Tim Aldred - The Frazzled Freelancer

Freelance commercial writer, successfully navigating self-employment one unexpected obstacle at a time. Contact me at twitter.com/tim_aldred

21 Quick-fire Finance Tips for Freelancers

Money. It causes sleepless nights for the self-employed, and it also buys us life’s luxuries. Whether you think you’re on top of your game or you’re looking for help breaking even, there’s always something you can do different to improve your cashflow. Here’s 21 quick tips you may not have considered.

1/ Always save for the taxman. A surprising number of freelancers get caught out every year when the tax bill arrives. You know it’s coming, so there’s no excuse for not putting a bit of your income aside each month in preparation.

2/ Negotiate a good price. Only work for a rate you’re happy with. If the client won’t pay enough, they’re no use to you as a business. Spend your time finding a better-paying source instead.

3/ Keep paperwork. It might seem impersonal to have a customer sign a contract upfront, but nothing’s uglier than falling out over prices and payment terms when a job’s been done and there’s no written evidence about what either party promised.

4/ Hire a bookkeeper. A bookkeeper is an investment. Sure they’re an expense, but their experience will help keep your finances in order, help you make the most of tax allowances and free up time allowing you to do things that bring home the bacon.

5/ Find new sources of income. If you’re a photographer, try licensing old photos on a site such as iStockPhoto. If you’re a blogger, consider putting adverts on your site or compiling your articles into an e-book and putting it up for sale.

6/ Try the 50-50 rule. Most freelances will bill when the job’s done, but others swear by the 50-50 rule, where you bill half up front and the rest on completion. It’s good for cashflow and saves you getting stung by a chancer.

7/ Set income goals. Calculate how much income you need and how much income you want. Use this as a yardstick to measure your success. It’s easier to be successful if there’s an end goal.

8/ Claim interest on debts. Saddled with a late payer? Try adding incremental interest onto your invoices, so the sooner they pay the cheaper their invoice will be. The Late Payment of Commercial Debts (Interest) Act of 1998 means really, really late payments are subject to additional interest and fees.

9/ Use PayPal. There’s still a few freelancers out there who are a bit unsure of technology. And sure, PayPal is far from perfect and has an iffy PR record, but if that’s how your customer wants to pay then don’t make it difficult for them by refusing.

10/ Track your time. By knowing how long each task takes, you’ll know whether it’s good value for money. Maybe there’s something that takes forever but isn’t very rewarding – or there’s a job you can do easily that pays great by the hour. Work this out and you’ll know where to focus your efforts.

11/ Pay off your debts. If your business is built on credit cards or borrowed money, make it a priority to pay back what you owe. Every day you don’t is interest accrued – and that’ll be at a rate way higher than anything you’ll be getting in your savings account. Having both savings and debt is an expensive way to be.

12/ Work at home. Offices are pricey, even coffee shops require you to buy an expensive drink every now and then. If you’re able set up an office at home, you’ll save loads.

13/ Don’t buy lots of things. Sounds obvious, but question each purchase. Do you really need that colour printer? And the branded letterhead? Are all your memberships necessary? Don’t make purchases that will make you ‘feel’ more like a business if you’re not going to use them.

14/ Use free software. There are a million and one tools out there that make running a freelance business easier. Whether that’s invoicing, tracking time, scheduling calendars, virtual meetings, it’s all out there and won’t cost a penny.

15/ Shop around. If you’re making an essential purchase, make sure you’re getting the best value. Small amounts of money can soon escalate when you total them up over a year. Book your train tickets in advance, buy your printer paper in bulk, cash in your vouchers and shop at the most affordable stores.

16/ Share resources with colleagues. Make friends in business and then pool your resources. Maybe there’s a service you’d really like but it’s out of your price range. Can you call up someone else who’d also find the service useful and will go halves on the bill?

17/ Record everything. Profit is about more than income, it’s about how little you spend getting there. You can’t cut costs if you don’t have a handle on what they are. Keep a record of everything you buy and look out for areas that are more expensive than they should be or areas where you could save a few pounds.

18/ Don’t use your expense account. Employees love expense accounts. They cover plush hotels, bar bills, expensive dinners. But that money has to come from somewhere, and when you’re the boss, it comes from you. Just because it’s ‘on expenses’ doesn’t mean it isn’t eventually coming out of your pocket.

19/ Chase late payments. One of the main reasons businesses pay late is because the longer the money’s in their account, the more interest they’ll accrue from the bank. Well that’s unfair. It’s your money and you should be earning the interest. Claim payments as and when you’re owed them.

20/ Keep money in the bank. You’ll sleep easier at night and be less stressed during the day knowing you’ve got a bit of a cushion if you go through a tough month. You don’t need to use it, but knowing it’s there means you won’t panic and make desperate decisions.

21/ Don’t be cheap. Whilst bearing in mind all the above advice, it’s important not to be cheap for the sake of being cheap. Don’t buy something that’s so low quality it’ll be broken within a month and you’ll need to fund a replacement. If you’re meeting a lot of people, don’t buy a cheap suit that will make you look unprofessional and don’t go without the important things such as business cards. It’s not good money management if it saves today but costs you even more tomorrow.

 

 

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Written by Tim Aldred on September 25, 2012 and filed in Frazzled Freelancer, Opinion , , ,


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