Tag Archives: Finance

Wise owls: Managing money

Liz Jones

Here are some things I’ve learned about managing money in 12 years of freelancing:

Tax is a potential killer. I’m happy and proud to pay tax, but it’s one of the things I’ve found most challenging to manage in terms of cash flow, especially in years when I’ve taken a few weeks’ ‘maternity leave’. It’s really important to set aside more than you think you’ll need: if your earnings fluctuate, so will your tax bills. I’ve found paying an accountant to be a worthwhile cost to help me get my tax calculations right and understand how I can make the most of allowances.
It’s essential to get into a position where you’re not depending on a particular payment being made on time in order to pay vital bills such as the rent or mortgage. Even with the best clients, timely payment is not 100% reliable.
I never justify charging clients a high rate by citing my circumstances. As it happens, mine is the main income for my family, but that’s irrelevant to them. They’re paying for my work, not to support my lifestyle.
I use FreeAgent to manage my invoicing, and my accountant takes the information directly from this to complete my tax return. It’s not free but it’s saved me a lot of time over the past few years.
I chase invoices as soon as they go overdue. After once losing nearly £2,000 on an unpaid invoice when a client went into administration, I also invoice regularly in smaller stage payments for large jobs, to mitigate the risk of a client going bust.

Louise Bolotin*

My nickname is The Spreadsheet Queen! I use spreadsheets for everything, although I’m barely proficient in Excel. No matter, as you don’t need to be. I created a spreadsheet to track my invoicing just by setting up a few columns with headings such as date, client, what the job was, PO number (if applicable), how much I billed, when I invoiced, when the money is due, etc. I have extra columns for notes and to tick off when my client has paid. I also have a spreadsheet for tracking client hours, with my per hour rate in a column. I bill some of my clients monthly, so I can tot up jobs on the tracking spreadsheet and transfer the billable sum to my invoicing one.

My outgoings are minimal – I’m mindful that expenses are tax-deductible (mostly). My biggest expenses are my CIEP fees (and conference, if I decide to go) and my trade union subs. Then there are costs for software, and, occasionally, stationery, plus fees for my accountant and PC fixer (an essential expense!). Again, I track all these on a spreadsheet – it’s useful to see how much I’m spending per year, including versus how much I’m making. I aim to limit expenses to 5% maximum of my turnover, but it’s usually below that.

I check my business bank account on my phone daily to see what’s gone in (or out). Yes, I have a separate business account – I find it easier to track income and expenses without having to trail through my supermarket shopping, Spotify subs and utility bills. It’s not possible to separate business and personal completely, but it’s about 99% foolproof. I set aside 20% of every invoice as it’s paid – it goes into a dedicated savings account for my tax bill after my accountant has filed my tax return. Setting that aside also stops me from thinking I have more disposable income than I actually have.

Hazel Bird

Managing money is about finding a system that suits your business model. For example, if you’re raising lots of low-value invoices, it might be worth paying for a system that raises, sends and tracks invoices for you, and integrates this data into an accounting package. I’ve seen CIEP members recommend the likes of Crunch, FreshBooks and QuickBooks for this purpose. I tend to raise fewer high-value invoices, so I use an Excel template (which I complete and convert to PDF) and do my tracking in Google Sheets. This lets me geek out with functions to create my own personalised reports. It also means I have no money-management-related expenses beyond the time I take.

It’s definitely not essential to have an accountant, especially if your finances are simple. But naturally this means keeping on top of current tax and accounting requirements, particularly if you’re registered for VAT or invoicing clients in jurisdictions outside the UK. Members often raise very helpful threads on these topics on the CIEP forums.

Finally, there’s a stereotype that freelancers never complete their tax returns until the week they’re due – and then discover we owe the government far more than we expected. I’ve always consciously avoided that approach, because it’s important to me to know my exact tax liability and ensure my cash flow will cover it. To make this as painless as possible, I tend to be one of those insufferable people whose accounts are always up to date. This is inevitably a bit tedious, but it shouldn’t be too tedious. Your system should slot into your work as seamlessly as possible. Money management should serve our businesses, not the other way around.

Nik Prowse

A wise man – a mentor from my early days as a freelancer – once said to me: ‘Put aside your tax money before you spend it.’ He also advised separate bank accounts. So I have a bank account into which all of my business income goes, and as soon as I have a receipt I put a percentage of it into a savings account to cover tax and National Insurance. I set the percentage slightly over what my tax will be, so that I save something each year just by hiving off my tax money.

