5 Tips For Keeping Your Freelance Finances Under Control
Whether you’ve left that 9 – 5 to pursue a career or personal passion, or you’re looking for the kind of flexibility that will nurture a better work-family balance, the everyday life of a freelancer can be both stimulating and exciting. But if there’s one potential downside to the independent, freelancing lifestyle, it’s keeping track of your finances. You’re a freelance designer, after all, not an accountant, and sifting through spreadsheets probably wasn’t part of your freelancing dream.
Hold on don’t throw that calculator at the wall in a fit of frustration just yet. There are a number of quick and easy ways to keep your finances under control without boring yourself to death. Here is our top 5.
1. Watch Your Personal Finances
For most small business people, there’s rarely a dividing line between your personal and business life, and this is never more the case than with your finances, where the primary business developer, accountant and bookkeeper is you, you, you. Use a tool like Mint to keep track of your spending and make smart budgets that can adjust for wild fluctuations in cash flow. Set up a savings account and store about three months’ salary for those low periods, contributing a set amount of each paycheck during the good times. You’ll also want to have a bank account set aside for your yearly and quarterly tax payments and your online tax return. When you’re just starting out, use the Mint’s goal tool helping you fill these accounts at a reasonable pace.
With the right tools at hand, finances don’t have to be a headache. Choose your processes and tools ahead of time so that when the time comes for wrangling your finances, you can speed right past the administrative parts and get right to the fun part: getting paid for being the best designer around.
2. Practice Smart Invoicing
As a small business person, managing cash flow is a crucial part of your job description. After all, if a client doesn’t pay in a timely manner, that can eat directly into your ability to pay your bills, or at the very least to invest in tools or systems that will help you grow your business.
That’s why it’s important to find an invoicing system that’s not just convenient but that also gets the whole process right. The online invoicing system, Xero, offers both simple invoicing and a community of financial professionals and small business people sharing best practices. For a taste of what Xero can do, which takes a comprehensive look at the types of processes that get invoices paid faster, from identifying the paying person in a client organization to pinpointing the best times to invoice and in what frequency. This will enable you to get paid faster and with less hassle.
3. Track Time Efficiently
Once you’ve begun work, time tracking will be key — both for the hourly rate model and so that you can better estimate time costs and create more accurate price proposals. In this area, organization and centralization are key; the last thing you want to waste energy on is gathering time from across multiple spreadsheets or documents and entering them manually into a spreadsheet.
Instead, use an online time tracker like toggle (or Harvest), which allows you to time work on projects either on the go or right from your desktop. Just enter a client, click the timer button and begin. When you’re finished, toggle will add this into a billing system so you can just send it on to the client, easy as can be.
4. Determine Prices
When you’re just starting out, figuring out how much you’re going to bill for your work can be a challenge. You may have encountered difficult clients or projects that ran over their allotted time in your desk job, but when you’re on your own, billable hours really matter. As you’re writing your RFP, sit down with tools like Instacalc and Freelance Switch, where you can easily break down every element of a project, estimate time and attach a price to be quickly added into spreadsheets. What’s more, tools like these also let you save calculations you have to do repeatedly, so they’re always there when you need them. Pro tip: consider moving away from billing by the hour, or at least from framing your pricing to customers that way. Instead, put together a variety of packages that break down deliverables. This way, you can both establish expertise and give clients a much better idea of what they’ll actually be getting, which may in turn allow you to charge more than quoting a large hourly rate.
On the backend, you’ll still know how long each element of the process should take, but you’ll profit more when you work with easy customers that take less than the estimated time and lose less when working with difficult time wasters.
5. Catalogue Receipts Online
Now that you own your own business, keeping track of receipts is even more important than when you were in a larger company’s expense budget. Okay, maybe it holds the same degree of importance, but you probably care more now that you can deduct everything from supply purchases to client meetings on your yearly taxes.
But, if you’re anything like me, when my receipts finally find their way out of my fat wallet, they drown in a stack of scattered paperwork. Enter Lemon, an online tool for cataloguing receipts. Just take a picture of your receipt to your smart phone or tablet and the system digitizes all relevant information, making for each syncing with your invoicing or accounting software so you can better track your spending. And, should you ever get audited (rare, but it happens), you won’t have to face that panicked scramble to gather all of your data.