Finance for Freelancers
Dealing with your finances can be one of the most stressful parts of the job for creative freelancers. How do you know if you’re charging too much or too little? How do you politely chase an invoice? How do you write an invoice in the first place? Consultant Remi Harris cleared it all up at a recent Creative Careers session as she gave an introduction to the financial side of being a freelancer.
Ask for specifics
The first step is to open negotiation with the client and find out exactly what they need.
It is important to ask them for the specifics of the job before you quote a price, “Ask what they want,” Harris said. “Do they want you to do an interview or extensive research? How many words? Ask these questions and then say you’ll get back to them with a price.”
How much should you charge?
To work out what you need to be charging as an hourly rate, Harris suggested working out how much you need to cover your costs. The figure you start with is the cost of your rent, bill and basic living expenses.
Divide that by week and then by hour, taking two days off for the weekend.
Then add expenses such as travel, equipment, training, office expenses, subscriptions and software, as well as taxes, holiday and sick pay. Up the hourly rate accordingly. If anyone offers you a job for less than this amount of money you should be wary.
Clarify the client’s requests via email
Follow up on conversations with the client with an email detailing their requests. This is useful to do at the start of the project as it both avoids miscommunication and provides written evidence should you need to chase the client up for payment later.
Harris recommended emailing to say it was great to speak to the client, and that you understand what they want is [detail]. It’s going to involve [research, interviews and travel etc] and that will take [amount of time] for which the cost is going to be [price]. Add that you hope this outline and price meets their expectations and if they have any questions, to get back to you. She suggested finishing by saying, “as soon as I get your confirmation I’ll issue your invoice and start the job.”
“Be clear,” Harris said. “Put the responsibility on the client.”
Alternatively you can ask the client to make an offer depending on the budget they have. If they give you a price you’re not happy with, ask what they’re able to stretch to, and start the conversation.
If a job is longer than a few days work Harris recommended sending the client a job sheet.
This should detail when the job will start and finish, what is being asked of you and how you’d go about terminating the agreement. It should also include that any additional work can be arranged but must be agreed in writing and it would incur an additional fee. Note that you want the fee to be paid into your bank account and provide your details. “Be really specific with it,” Harris advised.
- Remember to include a markup for your expenses, taxes and other costs
- Breakdown the quote and make it clear what is included and what isn’t
- Make sure the job spec and price is agreed before you start working
- Sometimes you will be asked to do a job that you have a set cost for and can go confidently into the discussion. Other times you might want them to say their price first
- Make sure you put a deadline for payment
Three more helpful websites:
What do I need to include on my invoice?
The invoice should include all legally required information such as your name, bank details and address, as well as any information your client wants detailed.
Harris provided an example invoice to show what needs to be included, and give an idea of how it can be laid out – Template Invoice for Young Creatives
Alternatively you can use a simple text document or system like Wave (free), Quickbooks, Freeagent or Xero.
To avoid later confusion, Harris recommended sending your invoice early and making sure your client agrees that all the information on the invoice is correct.
3. Getting paid
Harris recommended being “politely persistent”, chasing the client early and regularly. “Being a bit of a stuck record but very polite can be really effective,” she said.
When the payment deadline is looming, email the client a reminder. If they don’t deliver, ring them up. If they say they’ll pay you, tell them when you’ll ring again to check and make sure you follow up on it. It is especially helpful if you have a specific named person you can contact.
Sometimes there’s a separate accounts team so it might be worth contacting the creative side of the organisation and chasing them up. They will likely be embarrassed it hasn’t yet been paid and will give an extra push to the finance department.
If the client doesn’t pay think about withholding your work until they do. If all else fails, you do have the statutory right to be paid within 30 days.
Phrases to use when chasing your payment:
- It appears I haven’t received
- You agreed to pay by [date]
- I need
- Please tell me when it’s going to be made
- I’ve received some advice and if needed I’ll take further action
The key to these is to be polite and direct.
4. Organising Finances
Harris’s key advice was to keep finances well organised. Keep receipts, keep invoices, keep a list of business expenses. Make sure you can prove the work you’ve done and the money you’ve spent.
Harris suggested keeping receipts in a file or an app. Receipts are invaluable and can cause chaos if lost. Invoices and receipts are “a gift”, Harris said, like five pound notes to take off your tax bill. “That’s real money you’re able to claim back.”
If you’re earning money outside of a business, you need to register with HMRC as self-employed. You can phone up the government offices and ask if you need to register to see if you fall within the rules.
It’s important to know that the tax year is March – April, and the tax return can be submitted any time from 1st April up until 31st January. Remember to set some money aside to pay whatever your tax bill is going to be.
When do I need to do a tax return?
- You need to complete a tax return after your first year trading (by the October of your 2nd tax year i.e. if you start trading in 017/18, by October 2018)
- You need to complete a tax return after your first year trading (by 31 January 2019 if you start trading in 2017/18)
- You need to pay tax and National Insurance on profits (by 31 January if you start trading in 2017/18, you will pay your bill for 2017 plus payments on account for 2018/19 (ie. in advance of making a return for 2018/19)
Finance and tax returns can be stressful for creative freelancers, but Harris suggests that by keeping your finances organised throughout the year, your next tax return shouldn’t be too tricky. “Take a sensible approach to it and you’ll be absolutely fine.”
Find out about upcoming Creative Career sessions here.
Blog post by Kate Wyver