Top tips for freelancers
Having recently met with several freelance contractors, I thought it would be a good idea to share some tips for stress free finances.
1. Axe the tax
Whether you're a start up or seasoned professional, set aside some time to make sure your buisness is set up in the way that's best for you. Limited companies offer a best tax environment than sole traders. In part, that's because company tax rates are lower than income tax rates. However, while limited companies are generally more tax efficient, there are compliance costs to think about. As a general rule, a freelancer earning around £30,000 per annum or more will normally be better off as a limited company. Everyone's circumstances are different though, so speak to an accountant before you make a decision.
2. Every cloud...
Cash flow is important for any business, but perhaps no more so than for the one mand band, who can't rely on a back office function to chase up payments. Digital technologies have helped to turn what can be a laborious, difficult process into something much more user friendly. Regular communication helps to keep you front of mind for your clients, meaning that you're more likely to get paid faster, so look out for an easy to use, cloud based accounting software like Xero. The cloud base means it can be used on a smartphone or tablet - so you can quickly and easily check who owes you money, and drop them a quick email when you're out and about.
Record keeping is part of the nuts and bolts of running a business, so it's important to establish a fail-safe process from the word go. Today's small business owners can get a lot of value from using technology to their advantage. This is where business apps like Evernote really come into their own, allowing you to store notes, email drafts and images all in one place. It is cloud based so it synchs automatically, and you can tag search terms, making content easy to find when you're back doing admin in the office.
4. To DIY or not to DIY
One of the reasons that freelancing is so attractive is that individuals can operate with a much lower cost base, making the time spent working more profitable. When it comes to balancing the books however, the DIY approach isn't always the best, most profitable option. If you're spending hours on back office functions, you could be losing out on chargeable hours. Get a few quotes for the work you want doing, and weigh up the cost against what it will 'cost' you to do it. It can also be worth considering whether you have a head for figures, and therefore how long it might take you to do the same piece of work.