Okay, so this is a tough one for most people to be honest, but as a freelancer, this is very important. You don’t know when your next paycheque is coming in and have to do your own accounts.
When you set up as a freelancer, you have three options:
-Being Self Employed and set up as a sole trader
-Going through an external Umbrella Company
-Running as a Limited Company
I am not going to go into each option in this guide, but whichever one you pick, you need to have these general rules for staying on top of your finances.
Set up a separate business bank account for your freelance work. This will give you a clean slate and make it easy to track your cash flow.
Make an Excel sheet for your client jobs. This should show the days you have worked, the budget/fee you are charging, the day you invoiced, when you got paid. This is important for chasing overdue invoices.
Keep 30% of all earnings aside for your tax. This is key to making sure once the financial year is over, you can afford to pay your tax regardless of how much it is.
You can choose to get an accountant if you wish to do your finances for personal and or Business tax returns. I personally think this is a wise option, as they are professionals who can help you understand the best way to get the most out of your financial and tax privileges.
Accounting apps are great too. Some are free and some come with a subscription cost. These are good to automate your ins and outs, invoices and capture receipts for expensing.
In general, you want to keep low overheads, so make sure you can actually afford that new laptop you want, and it will be an expense.
Extra Tip: Pick a day in the week where you can dedicate at least an hour to go through your finances, invoicing and expenses. It will save you rushing closer to tax deadlines!
Catch up on previous parts of The Freelancer Grind below: