Freelance Finance

  • Keeping your business in the black and out of the red (Guest Post)

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    Getting paid by your customers or clients is one of the most important things that a business needs in order to flourish. But simply sending out your invoices isn’t enough – you need to remember that a sale isn’t a sale until the money’s in your bank account!

    Emily Coltman FCA, Chief Accountant to online accounting service provider FreeAgent, gives her five top tips on how to collect payment from your customers and clients, and ensure your books stay in the black – not the red.

    Make payment and collection easy

    Think about the different ways your customers could pay you, and which would be the most straightforward for them.

    It’s also worth considering whether there’s any risk to you that the payment might not be processed successfully.  For example, direct debits may be returned if the customer’s bank balance is too low.

    If you want to provide an easy method for your customers to pay you, it may be a good idea to use a service such as PayPal that lets you take card payments without a merchant bank account.  Using PayPal means that your customers don’t have to give their credit card details to you directly, and you won’t incur the fees and additional admin of a merchant bank account.  However, it’s important to also do your sums and check PayPal’s fees too, because they charge you when you receive money in from your customers.

    Finally, make sure you communicate clearly to your customers how they should pay you, including putting your bank account number and sort code on your invoices.

    When should you take payment?

    You need to make sure you achieve an acceptable balance of risk between yourself and your customer in this area.

    Asking for full payment upfront could put prospects off if they’re worried about losing their money if they’re not happy with your product or service.  Consider offering a money back guarantee to make them feel more comfortable.

    You could alternatively spread the risk by asking for part payment upfront and part on completion of the work, or delivery of the product.

    Asking for payment only once the work is done, or the product is delivered, puts a lot of the risk on to you.  If your customer delays payment, or refuses to pay altogether, but you’ve already delivered the service or the product, you could end up out of pocket.

    Communicate your payment terms clearly

    Make sure your customers and prospects know when they can expect to pay.

    Set your payment terms and make sure they’re clearly visible on your website, and reinforce the message by including payment terms on your invoices, too.

    You may also want to consider adding a more personal approach onto your invoices to better communicate them to your customers. For example, we had one FreeAgent user who customised his invoices with a picture of his children and a note saying that they wouldn’t get fed until the payment was received.

    While you might not want to go as far as this example, a personal message or style could still help ensure your clients remember your invoices and deal with them sooner – rather than leaving them lingering in their “to do” piles.

    Chase late payers

    A lot of small business owners make the mistake of not chasing money that they’re owed, because they’re worried about losing customers.

    Remember, you’re providing a product or service that your customer wants and needs.  Don’t be embarrassed to chase them for the money.

    If you’re worried that doing this yourself could damage your customer relationships, consider using a virtual PA service.

    Using an online accounting tool also allows you to send automatic reminders by e-mail to your customers, both before and after your invoices are due.

    No non-payers

    Especially if your customer’s business is a lot larger than yours, it’s sometimes tempting to take the line of least resistance and stop chasing them for payment – but keep selling to them, hoping that they will eventually pay up.

    In a word, don’t!  No business can survive for long without cash to pay its suppliers and its taxes, and remember you’ll want to draw some cash out yourself.

    So if your customers don’t pay you, and if they are still unresponsive even after you’ve chased them, you should consider not selling them anything else – because it’s not a sale if they don’t pay you!

    Emily Coltman FCA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers.  Try it for free at http://www.freeagent.com

    (If you fancy giving FreeAgent a try, they have a 30 day free trial. Here’s a referral link. This post is not paid for, but the referral link does give me a small discount on my own FreeAgent account if you love and continue using it after the initial 30 days)

  • How do I calculate my working from home expenses?

    One question I’ve had pop up a few times on the blog recently is regarding working from home expenses when you’re a sole trader. It’s something a lot of freelancers are unsure of. Can we claim our full phone bill? Can we claim for the cost of dedicating a room to my work? Thankfully, FreeAgent have come up with a snazzy little infographic to work out exactly how much you can put through as an expense for each kind of bill.

    Do you work from home? Do you know which expenses you should be claiming?

    View the full image at FreeAgent

  • The A-Z of Freelancing: Invoicing

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    Sending out an invoice is pretty satisfying. Seeing on paper what you’ve achieved can make a tricky month worthwhile.

    But waiting for a payment (and chasing it) is less fun.

    However, there are plenty of tools at your disposal to make invoicing and chasing so much easier.

