Freelancing

Freelancing has many benefits. Freelancers set their own hours and fees, work well around other commitments, get the chance to follow their passions and dreams and make something for themselves. But, the life of a freelancer isn’t all rosy. One area many people struggle is money.

The first challenge comes with knowing what to charge and preparing invoices. Then, many freelancers spend time chasing clients for payments, and even more time learning how to look after their own accounts and filing tax returns. And, that’s when everything is good. At some point, as a freelancer you may want to apply for a loan or mortgage. In which case, you’ll need to jump through multiple hoops to prove your income.

Accounting is often the thing that freelancers dread. Many even hire an accountant, even when their income is relatively low because they can’t face the idea of doing it themselves. But, there is no need. Freelance accounts don’t need to be difficult, and you certainly don’t need to spend money on an accountant to help.  Here are some tips to help.

Keep Track

One mistake many freelancers make is not realizing that they need to record their income straight away. As soon as you earn money you need to register as self-employed and start tracking your income. Or, you could find yourself in trouble at the end of the year.

One issue freelancers face is making money from a variety of different sources. This can make it harder to track your earnings. Create a template for invoices, so you only need to fill in the details before sending them. Save a copy to your own files, with a number. Use a Check stub maker, and then a spreadsheet to record everything and keep things organized.

Create a System

Once you’ve got your invoices, check stubs and spreadsheets set up, find a system that works for you. Some people sit and file invoices and fill in spreadsheets every time they get paid, others have 30 minutes for admin at the end of every day, and then some leave everything until the end of the week or even month and set an hour aside to do it all in one go. What works for you will depend on how often you get paid and how much time you want to devote to admin in one go. Whatever you choose, make sure you stick to it and don’t let yourself put it off.

Keep Track of Expenses

As a freelancer, you may not have too many expenses. But, whatever they are, record them. This could include things like stationery, subscriptions and other supplies. Keep your recipes together and set up another spreadsheet, recording date, expense, amount and receipt number.

File Early

One thing many self-employed people struggle within the first year or so is remembering to set aside money for tax. Then, they’re faced with a massive bill at the end of the year. Filing your return as early as you can, means you could have around nine months to pay anything you owe.

A huge number of businesses start on very little. They start with an idea in the mind of a wannabe entrepreneur, who often has nothing but a laptop to help get them started. The idea begins to progress; a business website is built, a strategy developed, a business plan written– all done from the comfort of the entrepreneur’s own home. These businesses are home-based, a wing and a prayer, someone trying to see if they can turn their idea into reality.

If you’re lucky and aren’t afraid of hard work, a home-based business can begin to take off. It generates a supplemental income; then it’s generating enough money to make it your entire income. The work comes thick and fast, and still that entrepreneur is huddled on their sofa, conducting an ever-growing business. It becomes clear the business idea is strong enough to require a move away from the comforts of home and into official, professional premises.

How Is It Done?

If you find yourself contemplating a move from your home into premises, then here’s the key point: Don’t panic. It might seem like a daunting task, but it’s a leap that your business needs to take so it can grow. Here’s a step-by-step guide to how it’s done.

Step 1: Locate Premises

Ideally, you want something within a reasonable commute from your home. You can scan business listings for yourself, or contact a commercial realtor to assist.

Step 2: Furnish Your Premises

With your premises found, you’re going to need to turn your thoughts to furniture, fixtures, and equipment– commonly known as FF & E. You don’t have to think through an entire office space design for yourself; there are plenty of companies that excel in delivering FF & E on behalf of business owners like yourself. Hire a company to kit your office out with everything you need and save yourself some stress.

Step 3: Focus On Your Contracts

Spend a few days going through all the contracts you will need at your premises. These should include:

• Phone lines
• Broadband
• Electricity, and other utilities if you have them
• Mail redirection if you have been using your home as your business address

Get these set up and set on a direct debit from your bank account, so you don’t have to worry about them.

Step 4: Move In

You might be thinking of how you need staff — at the very least, a personal assistant — before you move in, but there’s no rush. For a week or so, move yourself into the office and get back into the habit of commuting. This also gives you a chance to iron out any problems you have with the office until you introduce staff into the mix.

Step 5: Recruitment

If you’re going to be recruiting, begin when you’re relatively settled into your new space. It’s advisable to only begin to assemble your team when you can offer them a functional working environment, so your solo week trial is necessary to meet this need.

Step 6: Get Down To Business

The above may simplify a little, but for the most part, it’s an accurate reflection of the process of moving from home to office. Use a company to help, spend a few days working through the bureaucracy, and hold off staffing until you’re settled– if you keep these in mind, your move will be as seamless as possible.

Quitting your day job and setting yourself up as a freelancer is deceptively easy. In fact, you have to wonder if many people would consider this as a viable income option if they new how difficult it was to make a living as a freelancer compared to the ease of setting it up. Newbie freelancers soon learn the pitfalls of not having a steady job. If you don’t secure any work, you don’t get paid. If you take a sick day or go on holiday, you don’t get paid. If you don’t earn enough to pay all your expenses each month, you’re in serious trouble. That said, nobody would be a freelancer at all if the hard work didn’t eventually pay off. It’s just a matter of surviving the transition, so here are a few survival tips to get you through your first year.

Understand that you are a business

All businesses have brands, the employees dress appropriately, and there are always deadlines to be met. It should be no different when you’re a freelancer. Although it might be tempting to burn all your work outfits and just go about your business in your pajamas, this will kill your motivation and productivity dead. No one wants to hire someone who works in their pajamas, because they give them impression that they don’t take their job seriously. As a freelancer, you are a business, and only you represent your brand. Set yourself some work hours, get dressed, and don’t stop working until office hours are over.

You need protection

When you first become a freelancer, you’ll sign a lot of contracts with new clients; these are designed to protect your client’s interests, but as you are your own business, you also need protection in case a client forgets to pay you for your work. Therefore, there are two things you need to protect your fledgling business (i.e. yourself); you need a PI insurance quote and a lawyer. PI or Professional Indemnity insurance protects you when a client accuses you of providing inadequate services or designs; it covers the legal costs and expenses in defending the claim, as well as compensation payable to your client to rectify the mistake. A lawyer will not only defend you from these accusations, but they can also read over contracts before you sign them, and chase clients who don’t pay you for completed work.

You won’t be an overnight millionaire

The truth is, you might start losing a lot of money before you start making money, which is why it’s best not to quit your day job until you’re sure you have a sizeable safety net in place. It will take a lot of time and marketing of your services before you’ve secured enough clients to earn your previous annual salary. If you’re lucky, eventually you could be earning more than ever, or at least you’ll earn a decent income with fewer hours.