How to organise Management for Freelance platform business?

Hello everyone,

I’m facing a challenge with our business model and need some guidance to set things up in our accounting software.

Here’s the situation:

  1. Our company connects clients with freelancers (our employees listed in the software).
  2. A client places an order (currently entered via Sales Invoices, though I’m unsure if this is the best approach).
  3. For every order, the freelancer gets 70% of the profit, and our agency takes the remaining 30%.
  4. Regarding expenses, the freelancer covers 70% of material costs, while our agency handles 30%.
  5. However, the client directly pays the freelancer (like how Uber works) especially for cash payments.

The problem I’m facing:

I can’t figure out how to systematically organize this in our software. I’m struggling to set up the freelancer’s debt to our company. The only debt section I’ve found pertains to employers owing employees for salaries.

Can anyone provide a step-by-step or guide on how to structure this in the software? Any help or advice would be much appreciated!

Thank you in advance.

You first need to seek advise from an accountant. Why would freelancers be your employees, do you keep Payroll, pay taxes, health insurance, etc for these?

From my perspective your company should just issue a Sales Invoice to the freelancers.

  1. Create under the Customers tab for each Freelancer a Customer
  2. Create in the Chart of Accounts an income account in P&L named for example “Income from Services for Freelancers”
  3. Create in the Chart of Accounts an expense account in P&L named for example “Material Expenses paid to Freelancers”
  4. Create a Sales Invoice as for example in the test business below. Note that the amount in the second line with account “Material Expenses paid to Freelancers” is a minus value (-200 because it is an expense but this is a sales invoice used to record income).

The invoice total see screenshot below is thus 300 (income) -200 (expenses)

This will result in a Summary screen:


When you receive the actual funds you need to open the View screen of the Invoice and click on New Receipt a screen such as below will show up where you need to enter the bank account and optional reference number and description. Do not add or remove any line item.

The new summary screen will now reflect that the funds are in your Cash & cash equivalent account and no longer in accounts receivable.

Do you bill the client the full amount?

So each client ALWAYS pay the freelancer directly and on the spot? And then the client pays you the remaining 30% separately?

How do you keep track of whether or not a client has paid the freelancer? Or a freelancer will get paid at the end of the work regardless?

Assuming that is the case, I have a business that employs staff as well as freelancers. For tax purpose, I need to maintain records of how much I have subcontracted out to each vendor so I have implemented some controls so I can create a trail.

  1. Enter each freelancer as a supplier since they are not your employees - you are the middle man.
  2. Create a Sales invoice to bill the client in full.
  3. Create a Purchase invoice for the 70% of the fees of the invoice in step 2. This way you create a Payable balance for each freelancer.
  4. When client pays your freelancer, create a journal entry to debit the freelancer payable and credit the receivable from client. When client pays you then you can set off the remaining receivable.

Materials shared with the freelancer can be treated in a similar way.

I think he is saying he has listed the freelancers as employees in manager

I understood what he was saying, but I question if that is the right thing to do and urged to seek help from an accountant first.