‘So much to do and so little time’ – Time is only but the worst nightmare of a freelancer. You know when you get that job and you keep repeating to yourself ‘I’ve got to do it’ every day before discovering that the time has gone? Leaving your finances to be dealt with at the last tick of that tax hour can end up in excruciating horror to that bank account. Here are few top tips from Hardeep Mangat ACCA, founder of Nimble Jack Accounting Ltd to help you stay afloat:
Stay atop all that bookkeeping.
With various software’s now available, choose one that best fits your needs, one you like the look of (it may be a long term relationship) and one that’s most easy to get around. We use FreeAgent, we can vouch for its ease of usability, its main feature entails automated bank feeds that links to your account. It gives you an insight of estimated taxes payable based on the account activity. The system also helps to track all your jobs and relative income and expenses. This helps hugely to evade hefty fines against undeclared income or incorrect filing, one of very many benefits.
Chase your bills.
The nature of this business for freelance writers attracts mostly ‘one off’ jobs or clients. It is important to chase your debtors and be sure you are paid what you are owed. Timely reminders would help for timely payments. This would definitely have a positive bearing on your over all cash flow. Make it easy for clients to pay you. Supply your bank details so you can be paid by BACS (electronic bank transfer) wherever possible.
For longer projects spread over weeks or months, try to agree beforehand that payments be broken down into regular amounts. A tip that works would be for the client to have set up a direct debit. This will minimise your risk and help your cash flow.
Credit Payment Terms.
Keep a close eye on payment terms. A 30 day payment period, allows for you to make a payment up until the last day of the period. It would be sensible to make payments on the last day of the credit term helping you create a financial buffer before money rolls over.
Try to put aside roughly 25 per cent of your income each month. This will both cover your tax bill at the end of the year and also give you some emergency cash while waiting for invoices to be paid. Registering for VAT will also help your cash flow as you only have to pay the VAT back you have collected (20 per cent on all your invoices) every three months.
On time Filing.
Give yourself several day to file your taxes, a good few days before your deadline. Or hire a professional and try working with him or her before your confident enough to think you can work your taxes independently. Being penny wise and pound foolish is indeed foolish.