Setting clear and realistic payment terms and conditions minimises the risk of delayed payments and helps build stronger client relationships.

Delayed payments are a real issue, as recent research published by IPSE shows that almost a third (32%) of UK freelancers experienced payment delays from clients in the 12 months leading up to the survey.

Separate GOV.UK research also explored the ever-present late payment problem and found that businesses attributed paying invoices late to:

• Admin errors (36%)
• Disputed invoices (31%)
• Technical issues (23%)
• Paying late on purpose (1%)

Unsurprisingly, the businesses surveyed didn’t admit to factors such as poor payment habits or cash flow issues being the reason for outstanding invoices – but it’s likely these are also factors in play.

Reducing instances of late payments is one of the key benefits of setting client payment terms. We’ll explore the methods of implementing payment terms and possible late penalties in this blog post.
 

What are payment terms?

Payment terms cover the agreed arrangement between you and a client regarding when and how they will pay you for your services.

The most common ways payment terms are set up between a freelancer and their client are:

• Upfront: You are paid the full amount before the project begins
• Deposit: The client pays a deposit before the work starts and the rest after the job is done
• Fixed price/project rate: You and the client agree on a set budget for the work
• Daily or hourly: You are paid based on the hours or days you work, calculated using your daily or hourly rate of pay
• Milestone payments: You are paid at various phases of the project’s completion
• Retainer: The client pays you a fixed fee at regular intervals, usually monthly

When should I set the payment due date?

It’s completely up to you – GOV.UK’s research found that the two most common payment terms among micro-businesses were 30 days (54%) and 7 days (22%) after invoicing.

These are typically calendar days, not working days, but you can confirm and outline this for your clients on your invoice and freelancer contract. You might be happy to exclude Bank Holidays from the terms, for example.
 

What payment methods should I allow?

How you’d like your clients to pay is your choice. If you only want to offer one way to pay, that’s your call to make.

Giving your client’s options when it comes to payment methods can be an effective way to speed up the process though and reduce the risk of your payment being delayed.

Popular payment methods include:

• Bank transfer
• PayPal (or other peer-to-peer payment networks)
• Directly through built-in payment systems on freelancer marketplaces (e.g. Upwork and Fiverr)
• Cheque

Can freelancers set client payment terms?

Yes, freelancers are allowed to set their own payment terms. This means they can tell clients when and how they prefer to be paid. This includes pre-project deposits and full payment on completion.

Not only are freelancers allowed to set payment terms, but it’s also a recommended practice to support good admin and bookkeeping habits as well as healthy cash flow.
 

Can I charge late fees if a client doesn’t pay me?

Yes – under late payment rules and regulations, you are allowed to charge penalties for missed payment deadlines as a fixed sum, plus statutory interest of 8% and the Bank of England base rate. Late payment rates are currently set at:

• £40 – debts of £999.99 or less
• £70 – debts of £1,000 – £9,999.99
• £100 – debts of £10,000 or more

Note: you’re only allowed to charge the business once for each late payment. You can’t stack penalties. Check out the government’s free calculator for penalties and statutory interest on unpaid invoices.
 

What’s classed as a ‘late’ payment?

If you have a date specified on your payment agreement, anything after this is classed as late. If you haven’t though, don’t worry.

The payment will then be classed as late 30 days after your customer gets the invoice, or after you’ve provided the service (or delivered the goods if this came later).
 

Deciding what payment terms to set

You’re in control when it comes to deciding what payment due dates to set and which payment methods to offer. These might even vary depending on the client or project. When making these decisions, it’s important to consider:

• Your cash flow – For example, if your cash flow isn’t in the healthiest position, you might want to opt for the shorter 7-day payment turnaround, so you aren’t waiting as long for your funds.
• A client’s payment habits – If one of your clients is notoriously bad at paying their invoices on time, shorter payment terms can be an effective way of encouraging faster payment. It also means you can implement late payment repercussions sooner if necessary.

To build strong client relationships, we’d recommend agreeing on payment terms with your client together.

You can, of course, stand your ground if you’re not happy but treating these terms as a two-way street is a great way to show you are considering your clients’ needs as well as your own.
 

How to communicate payment terms to clients

You can simply add your payment terms to your freelancer contract at the bottom of your invoice document, including details about late payment penalties. However, for better client relationship management, follow these steps:

• 1. Agree on payment terms and methods with your client before sending over your contract and get it in writing (e.g. email or Slack message).
• 2. Add the agreed payment terms to your contract, which both you and your client should sign.
• 3. Add your payment terms to the bottom of your invoice document as a reminder. This will help the finance team or whoever is releasing payment to know when to schedule it.

 
Head over to our information hub for more guides, news and advice on navigating life as a professional freelancer, from finance to tech and more.

