Managing Your Finances as a Freelancer in 7 Simple Steps
At all stages in the freelancer’s career it is essential to manage finances to get the most out of self-employment. For people with creative leanings, finances and accounting may seem like daunting aspects of becoming one’s own boss. Below are simple steps, including useful applications and information resources, to help freelancers manage finances and increase profit and pleasure.
Step One: Keep Track of Your Time
Time is money, so it’s one of the freelancer’s most valuable assets. Managing your time efficiently can make all the difference to your finances so it is essential to maintain control of work schedules. Harvest (www.getharvest.com) is a simple time-tracking and invoicing application that enables effective time management. The package allows users to quickly and intuitively track schedules, log expenses, run reports and bill clients.
Step Two: Manage Your Invoices
It’s important to manage your invoices to make sure you get paid on time and that your finances are up to date. FreshBooks (www.freshbooks.com) is a great application for swiftly and simply sending, tracking and collecting payments. The package has features that can ease organisation of finances, make invoices look professional and enable tracking on the go with the connected iPhone app. Looking into more advanced software for financial management may be prudent if Freshbooks doesn’t serve all of your needs.
Step Three: Make the most of Online Banking
Internet banking allows simple bank transfers, and it’s simple to check your bank accounts online to monitor income and outgoings. Anyone who has used eBay will be familiar with PayPal as a means to pay for goods, but it is also a useful tool to fall back on to receive online payments from clients. It’s also useful to have separate bank account for all your freelance finances, separate from your personal accounts, to maintain a boundary between business and leisure.
Step Four: Track Your Expenses
It’s important to keep accurate records of all your expenditure throughout the financial year to ensure you don’t waste money unnecessarily. Wesabe (www.wesabe.com) is a great package for tracking expenditure, setting and checking targets, and graphically visualising spending. Importantly, Wesabe is a community-based application, so growing numbers of users can share financial tips and real-life experiences.
Step Five: Get Your Taxes Right
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If you are a freelancer working alone for a handful of clients the yearly tax return should be reasonably straight forward, and HMRC’s online self-assessment (www.hmrc.gov.uk) is a fairly intuitive way to file your tax return. If, however, you are outsourcing work, employing staff or renting workspace then taxes may become more complicated. The bigger your business, the more complex your tax issues are likely to be, so it might be necessary to get help of some sort. This could be in the form of software such as TurboTax (www.turbotax.intuit.com), an application for preparing tax returns ensuring you pay the correct amount. The package can be tailored to suit the nature and size of your business. It may also be necessary to employ the services of a professional accountant; if so make sure it is someone affordable within your budget and whom you can comfortably discuss your financial affairs.
Step Six: Get the Best Help
When working as a freelancer it is important to acknowledge your capabilities and limitations, so if your finances are become difficult or you can’t unravel your accounts then it’s good to get help and advice. Aside from accountants, there are many other sources of financial information for freelancers including online advice from sites such as Freelance: UK (www.freelanceuk.com). If you run into difficulties with your finances, the Citizens Advice Bureau (www.citizensadvice.org.uk) offers free information and guidance services.
Step Seven: Enjoy the Freelancing Life
Image: Matt Honan
There are many reasons to become a freelancer, but it is unlikely to be for the joys of managing your own accounts. The freedom to work independently shouldn’t get bogged down in troublesome financial difficulties. By managing your finances efficiently and seeking the right help when you need it, you can hopefully achieve the right balance and concentrate on the creative work that is at the center of the freelancing life.