Sift through a number of studies and you’ll see that freelancing is increasingly becoming the norm, growing numbers going self-employed across the globe. Greater freedom, greater flexibility, potentially greater money – it’s understandable why so many people are making the switch.
Alongside these benefits comes increased responsibility though, as going self-employed you’re left solely responsible for handling your own finances. Effectively your own small business you’ll need to get to grips with a lot of numeral rigmarole, or else face some angry questions from the taxman… worse still, your business going under.
In your first year all the financial stuff can be particularly hard to get your head around. So, if you’re an aspiring freelancer or a rookie struggling with everything financial, here’s five tips to help you on your way.
It’s dull, divulges money out your business and does little more than cause a headache for freelancers. Nonetheless, tax is something you’ll need to get to grips with.
Government websites can help here. The IRS, for instance, offer tax webinars and workshops that’ll give you an understanding of what you’ll need to pay, and when you’ll need to pay it. Elsewhere, consider chatting to an accountant. Whilst costing initially, their tax expertise is often invaluable and they’ll likely save you money in the long run.
Accounting – the mere mention of the word will send many a freelancer to sleep. It’s integral to your financial well-being though and something you’ll need to do regularly to prosper as a freelancer.
Early on in my freelance days I tended to put it off and off, avoiding it at all costs. In retrospect, it’s something I wish I placed a little more emphasis on, as my finances would have looked much less of a mess. In contrast to the (old) me put some time aside to do some bookkeeping every day, or at the very least once or twice a week. It’ll pay off later down the line. Trust me.
It’s important to develop a stringent system where paperwork is concerned. Keep all your financial documents in a disorganized draw or shoebox and your finances will likely mirror their disorder.
Instead, establish a filing system with different sections for things like invoices and bank statements – in fact every facet of your finances. This’ll make accounting easier and go a long way in reducing some of the problems that can result from documental disarray.
There’s a plethora of apps out there designed to help you manage your finances and its worthwhile exploring what’s available as there’s some excellent creations.
Check, Receipt Bank, My Price – apps like these can make things immeasurably easier on the financial front, the latter an amazing creation that’ll help you decipher just what to charge, based upon variables like the project, client and your own experience. As such, it’s an invaluable app when you’re just starting out.
As Ed Gandia’s 2012 freelance industry report reflected, the feast or famine nature of work is something that blights freelancers across the board, regardless of whether they’re a rookie or a veteran.
That said, it can be more pronounced in the early days when you’re assembling clients and establishing relationships. With that in mind, build a budget, ensure you keep to it and elsewhere, consider using financial tools like cash-flow forecasting. This should provide you with a better picture of your financial state, whilst helping you to legislate for any lean periods on the horizon.
Mark James is a UK based writer who lives and works in Brighton, a small seaside city 60km south of London. A former freelancer, he currently works in-house at Crunch Accounting. Outside of work he’s a soccer obsessive, and you’ll most likely find him on the terraces supporting his local team Brighton and Hove Albion.