    Here are just a few options:

    • Manual – many of my more organised friends favour a manual system, of creating their own invoices and logging it in a spreadsheet. The bonus is that it’s free to do! If you’re disorganised like me though, you’re possibly better to use an organised system, as this won’t send you alerts when someone is overdue.
    • Freshbooks (which, in the interests of being transparent, is my choice and I have a referral link if you’d like to try it).  It’s an online tool and app that allows me to set up invoices quickly and send them automatically at the same time each month if I choose to. It also adds on late fees for me if they pass the 30 day payment period without paying. The benefits are that it takes a lot of legwork out of the process. The downside is that you do have to pay for it (I currently pay $19.95 a month)
    • Crunch – I’ve heard a lot of good things about Crunch recently, partly because they also give you access to a number of accountants too.
    • Google Docs – Google Docs/Drive have a number of apps you can use with their docs, which can be used to create invoices

    A couple of hints before you invoice:

    • Let the client know, before you start working with them, what your terms are. This includes payment periods, late fees and early payment discounts
    • Add your terms to your invoice, particularly if the invoice goes to the company finance team rather than the contact you initially agreed the terms with
    • Stick to your guns. If you state when a late fee applies, and they repeatedly ignore it, make sure you add the late fee to the invoice.

    How do you invoice?

     

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  • Five ways to make money part time: Make the most of your free time

    how-toWant to make money part time, alongside a job? I’m not talking thousands here, but potentially a couple of hundred pounds a month if done well. It’s not as hard as you might think. Here are five fairly simple ways to earn a little extra money in your spare time…

    Park some money in your account

    Rent out a parking space – If you’re out for most of the working day, and you live in a town centre or near a train station, this is for you. You can rent out your parking space easily, using sites like Parkatmyhouse.com. Depending on your location, you can earn up to several hundred pounds a month, for very little effort.

    Snap up some cash

    Love taking photos? Have a skill for getting a great shot? You can earn money from your photos. There’s a great guide over on The Next Web about selling your photos online.

    Money in the hand for handmade products

    Online marketplaces like Etsy (USA) and Folksy (UK) let you set up a little online shop to sell your products. It’s a great way to get your handmade products seen, without having to invest in a website. You can sell almost anything on there, from greetings cards and posters to jewellery and gadget cases.

    Make a bid for it

    Offering a service? There are a bundle of sites you can go to, to bid on jobs that need doing. I’d recommend checking out Fiverr, People Per Hour and, occasionally, Guru. You won’t earn as much as if you got the job direct, but every little helps.

    Pet Sit/walk

    If you love animals, and have some spare time during the day, pet sitting or dog walking is a great option. Many people prefer to have a visiting pet sitter rather than a residential pet sitting job, so you may need to have a CRB check.

    Matched Betting

    Matched Betting might sound a bit odd, but essentially it’s a way of taking advantage of sign up offers bookies offer, balancing them against an exchange so you break even, then use the bonus money they give you to make a profit. If you want to give it a try, Profit Accumulator (affiliate link) talks you through your first two bets for free where you can make a profit of up to £45. It’s not something I would recommend to anyone who has a very addictive personality or gambling issues, but in theory if you stick to the process there’s no risk. Have a look on Google or YouTube for some reviews. People can earn anywhere from £250-£1000+ a month, and it’s tax free!

    Do you have any other suggestions for how to make money part time? Selling products and services? Jumping on eBay? Odd jobs? Let me know in the comments!

  • Freelance Book Of The Month: Jump Start 2013

    Happy New Year everyone! How’s your head? Are all those new year’s resolutions looking a little more intimidating now you actually have to do them?

    I appear to have kick-started 2013 by publishing the wrong post a month early. Oops! This month’s Freelance Book Of The Month is actually Penny Golightly’s rather brilliant Jump Start 2013 eBook.

    In the spirit of a fresh new year, I thought it might be useful to feature a book that helps you improve your life over the space of a month. With the tax return deadline approaching at the end of the month, it’s a great opportunity to get your finances in good shape and develop some other good habits too. Which is why Penny Golightly’s ebook Jump Start 2013 is rather brilliant. Jump Start 2013 is a collection of small daily actions to help you improve your life.

    Jump Start 2013 is split into five themed weeks – personal finance, decluttering, tenner week, healthy week and reflect and look ahead week. Each day has a small task that can be easily slotted into your daily routine. If you’ve got a lot of resolutions lined up, this is a great way to achieve them – little steps rather than battling against huge intimidating ideas.