I don’t use anything other than Microsoft Excel to manage my business income. I have a spreadsheet with columns for date, project name, invoice number, ingoings and outgoings, with a reminders column for payments due for bills and the mortgage. I have separate sheets for the money put aside for tax, business expenses and income from clients. That way, when my tax return is due my business income and outgoings are all present in one handy file.

These two systems have always allowed me to know how much I have, and to be certain that I can’t dip into crucial money that will need to be paid to HMRC.

Sue Browning

My key advice is to do things as you go rather than leaving them to pile up and need sorting out later. Sent an invoice? File it and record it on your income sheet. Renewed your CIEP subscription? File the invoice/receipt and record it on your expenses sheet. I give each invoice and expense a unique reference. Then each month, I download my business bank statement and reconcile it with the invoices issued, marking up each item on the statement with its reference number in my accounts. This reconciliation takes me less than half an hour each month. I do everything electronically, scanning paper receipts on the rare occasions I receive them. I also use a program called Cushion for scheduling, time-tracking and invoicing so my information is all in one place, but do what works for you.

I also put about 20% of my month’s income into a savings account earmarked for tax. This means I don’t dread the total when I submit my return. My accounts spreadsheet has a totals worksheet that collects the monthly figures and gives me an annual total. Come tax return time, I have only to refer to that sheet, knowing that all my invoices and receipts are in order, so my tax return takes me about half an hour. That’s when I am grateful to past me for taking a few minutes regularly to keep on top of things.

Sue Littleford

Knowledge is a wonderful thing. First, know your money style. Are you disciplined? Does it trickle through your fingers? Track your invoices, and pounce on any that become overdue the first day they’re overdue. Don’t be shy. You’re in business, not pursuing a hobby. Be polite but firm, and repetitive – it works in most cases. Don’t be afraid you’re ‘nagging’ – you’ve done the work, so your client should pay up! Budget for your business and household expenses: work out what you want to spend on training, marketing, CIEP membership and conference attendance, materials, resources and overheads – and know when those become due.

Work out what you need to live on, likewise. Use that knowledge to help you set the hourly rate you want to earn. A simple spreadsheet of your invoices with a running total can be used to forecast your tax and National Insurance bill. According to your money style, either save enough from each paid invoice to pay the tax on that invoice or do your tax return as early as you can and set up a direct debit with HMRC to pay in monthly instalments (more like a PAYE scheme, and there’s no temptation to dip into your tax pot before you pay it to HMRC). With interest rates so low, the satisfaction of knowing you’re paying down that tax bill rather than saving the money and earning on it may balance out easily. Attend HMRC webinars on business expenses and filling in your tax return.

*Louise Bolotin died in October 2022; her contributions are much missed.

If you’re starting out on your freelance journey, the CIEP’s guide Going Solo covers the finance basics, including tax and record-keeping obligations.

Photo credit: owl – Dominik VO on Unsplash

Proofread by Victoria Hunt, Intermediate Member.
Posted by Abi Saffrey, CIEP blog coordinator.

The views expressed here do not necessarily reflect those of the CIEP.

Wise owls: freelance business goals for 2018

Sue Browning

Around the turn of any new year there’s always a plethora of advice on reviewing the year just past and setting goals for a brave new you in the year to come. And it’s always good to take stock and review what worked for you and what didn’t, what you enjoyed and would like to do more of, and what you never want to do again. It’s also good to review your fees, check out software and other tools, and look over your processes and see if they can be streamlined.

I’m going to say something heretical now. I’m not much of a one for setting goals and, with a few exceptions (CPD, holidays), I don’t make hard plans. Instead I try to make incremental changes in my behaviour that work towards increasing my overall efficiency and enjoyment of my job and life as a whole. The thing with incremental changes is that they are achievable and sustainable; the ambitious goals one tends to set under the influence of inspirational advice quite often turn out to be neither of these.

So why not resolve to learn some (more) keyboard short cuts – not just for Word, but for Windows/OS, your email client, Acrobat/PDF-XChange. Start with maybe one or two of the commands you use most frequently, learn or make short cuts and use them until they become second nature, then learn another one or two. Do the same with Find & Replace commands and maybe macros. Start simple and work up. If you do this regularly, you will soon accumulate a good arsenal of tools and techniques, you’ll be more efficient and your mouse-clicking finger will thank you.

Many of us will have just paid our tax bill, so it’s also a good time to start planning for the next one. If you can, consider setting a percentage of your earnings aside every month so next January (or July, if you’re in that bracket) isn’t such a worry. Put it in a high-interest account and try to forget about it. If you can afford it, also put some money aside longer term, to help tide you over those times when you are ill, or even as something for your retirement.