The post Can Freelancers Set Payment Terms? appeared first on Freelancer News.

If you do fall under CIS and don’t comply with the system, you could find yourself facing crippling financial repercussions. HMRC can request your CIS records at any time and if you aren’t able to produce them, they can fine you up to £3,000, as well as further late filing fees—even if it’s just an honest mistake.

The Construction Industry Scheme in a nutshell

The Construction Industry Scheme was introduced in 1971 to simplify and standardise how contractors pay sub-contractors working in the construction industry. The scheme was also designed to streamline how tax is paid and how deductions are made.

Basically, CIS was put in place to address false employment and tax evasion within the construction industry.

Contractors and CIS tax deductions

Under CIS rules contractors are required to make deductions before paying a sub-contractors’ invoice. These deductions go straight to HMRC and are put towards the sub-contractor’s tax and National Insurance (NI) bill as a sort of advance payment on their Self Assessment bill. It basically means that their earnings are taxed at source.

Does a freelancer have to register for CIS?

Not all freelancers will need to register for the Construction Industry Scheme. If you provide services such as copywriting, graphic design, or bookkeeping, for example, you won’t need to worry about CIS at all. As the name suggests, CIS is only relevant to those working within the construction industry.

Am I a contractor or sub-contractor?

If you hire another self-employed person to work with you on a project, and they’re not paid through PAYE as an employee, they’re your subcontractor, and you’re a contractor.

It can get a bit confusing because you might be both a contractor and a subbie at the same time. For example, if you work for someone else as a subcontractor, whilst also contracting work out to a subcontractor of your own!

CIS for contractors – at a glance

As a contractor in the construction industry, you’re legally required to register for CIS whenever you begin paying sub-contractors for work directly related to construction. This doesn’t happen automatically, so it’s up to you to make sure you get yourself set up and sorted.

You’ll need to ask your sub-contractor for their Unique Taxpayer Reference (UTR) and use this to verify that they’re CIS-registered with HMRC. It’s an important step, because their registration status determines which rate you use to make deductions from the bill before paying them.

You must submit CIS Returns to HMRC each month (unless you tell them that you no longer pay any subcontractors) and report the details of any payments and deductions.

CIS for sub-contractors – at a glance

Although a sub-contractor working in the construction industry isn’t required to register for CIS, some people find it has its advantages – namely in terms of cashflow. The rate a contractor uses to work out how much CIS tax to deduct depends on whether or not you’re CIS registered.

• Registered: 20% deductions
• Unregistered: Deductions are made at 30%

When you submit your Self Assessment tax return, you’ll get back any overpaid tax in the form of a tax rebate.

You’ll be issued a statement or payslip detailing the gross payment and total deduction amount each time the contractor files a CIS return with HMRC. Keep these safe for your financial records.

Exclusions from CIS

There are a few exceptions to the rule where both contractors and sub-contractors are concerned, including:

• Architectural surveying
• Carpet fitting
• Delivery of materials
• Site facility management
• Scaffolding hire (without labour)
• Work on construction sites that is clearly separate from construction-related activities, e.g. food catering.

Staying on top of tax as a freelancer under CIS

It’s not unusual to overpay tax under CIS. This is because the deductions don’t take into account your personal allowance or any tax relief that you claim on your allowable expenses.

If you end up overpaying tax under CIS, you’ll be due a refund (or a rebate) from HMRC. One of the best ways to speed up this process and reclaim your money quickly is to get your Self Assessment return filed ASAP!

Looking for more advice on all things finance and accounting as a freelance professional? Head to our Freelancer Finance hub where we have a whole host of handy guides for you to get stuck into.

The post Do Freelancers Need to Register for CIS? appeared first on Freelancer News.

So, if you’re wondering whether making the switch to self-employment from employment would be a good move for your bank balance, keep reading.

We’ll take you through some of the different scenarios and highlight some recent facts and figures to help you build a better picture of the current freelance vs full-time income landscape.

The growing freelance population

There are now currently more than 2 million freelancers in the UK alone – a statistic that has been climbing consistently over recent years.

Not only does this demonstrate that more and more professionals are turning to self-employment, but it also shows that, for the freelance population to carry on growing in such a way, there is clearly significant demand for this ‘gig’-style work.

Surely this suggests, then, that freelancing is a lucrative and financially appealing way to earn a living… but do freelancers make more money than employees on the payroll?

The answer to this is in a constant state of change. What could be the case now might not be the same in 10, 5, or even just one year’s time.

Let’s take a look at the financial benefits of being a freelancer right now before we compare this to the financial advantages of being an employee.

What the average UK freelancer is earning right now

It seems that the current stats are in the freelance population’s favour and not just financially. There are plenty of reasons why self-employment might be the best way for you to make an income.

