and properly communicate it with a lender is not even difficult, it’s impossible. Having accurate bookkeeping is the best way to explain fluctuations in your income and pay stubs from previous months and quarters will help you further prove your point.
2. Payment is issued from a variety of sources
Income verification can be a challenge when you’re paid in a variety of different ways. Some clients pay by check in the mail, some through PayPal, some through Stripe, and maybe even some in cash. In the digital world we live in, we’re accepting payments in all different forms to try and appease our clients and ensure that we make the process as easy as possible so we can get paid. This is one area where pay stubs can really come in handy because you can compile all the payments from each avenue and have everything in one place.
3. Being paid in cash
If you’re trying to learn how to show proof of income if you’re paid in cash, it’s not easy. Freelancers paid in cash will need to keep highly accurate records of every dime they make and having pay stubs that state this income looks so much more professional than a spreadsheet you made yourself. Remember, the better it looks the better chance you have of getting what you want be it a credit card or car loan.
Using Pay Stubs for Income Verification
When it comes to income verification, freelancers have it a bit more difficult than our W-2 friends. Independent contractor taxes, loan applications, and auditing are all aspects you have to worry about but having accurate pay stubs can help clear up any confusion. Using a pay stub generator from Pay Stubs 365 will not only help you keep track of your income but it’ll help you tremendously whenever you’re trying to verify your income.