Hazel Bird

My suggestion for setting New Year business goals is to make this an opportunity to really focus on the one, two or perhaps three things you want to do with your business this year, or maybe improve on from last year. It’s all too tempting to look at all the interesting courses, self-development and business development ideas out there and want to do all of them. However, by spending some time thinking about what you want your business to look like by Christmas 2018, drilling down to find the key actions that are most likely to get you there, and then making sure you actually have time to carry out those actions, you’ll be more likely to see some real results from your efforts.

Abi Saffrey

Setting goals when you run your own business can be harder than doing it as an employee – there isn’t anyone else looking at the bigger picture for you. You’re the strategist, the business development manager, the marketing master, the holder of the purse strings and the person who has to make the results happen.

Whatever goals you set, consider how you are going to achieve them, by when and, just as importantly, why you want to achieve them. The hardest goals to meet will be the ones that are there just for the sake of having goals.

Break goals down into what you need to do to achieve them: your income won’t rise, your costs won’t fall, your skills won’t stay relevant, you won’t have a new service to market if you sit around waiting for some magical, mystical external force to make it happen.

Whatever goals and actions you decide on, there should be some training or CPD in there – it might be to learn a new skill, refresh or improve an existing one, or deepen relevant knowledge. You don’t know what you don’t know, and even training that revisits what you already know will keep you and your business on track.

Review your progress against your goals regularly – put reminders in your diary – and it’s okay to revise them, add to them or get rid of them if you realise they aren’t working for you or your priorities change. Keep records on progress or changes so that you can monitor your actions and decisions – and it’ll help you to keep the things out of your next set of goals that, it turned out, gave you nightmares.

Sue Littleford

Starting the year with a blank sheet of paper for your business new-year resolutions can be a bit daunting, but don’t overwhelm yourself with an impossible wishlist, or the feeling that this year you Must Be Perfect. Who needs that stress? Just aim to be better in some areas.

Review your financial records and decide on a training and development budget and an income goal, and think about what training you want to undertake. What do you need to upgrade? What do you need to fill in gaps in your knowledge or to consolidate what you already know and boost your confidence? What do you need to keep abreast of new developments in publishing or to add a new service to your offering? Must it be paid-for training with a certificate at the end, or are there YouTube tutorials you can do? Can you afford it this year, or can you at least save some money towards it, and do the training in 2019?

Think carefully about timing for best results. If you’re looking to expand your client base and one of your selling points is that you’re available throughout the summer, start cold-calling/writing two or three months before the main holiday period when many clients are wondering how they’re going to cope with their freelances taking time off.

Are there any clients you need to fire, who pay too little, or are more trouble than they’re worth? Make time to find and work for new, better clients.

Do you want to engage more fully with the SfEP? Do you have the capacity to volunteer? Or do you want to go to your local group meetings consistently? Perhaps your resolution will be to read all the SfEP emails and see what the Society is hoping its members will help with.

Maybe you have a hitlist of little niggles – procedures you want to nail down, documentation and templates you want to develop, a Word hack you want to find. Log them and tackle them.

Scatter your resolutions through the year – don’t try to start everything at once. And put review points in your diary when you’ll evaluate how much you’ve already achieved and decide the next steps. Resolutions are for life, not just for January.

John Espirian

For those new to the editorial profession, the best place to start is by taking good quality training. Without this, most people will lack the skill and confidence to do a good job for their clients. Thorough training should be a minimum requirement – so put that top of your agenda if you’re just starting out.

My goals for business success in 2018 are based on improving my marketing so that I can be better known in my space. That means continuing to post relevant and helpful content on my blog and looking for opportunities to enhance my profile via other streams.

One method I like is to appear as a guest on podcasts, as this is a quick and easy way to introduce yourself to new audiences. I’m aiming to make it on to 10 podcasts this year.

I’ve also decided to dedicate a little more time to in-person networking, so will be attending three conferences in 2018, including the SfEP’s annual conference at Lancaster University in September.

Liz Jones

I find it helps to have a clear understanding of where I’m at to see where I want to take things in the future. It’s worth spending some time analysing your business to find the answers to questions like ‘where does my income come from?’ (by client and by sector), ‘which clients pay best?’ (and worst) and ‘what do I spend most of my time doing?’. I did this last year, and the answers were illuminating – and in some cases quite surprising. Finding out what was really happening in my business enabled me to make some big decisions about who I wanted to keep working with, who I didn’t, and the type of work I wanted to spend most of my time doing. As a result I’ve streamlined the types of work I take on, but increased my income, and have also found time for creative pursuits on the side. Without taking the time to understand at a very detailed level what was happening in my business, I might not have felt able to make such changes for the better.

The views expressed here do not necessarily reflect those of the SfEP