The facts and figures

In a recent survey comparing freelance and employee earnings, 59% of freelancers said they make more money than their counterpart working a full-time job.

Employment platform Indeed says that the current average salary for a freelancer is £18.16 per hour in the United Kingdom. The highest earnings are in East London, where the average hourly rate is £22.30.

Meanwhile, numbers from digital salary benchmarking tool, Figures show that the average hourly wage for UK employees is £16.60, based on a 41.8-hour working week.

The financial benefits of being a freelancer

So, right now it seems that many UK freelancers are in fact earning more than employees on the payroll. Other advantages of being self-employed include:

• The money you earn is yours to keep – Any profit you make is yours for the taking, rather than going straight to your employer.
• More control over your own time – Your working hours are normally dictated by your employer, making it difficult to work more (and therefore earn more), or to choose your own working pattern. Freelancing gives you more autonomy, putting you in charge of when and how you work.
• You’re in charge of what you get paid – As an employee, what you earn is entirely controlled by someone else (your employer). As a freelancer, you can decide what you charge and when you want to increase these prices without having to jump through HR hoops for a pay rise.

Some advice on how to price your freelance services

Setting your prices can be one of the trickiest parts of being self-employed. Here are some quick tips to steer you in the right direction:

• Do some digging to see what the current industry standards and averages are, then decide where you want to position yourself
• Make sure you consider all of your expenses to cover things like insurance, accounting fees and home office running costs
• Don’t undercharge as this runs the risk of damaging your reputation
• Don’t overcharge as this will only send potential clients to cheaper competitors instead
• Review your prices regularly with all of the above in mind
• And remember that you don’t get paid holiday leave or sick pay!

The benefits of being an employee

As we mentioned earlier, although the current financial landscape generally shows that freelancers are earning more than employees, this isn’t necessarily permanent and could change over time.

Plus, it’s important to remember that these averages can vary depending on things like experience and location. The £22.30 per hour that freelancers in East London are earning, according to Indeed, drops to £12.17 per hour for freelancers in Glasgow, for example.

It’s also worth keeping in mind the following pros that employees benefit from that freelancers don’t:

• Paid sick leave
• Paid maternity leave
• Employer pension contributions
• Regular, stable income
• Dependable work with no gaps in earnings
• No need to spend valuable time chasing things like new work and late payments

Our advice? Start small with a side hustle

These days, employment and freelancing doesn’t have to be a choice. You can do both by setting up a freelance side hustle to supplement your PAYE salary. This means you can generate a secondary income stream to earn more money and protect yourself with a financial security net.

Starting out with a side hustle, rather than taking the leap and cutting ties with employment, means you can do all of the following with the stability of your regular salary to support you:

• Establish the scale of demand for your skill or offering
• Scope out the competition
• Start building client relationships and a network of contacts
• Grow your portfolio so that you can eventually charge more for what you do

If full-time freelancing is still something you want to do further down the line, you’ve then stood yourself in great stead for success.

Done here? Head over to our Freelancer Hub where we have a whole host of handy guides and resources to dive into.

The post Do Freelancers Get Paid More than Employees? appeared first on Freelancer News.

• The reason the work wasn’t completed
• The kind of relationship you have with the client
• External influential factors which neither party can do much about

In most cases a commonsense approach is probably what’s needed, but freelancing isn’t always so straightforward.

So, let’s take a look at some examples of what happens when a project doesn’t work out, and what this means for billing. In some cases, charging the client might be appropriate, but there might be times when invoicing is off the cards.

When is it ok to charge for unfinished work?

In the following instances you’re most probably well within your rights to still charge a client, even if the project doesn’t quite go to plan.

If the reason it didn’t work out wasn’t your fault

We’ve all had that client where, no matter what we do, things just don’t work. If a freelance project doesn’t work out and it’s the clients’ fault, then you can definitely still charge them for your work!

A (surprisingly common) example of this is a personal trainer who has been working with a client to help them lose weight in the run-up to their wedding or a holiday. The personal trainer can only do so much to support the client, and ultimately, if they don’t follow the plan their PT provides, they won’t hit their goal weight. But that doesn’t mean they don’t have to pay the bill.

When the client swoops in with a change of plan

This one’s a bit trickier. If you and your client agree the brief, and then they change their mind, it depends on the timing.

• If you haven’t started the work then unfortunately, you can’t really charge anything for your services (unless you have terms and conditions which say otherwise)
• However if you’re part-way through something then it’s perfectly reasonable to request payment for the work you’ve done so far, or to compensate you for any materials bought specifically for that job.

If the client changes their mind about work you’ve completed

Our clients hire us for the expertise we bring, so there are very likely to be times that you find yourself on a job where the client isn’t entirely sure what they want the finished project to look like. It’s why it’s so crucial to get the brief right!

