Five Ways to Become a Better Freelancer
This week, we welcome Elizabeth Grey as a guest blogger. Grey is a freelance writer and editor who enjoys sudoku and art galleries when she’s not glued to her laptop. She tweets about freelancing, finance, and education @ej_grey.
When I started as a freelancer, the financial fundamentals really intimidated me. I was lucky to receive some good advice early on. As my career took off, I realized just how important it is to get those essential financial foundations in place.
Some of these foundations helped me drive my freelancing in the most profitable direction, while others have saved me vital time. These are the basics that help me the most.
Planning for taxes from day one makes life much easier. One of the best pieces of advice I ever received was to put aside a percentage of my earnings in a dedicated bank account to cover taxes. Experts often recommend putting 30 percent aside. This means that you won’t be presented with a large tax bill you can’t pay at the end of the year—a stressful situation that’s not uncommon among freelancers.
Source: E-Smart Tax, 2014
Ensure that you know what you can claim as a business expense from the start, too. Doing this means that you can keep vital receipts and records as you go along, which helps you make the most of your deductions and makes tax season a lot easier.
It can be tempting to skip this when you’re really busy, but doing monthly bookkeeping is one of the financial habits that made my freelancing profitable.
Tracking monthly expenditure and income allows you to see exactly where you’re making money, who your best clients are, and which projects are most profitable. It also allows you to see what you’re really spending on overheads and expenses and which clients or projects aren’t financially viable.
As a result, my business is a lot leaner and focused on my best-paying projects. This is essential for keeping ahead in a crowded marketplace—not to mention making tax preparation more straightforward!
Setting rates is something the majority of freelancers, especially new ones, struggle with at some point. Getting it right is essential to making self-employment sustainable.
Set your rate too low and you risk burning yourself out. You’ll work all hours to make a decent income, working with clients who don’t really value what you do or on low-quality projects. Even worse, you can end up resenting your clients or your work.
Many experienced freelancers recommend having a minimum acceptable rate and never dipping below it. When considering your rates, remember not to base your rates solely on deliverable work. As a freelancer, you should factor in time spent on non-billable tasks, such as bookkeeping and marketing, as well as vacations and sick days. Otherwise, you may find it difficult to get paid enough to make freelancing worthwhile.
One of the mistakes I made initially was using a plain pro-forma invoice, which I then had to fill out every time I needed to send a new invoice. This became surprisingly laborious, especially when it came to tracking payment.
Using an automated invoice system saves so much time and lets me see whether a client needs a reminder to pay an overdue invoice.
Do chase overdue invoices, and have a system in place for escalating late payments. I created a template email I can adapt to the situation, which removes a lot of the awkwardness.
Cash flow can be a real issue for freelancers, so making it easy for your clients to get money to you quickly and cheaply is essential. This becomes even more pressing if you take on work from overseas clients.
Getting paid by check is fine, if a little slow, but if you want to take payments online, instantly or from abroad, you’ll need another system. I find PayPal adequate for my needs, although transaction and currency conversion fees can add up. If PayPal doesn’t work for you though, there are plenty of other systems you can try.
Just make sure that you factor the cost of receiving money into your rates.
These habits and practices have enabled me to flourish as a freelance writer and editor. I hope that they will help you make the most of your freelance careers, as well.