Hard up freelancer? You might be making these mistakes…
Freelancing can seem like a perfect way of working. It can mean a flexible working schedule, with an array of clients to keep your work varied and interesting. But, as I am discovering from setting out as a freelance copywriter, there are also a whole bunch of mistakes just waiting to trip you up.
1) Getting your day rate wrong
Where do you even begin with deciding on your day rate? Starting out a few months ago, I could come up with a figure about as easily as I could guess how many baked beans could fill a bath tub, or the market value of a signed Cliff Richard poster. Charge too little, and you could find yourself swamped with badly-paid work that isn’t worth your while. Ask for too much, and you might struggle to find clients.
Finding some benchmarks and average figures on the internet is obviously a good place to start. Think about the skill level of what you’re doing, and the value that you’re adding to the company. In your head, set an absolute minimum that you’re willing to work for, and then go in higher. Ask the client about their budget, and get an idea of what they’re hoping to pay. Don’t go below your minimum amount, and also remember to rethink your rate if the work changes.
2) Working too many hours
This is one that gets most new freelancers, and I can’t say I’ve cracked it completely yet. The fluidity of freelancing is one of the best things about it, but it can be a bad thing as well as a good one: there’s no point securing a great day rate if you end up letting ‘one day’ of work fill up a whole week.
When I first began freelancing, I got talking to a freelance designer and filmmaker at a party. He told me that he’d come up with an ingenious way of separating ‘home life’ and ‘work life’ and only doing the hours he was being paid for. In the morning he’d leave his house, walk round the block – perhaps buy a takeaway coffee – and then return home. When he put his key in the lock this time, he was ‘coming to work’. At the end of the day, he’d do the same again, only this time when he got back to his house he was ‘arriving home’.
It might seem extreme, but tricks like this can help to make sure you don’t let freelance work fill up your whole life. I also find it helpful to use a time-tracking tool like Toggl so that I can keep an eye on the number of hours I’ve worked. I’m also learning to be strict with myself, for example filtering work emails into a separate folder and only addressing them when I’m working for that client. If finishing a project just isn’t feasible in the time I’m being paid for, I tell the company that I need more hours or days to do it, rather than rushing to finish or working many more hours than they’re paying me for.
3) Failing to chase up those invoices
You’ve sent off that first invoice. You wait nervously. Gone are the days when a steady salary hit your bank account on the same date each month, and everything’s become a little more financially unpredictable….
Recently, with the prospect of major festive expenditure looming in the near-distance, I finally chased up the invoice that I’d sent off a couple of weeks earlier.
Chances are, your invoice has merely got lost in the system somewhere, since it has to travel through line managers and a finance department, and it will be sitting in a queue with a lot of other pending payments. In my case, I sent an email and my manager chased up the finance team and my invoice was paid the same afternoon.
Don’t be afraid to send a polite reminder to get things sorted. Also, when you submit your invoice in the first place, include a time limit for payment such as seven, 14 or 30 days. This could affect how your invoice is placed in a prioritisation queue.
4) Forgetting about the tax bill
When you don’t pay tax through PAYE, it’s important that you remember to put something aside for the tax that you’ll have to pay through self assessment. You need a sensible approach to spending and saving as a freelancer, so that you’re not faced with a giant tax bill and an empty bank account at the end of the year.
Remember to register for self-assessment and file a tax return each year. To get an indication of how much tax you might have to pay, try HMRC’s self-employed tax calculator. Once you know how much you’re likely to pay, try to save a portion of your earnings each month.
The prospect of filling in a self-assessment form is already making me feel a bit queasy. Maths and paperwork are not strengths of mine. In the spirit of following my own advice, I’m trying to squirrel away a small amount of money each month though for when that dreaded tax bill arrives.
5) Getting into hot water
Hopefully it’ll never happen, but if one of your clients makes a claim against you for losses that they blame on your work, then the legal bills could be really high.
If, like me, you’re a natural worrier who goes to bed running through worst-case scenarios, then there are also other things that might help put your mind at ease: you may consider getting an accountant to help you with your tax return, and it might be worth exploring income protection insurance so that you’re not left struggling to pay the bills if you’re too ill to work.
It might seem like there are lots of possible pitfalls, but as a freelancer you fail fast and learn even faster. Once you’ve got into the swing of things, it’s likely you’ll never look back. I’m still making plenty of mistakes but I’m also really enjoying the journey. But maybe ask me again once I’ve had to file my first tax return…