If you’ve already completed the work and it nails every point on the brief, but then the client changes what they need, then yes – they should absolutely pay you for the work carried out so far.

It’s up to them if they want to issue you with a brand-new brief for a refreshed direction and pay you for that too.

Examples of situations where you probably can’t charge

On the flip side, there are likely to be times where you either straight-up can’t charge the client, or you probably shouldn’t.

This is an important distinction to make because there could be times when billing the client simply isn’t an option at all, but at other times going ahead might be ethically or professionally questionable (and therefore best avoided).

Illness or other personal circumstances

If you’ve agreed to a project but then fall ill or become unable to fulfill the work as a result of other personal circumstances, such as the death of someone close, the client shouldn’t be expected to pay.

However, there are grey areas around this topic too. If your illness or personal circumstances means you have to pause or delay a project, but the client is happy for you to resume or start the work at a later date, then you can probably still charge as normal.
 

If the project doesn’t go ahead

In the world of business and project planning, not everything runs according to plan. Unfortunately, even after agreeing a brief, a project can still draw to a sudden halt.

As frustrating as this is, you can’t charge a client if you haven’t actually executed any work unless you have an agreement in place that says otherwise.

If you’ve spent time attending meetings or briefings, there might still be room to discuss invoicing to compensate for this. That will be between you and your client.
 

If you miss crucial deadlines

If the client is forced to deviate from their project strategy as a result of you missing deadlines or not producing work to the standard they expect, your right to bill them is on shaky ground, particularly if you’re looking at charging full price.

If the client must get somebody else to step in as a result of any of your own shortcomings, you will need to come to an agreement as they might want you to reimburse them for this inconvenience.

Of course, there’s a very easy way to ensure this scenario doesn’t arise and that’s to meet deadlines, produce great work, and manage client expectations. Did we mention how important it is to get the brief right?!
 

The benefits of client contracts and agreements

All of the scenarios above are general examples but ones you might come across when working as a freelancer. There’s rarely a definitive answer as to whether or not you can still charge for a project that doesn’t work out, so it pays to protect yourself as much as possible. One of the best ways to do this is by putting a contract or agreement in place with your client before you start any work for them.

This will also help you in situations that neither you nor your client could foresee or prevent. The Covid pandemic is a classic example of this, causing many clients and their contractors to abandon work.

In a contract or agreement, both parties can detail any insurance cover they have which might impact payment for projects or work that doesn’t take place.

An official document like this is also the perfect place to implement a milestone payment plan that you and your client can agree on. This means that rather than getting paid once all the work has been completed, you can decide on several milestone payment dates along the way.

Not only will this give you peace of mind when it comes to your cash flow, the client might also appreciate the breakdown of costs. Win, win!

Want to know more? Check out our Freelancer Hub for all things freelancing!

The post Can I Still Charge for A Project Which Didn’t Work Out? appeared first on Freelancer News.

With so much to consider, it can be hard to know where to begin and easy to get lost. So, with that in mind, we’ve put together this simple guide to run you through the key points.

Knowing your worth

When considering your rate, the best place to start is by understanding your worth within the market. Are your skills in demand? Is there a lot of competition in your field?

The value of your specific skills is a great starting point to help you determine the price point to charge your client. Your qualifications, expertise and experience all make you unique, and help you stand out from the crowd.

If you can demonstrate the proficiency of your skills (perhaps through a portfolio of past work or positive reviews from previous clients), you will be able to prove your worth and justify charging your clients a higher rate.

Always remember what keeps you in demand with your client. You have a lot to offer – don’t sell yourself short. Remember, your years of experience and knowledge are reflected in the fee.

Industry trends

One of the many benefits of being a freelancer is that your rate is never fixed. Always be aware of growing trends in your industry. Regularly re-evaluate your own rates to reflect the industry standard.

• How much does your competition charge?
• Are they cheaper or more expensive than your own rates?
• Perhaps most importantly, have they changed their fees recently?

Remaining competitive is important, but it can be a difficult balance to strike, especially when competitors regularly change their pricing. Try not to undervalue yourself. Charging lower rates can lead to missing out on potential earnings, and might even put some clients off if they think you’re not good enough.

As a rule, clients normally expect to pay more when using freelance services. When proposing your rate to a client, communication is key and their feedback is important. Listen to what they say and pay close attention to your pricing.

When freelancing, no two projects are ever the same. Each job is unique and brings its own trials and tribulations. Always consider any additional specifications of a project in your fee. If there is a strict deadline or greater complexity required, this will naturally demand more effort from you.

Your time is precious, and so the projects you work on need to be worth the effort, whether that’s financially, or in terms of growth and opportunities. Don’t be afraid to reflect this in your fee.