    Penny’s writing style is warm and friendly, so you feel like it’s helpful advice from a friend. I love that each task only takes a couple of minutes to read, and most of them don’t take longer than an hour. January is usually a quiet month, so it’s a great opportunity to do some life maintenance like this.

    Oh, and it’s just £2.05 on Amazon. Bargain, huh? If you like money-saving tips, Penny Golightly’s blog is well worth a read too.

    p.s Freelance? UK-Based? Join us for the #FreelanceUK Twitter chat tonight from 6.30pm to chat all things freelance. Tonight, we’re focussing on pitching. 

  • Free Printable! The Weekly Freelance Challenge: Does your time/work ratio work for 2013?

    The end of the year is a great opportunity to take stock and decide what to do in the coming year. For me, it’s been a feast and famine year. I lost three main blogging clients in the space of a month thanks to budget cuts, which led to me looking at what I’m currently doing and readjusting it. After listening to Tim Ferris’ 4-Hour-Work-Week, I realised the bulk of my income was coming from social media work, but the bulk of my time was spent doing blogging work. I was working evenings and weekends trying to keep up with blog posts, when I could take on half the number of social media clients for at least the same amount of income – and have time to dedicate to other things. Fairly important in particular this year, with a wedding to arrange in April. Additionally, I found my passion in 2012 sat with social media, so it seemed like the most logical move.

    As a result, I now have more time to blog for sites I really love, like Dork Adore and The High Tea Cast, as well as The Freelance lifestyle. I’ll also have the time in 2013 to work on some projects I’ve been dying to do.

    So, my challenge to you for the first week of 2013 is to work out where your income is coming from, and how hard you’re working to get that income. Are you working all the hours you can find for something that isn’t particularly lucrative? Is there another way you can work, or another income stream you can investigate?

    To make it easier, I’ve created the below free printable:

    free printable

    All you need to do is:

    • Fill in the tasks you do regularly in the Current Tasks section. For instance, you might blog, carry out social media management and graphic design for your clients.
    • Fill in the time you spend and the income you earn for each of these tasks in the right box.
    • This should give you a better idea of which tasks are better to focus on. Write these tasks in the third box, and include any additional income streams you might think of (for example, teaching or ebooks).
    • Finally, fill in all the things you would do if you have time, in the final box. These could vary from volunteering to spending more time with family.

    The reason I’ve added in the last section, is because I know most freelancers don’t just work for the money. However, it’s easy to fall into the habit of working for work’s sake. By stating achievements OTHER than work that you want to fulfil, it gives you something to focus your efforts on so you’re working to live – not living to work.

    Are you re-adjusting how you work this year? What do you want to do aside from your freelance work? Leave a comment to let me know what you’re hoping to achieve. 

  • Tax Returns: It’s Not Just About Your Expenses

    Rosie Slosek, who runs One Man Band Accounting, has kindly contributed a guest post this week.

    Tax return time is upon us in earnest, and now is the time to get the hassle out of the way before more fun stuff arrives – like parties and eating lots!

    It’s easy to think of your self assessment tax return as just being about the expenses. It isn’t as simple as that unfortunately.

    There are lots of reasons you may need to file a return: self-employment is only one of them.

    • Are you a director of a company?
    • Do you rent out a property or a room in your house?
    • Has HMRC sent you a return and told you you need to do it?
    • Do you have a job as well as freelance?

    While doing your bookkeeping takes up most of the time involved, it’s only one aspect, and the others are equally important. Your tax return is about declaring income to HMRC and you need to make sure you get those parts right, as well as having your accounts in order.

    Here’s a quick check list of what you need to think about.

    Employment

    • Have you any part time work? Did you finish full time work in the last tax year?
    • Get your P60 as you’ll need to give details
    • If your self-employment made a loss, you may be able to claim a refund against tax paid in your job

    Being a company director

    • You need to file a self assessment tax return if you’re a director

    Self employment

    • You need to declare any income , capitals items (eg. a computer) and expenses in your business

    Partnerships

    • If you’re in a partnership, you’ll need to file a partnership return and both partners (not just you) need to file a self assessment tax return

    Property

    • You’ll need to complete the property pages if you rent out a property to someone else, even if you’re an ‘unintentional’ landlord. You also need to keep records of income and expenses like you would for a business
    • You also need to declare if you rent out a room in your house and you may be able to take advantage of the Rent A Room Scheme

