Managing Freelance Finances
This week, I thought that I'd tackle what is probably the biggest struggle and stress of being freelance for me personally. So I'm going to share what I have learnt about managing your finances as a freelancer but if anyone else has any advice for me, feel free to tweet or email me because I could do with the advice!
So let's get started with the most important and crucial part of freelancing......
REGISTER AS SELF EMPLOYED
Honestly if you want to be self employed, and especially if you think you could genuinely make a career out of it, get yourself registered with HMRC, and don't get me wrong because most people do, but I know 100% of people in the past who haven't. It's not worth the consequences because it will come back to you, probably at the worst time, just be a professional.
THINK ABOUT GETTING AN ACCOUNTANT
This is something I have been looking into for a while and feel like I'm close to finding what I'm looking for. You definitely don't need an accountant, but when you have to sit down and fill in your tax return, along with reading all of the documents on the HMRC website, on top of keeping track of every expense and payment, you'll realise it's just worth paying for one. It also helps massively when it comes to getting a mortgage, so even if you don't think you need one right now, it's pretty much essential to have one for a few years before you'll be able to get a mortgage, they've not made it easy for us that are self employed in that regard!
ALWAYS SET ASIDE MONEY FOR YOUR TAXES
One of the best and most basic steps you can take when first starting out as self employed, is to set up a separate account (mine is just an online saver) for your taxes. Then all you do, is every time you receive a payment, put 30% of that into your taxes fund. This way, you ensure you have enough to pay off your taxes when it comes to file your tax return and anything left over can be used to treat yourself or invest in building your business. I personally choose to put 35% into my taxes fund, giving myself a little bit extra to treat myself with without really noticing that it's there. Also, not everyone can afford 30% initially, but just do what you can, and work your way up towards the 30% mark.
INVOICES & ESTIMATES
I'll start this one by saying, don't ever quote someone over the phone, social media or in an email conversation, I'll admit sometimes that it just can't be helped, but for the majority of quoting situations, just don't do it. All you have to do is tell your client that you will just need to work a few things out and you will get back to them with an estimate which you will email to them, fair enough some people might want to hear the estimate over the phone, but it's still important to go away and really work out numbers with all of the details from your client before you quote them.
Also, keep it professional, you can work up your own fancy invoice/estimate document in a number of programs, but I've found it easier to just use apps. The one I use is Wave apps, it has easy to use and edit templates which look really smart but personalised at the same time. It also keeps track of everything for you so you can see when you sent a document, if it has been paid, when it needs to be paid by and exactly how much you have outstanding.
KEEPING TRACK OF PAYMENTS
As mentioned above, you can keep track of payments with wave apps, but I personally only really use it for it's invoicing/estimates system, and not so much keeping track of client payments. Mainly because I have regular clients who I have contracts/agreements with who I've worked with for months/years and don't invoice them because I have a payment plan set up with them. I also receive payments through different methods so I choose to work from my own document in sheets instead.
So above is an example of one of my documents which I use to keep track of payments (sorry it's so small! It has quite a few columns, so just click on it to make it bigger). As you can see, I have my clients to the left, and then all of the columns to the right of those keep track of the numbers for me. I can see how much the total payment amounts to, what the deposit percentage is, what the deposit amount is, when it was paid, when I sent certain invoices (which helps with making sure you're paid on time), how much is left to pay etc. It's very basic, and I'm sure I'll have a much better version of this in a year or two!
I also have the above document which helps me forecast my month in terms of payments and income. Keeping track of what I'm going to earn and working out how to give myself a wage/how much to give myself etc. has been the biggest struggle for me. This is the first month that I'm trying it with this document so hopefully it'll help me out a little!
STAY ON TOP OF EVERYTHING
One huge mistake I made when first starting out, and I know for a fact others have done the same, is to leave sorting any of my finances until it's time to do my tax return, this is a massive hassle for many reasons. First and foremost it's just a pain, having to trawl through a years worth of payments, expenses, bank statements etc. not only does it take a long time anyway, but you have to try and remember certain expenses and where they've come from and it honestly can take days to go through it all properly.
I will admit that I only did this because I was doing freelance part time and it wasn't really about the money, but if you want to get serious about freelance it's important to stay on top of your finances on a monthly basis, because if you don't, how will you know if you're doing well income-wise or not? The best thing I've done is just setting a day a month aside to do a sort of mini-monthly tax return, I print everything out I will need, check over any outstanding/unpaid payments and contact the relevant clients about those, and make notes on what I can do from them on to improve financially.