Should I charge per hour or per project?

When determining your rate, there are a number of pricing models to consider, such as charging an hourly rate, or quoting a project fee. The difficulty is that:

• Clients usually want an idea of how much something will cost beforehand
• You don’t want to undersell yourself
• You don’t want to price yourself out of the job

It’s a balancing act, and there are pros and cons to every charging method.

Hourly rate

Charging an hourly rate has the benefit of simplicity. You only charge your client for the hours you work to complete the project. This pricing model is common among upcoming freelancers and ideally suited for service-based projects. You’ll still need to give clients an idea of how long you expect something to take, though! Plus, if it looks like you’re going to significantly go over the time quoted, tell them in plenty of time.

Charging per project

Alternatively, some freelancers prefer offering a fixed rate per project. For long-term assignments with clearly defined client goals, this can be a perfect fit. When you can’t provide a definitive timeframe for a project’s completion, offering a fixed rate to clients can be more appealing, as it helps them manage their budget more efficiently.

There is no right or wrong method, so experiment and find which pricing structure works best for you.

Paying your bills and covering costs

Another important consideration in deciding your rate is the cost of your bills and outgoings.

• How much money do you need to earn to support yourself and your family?
• What is your annual salary goal?
• Will the project require any supplies, equipment or specialist software?

It’s your responsibility to ensure that your hard work empowers your lifestyle and that you are able to keep your business afloat.

Always factor in the cost of running your business, and check your financial reports to make sure you’re on track. Every freelancer has their overheads, whether it’s purchasing new hardware, renewing a software subscription, or marketing. These necessary costs need to be accounted for, and factored into your rate.

Don’t forget your tax bill

If your self-employed income goes above £1,000 in a tax year, you will need to report this to HMRC. An important point to note is that this is based on income. You’ll pay income tax and national insurance on your profits. Keep this in mind when you’re working out what to charge your clients!

You can make the most of your profits by hiring an accountant to assist you with claiming expenses, improving your tax-efficiency, and paying your tax bill on time; but you will need to pay for their services too. Even so, finding an affordable and skilled accountant can be a real boost to your take-home pay.

Considering cashflow

In life and business, preparation is the key to success. Having a solid cashflow strategy is essential to support your business and a keystone in setting your freelance rates.

How much you charge determines your ability to prepare a financial safety-net for those quieter months. Business costs can arise at any time, and you need to be prepared for when they do.

To keep your cashflow running smoothly, always ensure you have a written contract with your clients. This helps prevent miscommunication and, if you include payment terms, gives you a time-frame within which you can expect to be paid.

After completing a project, invoice your clients correctly and on time. It is your responsibility to ensure you are paid correctly and in a timely fashion, and communication is key.

To avoid anyone forgetting to pay you, send payment reminder letters or emails when the agreed payment deadline is near. If a repeat client is proving difficult, you can always withhold your services until any outstanding bills are paid.

Factor in the hours you won’t get paid for

When you are a freelancer, you don’t have a team to fall back on, and the success of your business rests solely on your shoulders. We don’t mean to sound scary, but like all good things, running a business takes time.

To keep things running you’ll inevitably find yourself spending a lot of time sending out invoices, building client relationships and replying to emails. Whilst this administration is important, it’s also non-billable time.

With each project, do your due diligence. Consider how many non-billable hours will be required to complete a project and factor that into your rates. It might be worth looking at tools or software which can help automate some of the more time-consuming aspects.

Life can be unpredictable, too. When you run your own business, factor in the possibility of sickness or other unexpected absences. On the days you are feeling worse for wear, you might need some downtime to recover. It’s sensible to account for several sick days in a year, as its better to have them and not need them, than to be stuck working when you’re feeling run down.

One of the biggest advantages of being a freelancer is you have the freedom to take time off whenever you wish. You don’t need to request it, but this flexibility comes at a cost.

You might not get paid holidays, but taking some time away from work is well deserved and essential for your health and mental well-being. So don’t forget to factor this into your pricing, either!

Find more guides and resources for freelancers in our online hub.

The post How Much Should I Charge? appeared first on Freelancer News.

Your bookkeeping and accounts will suffer if your invoicing process isn’t run like a tight ship. Messy books can also lead to bigger issues such as errors in your accounts and missing important HMRC deadlines, resulting in financial penalties.

Best-practice invoicing starts with you creating documents that tick all of the necessary boxes. Some of the information you’ll need to include goes without saying – and we’ll explore all of those essentials below to ensure that they’re on your radar (and your invoices).

However, some information isn’t quite so definitive. One example of this is your Unique Taxpayer Reference (UTR) and in this article, we aim to clear up any confusion you might be feeling around that particular topic.

What is a Unique Taxpayer Reference?