    Interest, dividends, shares

    • Do you have savings that aren’t in an ISA? The interest needs to be declared although it’s usually already been taxed
    • If you receive income from dividends they also need to be declared (that’s also those companies you’re a director of)

    Benefits, foreign income, trusts, capital gains, pensions

    • Income from abroad, trusts and capital gains (eg. selling a house or major asset) need to be included. If you have any of these, it’s a good idea to ask for help, as they’re complicated areas that are easy to fall foul of
    • There are also some benefits that need to be reported if you received them in that tax year, eg. Jobseeker’s Allowance
    • Some of you may also have student loan repayments which need to be included

    See, it’s not too difficult, apart from a few areas (that pesky capital gains again).

    It’s not that hard though. It only gets tricky in certain circumstances and you need to know that’s when to ask for help.

    For your expenses, you also need to know what’s allowed all of the time, what isn’t allowed all of the time, and what’s allowed some of the time (that’s the tricky bit). Clothing, foreign travel and food are examples of what you need to keep an eye on.

    If you’d like help, email me and we can arrange a chat free of charge. I do offer a Notes To Help You Do Your Own Tax Return service and a Checking Your Own Return service if you would like help but don’t want to outsource completely 🙂

    Oh yes, and always have a brownie when doing bookkeeping or tax returns. It’s essential as far as I’m concerned.

    Rosie Slosek runs One Man Band Accounting, supporting one man bands in the UK with hassle and fear-free accounts mentoring and tax returns, with a home made brownie for every client.

    She’s also on Twitter, LinkedIn, Facebook and Google+.

    Start your week well and sign up for her free Accountability email every Monday morning at 8am.

     

  • Saving Money as a Freelancer or: How to Afford Better Cereal

    Today we’ve got a guest post from Josh Boyd, a freelance copywriter, who wants to share his tips for saving money as a freelancer so you can enjoy more of the good stuff!

    Hurray! You’ve thrown off the shackles of full-time employment and are now reaping the benefits of being able to work in bed while eating Sugar Puffs. You relish in the ability to do your top quality work in your garishly bright pyjamas, while you pity the poor souls going to the office from your window. How foolish they seem now. Unfortunately, this feeling of happiness and sense of superiority will likely be brief and misleading. A few months have passed since you walked out of your old job laughing and mocking your ex-coworkers and the Sugar Puffs have now turned to Morrisons own brand corn flakes (the ones that don’t even come with a cardboard box). You’re also on the powdered milk too. Turns out the work hasn’t come as thick and fast as you’d hoped and all your friends with proper jobs have started to complain about your raggedy clothes. Time to start saving some money, you short-sighted fool.

    So, chances are you’re going to want to claim some tax back for those corn flakes as some kind of business expense. Unfortunately, you have pretty much no idea what you’re doing and so you got an accountant. This will have been bleeding you dry and has left you in the sorry cereal state you’re in. There is a much better alternative to this. You should try online accounting instead. It simplifies the whole process massively meaning that even your malnutritioned brain will be able to use it and keep track of everything. You’ll also have much easier access to your accounts and what’s going on too. So, find your trousers with the least holes in, get down to your accountant, fire them and then get online.

    You might have decided that your genius deserved it’s own .co.uk website. You guffawed as you saw other freelancers use blogs as their websites. “Unprofessional!” you scoffed as you bought way more bandwidth that you really needed. Time to scale back. Move all your stuff to Tumblr instead. It is completely free and very customisable. You can make a great site with Tumblr, plus you can use it to link up with people who might be interested in your work. If people like your stuff, it’s also very easy to share it with other people who too might appreciate your incredible skills. Plus Tumblr is, like, cool and stuff. Don’t be a square, daddio (and if you’re that fussed about having your own URL, just buy one and have it re-direct to your Tumblr).

    Marketing yourself can be a difficult task, especially when you start out. For some reason, people just aren’t drawn to your impeccable work through unprecedented word of mouth spread. The few jobs you have done so far has, as of yet, failed to cause panic among prospective clients to hire you. There are a few ways to get free publicity. One of the best is to find a blog dedicated to your field and attempt to get an article posted on there which outlines some thoughts from your incredible mind. You’ll be unlikely to get paid for this, but suck it up and enjoy the chance for more people to discover you.

    Decrease your outgoings enough and you’ll be back on the Sugar Puffs within no time. One day, with enough work, you might even reach Lucky Charms levels.