It is certainly true that freelancing offers a degree of flexibility when it comes to working hours. Instead of resisting the temptation to snooze the alarm clock at 7am every day in order to beat the morning rush, many freelancers will often start their day at a time that suits them and more importantly, from a location that suits them.
This often makes things such as running the family home, doing the school run, commuting, and taking time off for holidays a lot simpler than when you are an employee of someone else’s company. At the end of the day, the freelancer can often take his or her work with them wherever they decide to go. A flexible work-life balance is one of the major advantages when working for yourself as a self-employed freelancer.
Setting up a freelance business
While this flexibility is a godsend to many, it should by no means spill over into your finances. It is of the utmost importance to get your accounts in order prior to setting up a business, and to keep on top of them during the day-to-day running of your business. To do this, you must begin by creating a business name and setting up a business bank account. You must then inform the Inland Revenue (HMRC) that you’re a sole trader.
Managing your taxes
Unlike full-time employment, when working on a freelance basis you will have to manage your own accounts. This often means that you have to sort out for yourself how much tax and national insurance you owe, and when they need to be paid. This can be time consuming and you must ensure you have the necessary funds in place when it comes to the end of the tax year so that you can meet your financial obligations.
Managing unforeseen costs
Quite possibly the biggest problem with freelance work is that one week the money might be rolling in and the next week work it may have completely dried up. This can make organising your monthly finances somewhat difficult, especially if you have an unexpectedly high bill to pay, unforeseen house repairs to cover or a daughter’s wedding to contribute towards.
Getting your processes right
Being efficient is often the key to running a profitable business. This means ensuring that your time is well spent. It’s wise to begin by putting your processes in order, which often entails sorting out your accounts, your invoices and your bills. Using bookkeeping software will help you to do this, or you can hire the services of an accountant.
In order to make money you must be ruthless, especially when working on a freelance basis. This often involves chasing up invoices on the day they are due, being disciplined with yourself and ensuring you claim for the likes of travel, software and business costs – either through tax deductions or from clients.