A Unique Taxpayer Reference – or UTR for short – is a 10-digit number that is used to uniquely identify you or your business when it comes to matters of tax.

It’s similar to having a passport number or a National Insurance number – it differentiates you within a system so that you can be identified from other people and in this case, other businesses.

Anybody who registers for Self Assessment will automatically be assigned a UTR number by HMRC. Sole traders only require one UTR but in the case of partnerships, each individual partner will need their own UTR and so will the partnership itself. A company director will also have a UTR number, separate to their company, so they can submit Self Assessment for their own personal income.

Examples of places you’ll be able to find your UTR (apart from your initial SA250 welcome letter) include:

• Self Assessment payment reminders
• Statement of account
• Previous tax returns

Is a UTR required for invoices?

Your Unique Taxpayer Reference number shouldn’t be included on your invoices. For some people, the confusion here lies in a mix-up between UTR, CRN (Company Registration Number) or a VAT Registration Number.

Whilst the latter two must be shown on any documents that you send or receive (as well as other instances such as on your website) UTRs, on the other hand, are highly confidential pieces of information. For that reason, they should never be shared publicly on something like an invoice.

Some freelancers believe that because they don’t have a company registration number, they need to share their UTR number instead – but that isn’t true. They’re not interchangeable and should never be treated as such.

A great rule of thumb to follow is to always remember that clients and customers do not need to know your Unique Taxpayer Reference. Your UTR relates to your personal tax information, so think logically about who you’d want to make privy to this.

Is there anyone I should share my UTR with?

As we mentioned earlier, the only people you should ever really need to share your UTR number with is an accountant, a financial advisor or somebody from HMRC. Or if you’re a subcontractor, you’ll need to share your UTR with the contractor hiring you (so they can deduct tax at the correct rate under the Construction Industry Scheme).

In fact, there are very few reasons why you would ever need to share your UTR number so if prompted to do so, think carefully and double-check first. If your UTR gets into the wrong hands, you could be leaving yourself open to fraudulent crime.

Things to include when creating an invoice

Okay, so, we know that you should definitely not include your Unique Taxpayer Reference number on any invoices for freelance work – but what should you include?

No doubt you’ve already been sending invoices for a while now but hey, a quick refresher on best practice never does anyone any harm. So, let’s take this opportunity to run through the essential information you should be included on every invoice.

Things to include on all invoices:

• Your name and/or company name
• Your legal address and contact number
• The name and address of the company/individual you’re invoicing
• Date of invoice
• Unique invoice number
• Any purchase order or job numbers the customer has provided you with
• A description of what you’re charging for (the work that has been carried out)
• Items and cost breakdown (e.g., days and day rate)
• Total amount owed
• Bank details for the account you’d like to be paid into
• Payment terms (typically 30 days unless otherwise agreed with the customer)

In a bid to clamp down on overdue invoices, some will also choose to include a late payment disclaimer on the bottom of the document. This pre-warns customers that should they go over the agreed payment terms, you have the right to apply late payment fees.

If you’re VAT-registered, you will need to include your VAT registration number and a detailed VAT breakdown on the invoice.

For more help, visit our information hub.

The post Do I Need to Include My UTR Number on Invoices? appeared first on Freelancer News.

What is a tax residence status?

A person’s tax residence status is basically used to determine which country they should be paying income tax to. A British person working in the UK, for instance, will most likely pay tax on their income to HM Revenue & Customs (HMRC).

Though it can sometimes be confusing, it’s important to get to grips with your tax residence status. It will help you avoid any sticky situations, such as failing to pay the tax you owe or on the flip side, paying tax on the same money but in both countries.

To find out your tax residence status, you will need to take a Statutory Residence Test.

The results are determined by factors such as how much time you’re spending where, and what your connection is to each country in question.

How can I freelance for foreign clients?

Whether you’re planning on taking your skills for a trip around the world, or you have overseas clients on your books already, there are some processes worth honing! We’ve gathered some of our tried and tested tips for freelancing when clients are in a different country.

Remember, you’ll need to work around time differences

This might sound like an obvious one, but it’s easy to let an exciting brief with a handsome budget blind you into forgetting about the logistics.

Get excited, but just don’t forget to consider how you’ll manage any collaboration if your time zone is at odds with theirs. Is it going to work around your other clients? Will it fit in with your personal schedule? If you need to work unusual hours to be available for any meetings, is this realistic?

As a freelancer you probably already go through this process at the start of each project, but adding the time difference in can’t hurt!

Put a contract in place, and consider which laws apply

Contracts between freelancers and clients are already fairly common, and definitely best practice, no matter where in the world both parties are located. It’s even more important if you need to safeguard against the potential pitfalls of international freelancing.

Language barriers and cultural differences can lead to confusion and mismatched expectations. Putting a contract in place for both parties helps you to manage these, and make sure everybody is on the same page. It’s also a good way to make sure there aren’t any legal issues that might trip you up later. For instance, any licenses or permissions you might need to collaborate.

Don’t forget about exchange rates when discussing costs

Again, this might sound like another obvious statement to make but when it comes to the topic of costing and quotes, remember to factor in exchange rates between currencies. Calculate these beforehand and then price accordingly. Include the exchange rate on your quote, and make it clear that the invoice total might be different depending on fluctuation currency exchanges.

Failing to do so might mean you end up falling short of what you were hoping to cash in, and open the door to some awkward conversations between you and your client.

Invoice in your local currency

Even though it’s essential to factor in exchange rates during your costings and quote process, it’s advisable to invoice in your local currency. It will make your tax return far simpler, too! Consider using bookkeeping software like Pandle which includes a built-in real-time currency exchange rate tool to make multi-currency invoicing easier!

Set up a money transfer account

Taking advantage of a money transfer account isn’t completely necessary but it sure can make your life a heck of a lot easier.

International cash transfers – without the help of a transfer service – can result in high transfer fees being incurred, and will also take longer to process.

Implementing something like this into your process means you can reduce the headache of expensive transfer fees and have cash in your bank much quicker.

Popular money transfer services include:

• Wise (formerly TransferWise)
• Remitly
• PayPal
• OFX
• Western Union

Consider introducing a deposit system (if you don’t already)

Working with overseas clients doesn’t have to be complicated but it does add an additional layer of consideration. To cover your own back, you might think about asking the client for a deposit – this could be 50% of the total bill before completion and 50% after, for example.

You may very well already be doing this but if not, now might just be the ideal time to start! Find more help and advice in our freelancer information hub.

The post Can I Freelance in the UK for Overseas Clients? appeared first on Freelancer News.

We’ve put together some of the key points that a freelance contract should include, whatever format it’s in.
 

The basics of freelance contracts

Cover the basics first of all. You should have the details of both parties on either side of the agreement written down, although you will know them already. You should have a written overview of the work needed that both sides read and agree to. It should be made clear that you are not an employee and should not be treated like one.
 

Be specific about the project

You should put together a highly detailed proposal and outline what you will be doing and what the client will be getting for their money. It is important that no one is able to misunderstand or twist the wording of the contract.
 

Agree a time frame for delivery

You should come to an agreement on a deadline for the project to be delivered. Though deadlines are never much fun, they are important and also help you to schedule your other duties/jobs around this project. That being said, you may need to have some flexibility on deadlines. Any changes to this should be communicated as soon as possible and agreed to by both sides.
 

Who is your point of contact?

Sometimes you will get different people from the same organisation offering feedback and requesting changes they might not necessarily have discussed with each other. That will leave you working for different people and it will quickly become confusing. Agree to make someone a single point of contact so that the information you receive is consistent.
 

Rates!

Clearly state your hourly, daily or project rate! Think about itemising your fee so that the client can see where their money is going. Many clients will underestimate the amount of time and energy that goes into preparation and research.

It is a good idea to ask for a portion of your fee upfront and the amount should be stated in the contract. Some freelancers prefer instalments throughout the project or a simple 50% before and 50% after.
 

Does your quote include the cost of alterations?

It is natural for the client to want some alterations in the work. As a freelancer you should account for this and try to include about two edits in your fee. Some clients may try to squeeze more work out of you, even if it’s ‘just a little bit’. Those little bits all add up and it’s important to put your foot down and not get into the habit of being taken advantage of. Extra work should be chargeable.
 

Payment terms for freelancer agreements

Invoices commonly ask the client to pay within 30 days unless you make your own. You will also need to decide how you will accept payment, and whether that is convenient for the client. It’s also worth considering whether or not you want to charge late payment fees. If you do, let your client know if advance!
 

Do you want to include a cancellation fee?

Also known as a cancellation clause, the kill fee is a procedure in place if the client decides to cancel the project half way through. You should be compensated for the work that you have done because you could have been spending that time working on someone else’s project.

It is up to you how much your kill fee is but it should at least cover the work you’ve done up until cancellation. Generally, most clients will be fine and expect this clause and the ones that aren’t are generally the ones you need the clause for.
 

Confirm the delivery details

You should agree how the project will be delivered to the client. This will largely depend on what line of work you are in but whichever way you choose to deliver, make sure it is simple and convenient for the client. You want this part to go as smoothly as possible if you hope for repeat clients.
 

Who owns the Intellectual Property rights?

To avoid having your work stolen, you should put in writing that you retain ownership of all your own work until you receive payment. If your client refuses to pay, they cannot legally use your work and you have grounds to sue.

Find more resources for freelancers in our info hub, or contact us for help!

The post What Should I Include in my Freelancing Contract or Agreement? appeared first on Freelancer News.

We’re all human, and we all make honest mistakes, so the occassional overdue invoice may simply be the result of an innocent oversight. However, as a freelancer, it’s vital to keep the money rolling, and follow up every missing payment.

We’ve put together a list of late payment fee FAQs, and how they can benefit freelance professionals.

What are late payment fees?

Late payment fees have been around since the late eighties, as part of The Late Payment of Commercial Debt (Interest) Act (1988). They are not compulsory, but are generally thought to be good practice.

The Act was amended in 2002 to include fixed late payment penalties alongside interest claims. These fees are a way for freelancers and companies to reduce the financial impact late-paying customers have on a business.

How much should I charge in late payment fees?

Under late payment legislation, you can charge penalties as a fixed sum, as well as statutory interest of 8%, plus the Bank of England base rate.

These fixed late payment sums vary on a sliding scale, depending on how much the customer owes.

It’s worth noting that you can only charge the business once for each late payment.

The official gov.uk website has a formula to help you calculate penalties and statutory interest.

When do late payment fees apply?

When you create a customer contract, it’s up to both parties to decide on reasonable payment terms. These might mean you ask for payment up front, or set a payment deadline.

Most freelancers put 30 day payment terms on their invoices. It means that your client is contractually bound to provide you with payment within 30 days of receiving their invoice.

If the agreed period of time passes without payment, the invoice becomes late (overdue) with immediate effect. So, if payment is due by the 7th of the month, it becomes a late payment from the 8th of that month.

What if we don’t agree a payment date first?

Don’t worry if you didn’t explicitly agree a payment date with the client. Legally, a payment becomes late 30 days after the customer receives their invoice, or you deliver the service, whichever is later.

You can claim statutory interest on late payments for up to six years in England, Wales or Northern Ireland. It’s five years if you’re in Scotland. That’s a long wait for payment though, so it’s usually more efficient to stay on top of that invoicing.

How do I charge late payment fees?

If a client doesn’t pay you, and the payment deadline passes, you can charge late payment fees by issuing another invoice.

This isn’t an amendment to the original unpaid invoice, and instead shows the details of the late payment penalty. It should also refer to the original invoice.

Do I need to tell my clients that I issue late payment fees?

You aren’t legally obliged to warn customers in advance if it’s your policy to issue late payment penalties. For the sake of a maintaining a working relationship with them, it might be useful to mention it though.

Government advice suggests that invoices (including those you issue before late payments occurring) show the below text somewhere on the document:

“We/I understand and will exercise our/my statutory right to interest and compensation for debt recovery costs under the late payment legislation if we/I are/am not paid according to agreed credit terms.”

If you do find yourself approaching a payment deadline without hearing from the customer, it’s always worth sending a gentle reminder.

Get in touch the week before the payment deadline, and remind them that the cut-off is looming, as well as mentioning late payment fees. It’s generally useful to word these early reminders on the basis that the customer has genuinely forgotten to pay you.

What if my client doesn’t pay the late payment fees either?

The late payment legislation aims to prevent businesses from putting loopholes into their contracts. If you do find yourself facing further issues, approach a representative body about challenging this on your behalf. Be aware that this might result in the issue going to court, so consider it a last resort where possible.

Visit our freelancer resource hub for more information and support for freelance finances. 

The post A Freelancer’s Essential Guide to Late Payment Fees appeared first on Freelancer News.

What a freelancer might offer for free

Deciding whether or not to waive your fee for a piece of freelance work is an entirely personal decision. It might be something that you never consider dipping your toes into. In some cases though, it can be a useful tool for attracting and retaining clients.

We’re not here to advise you one way or the other on this! Read on for common examples where not invoicing might actually pay off in the long run.

When working with a charity or not-for-profit organisation you care about

Maybe it’s a charity, a community project or even a small start-up that your friend is launching. Whatever it may be, if there’s a cause you want to gift your time and skills to, you can! Just make sure that you can realistically afford to.

When you’re trying to step over some competition

If you’re pitching for project against tough competitors, offering something for free might just help you pip them to the post.

It could be something as part of the project which your client sees as a value-added extra.

A bespoke copy of your portfolio

If you are in the process of tendering for a project or pitching a proposal, the client may ask you to provide a tailored version of your portfolio or showreel.

You might choose to do this at no extra cost, to show that you’re willing to go the extra mile to win work.

If you’re happy to help a client cut costs

If there’s a particular business or project you’d love to work with, but the client has a limited budget, you might consider doing some complimentary work.

Offering something for free demonstrates your enthusiasm, but in a way which acknowledges this is usually chargeable work.

What if I don’t want to work for free?

Producing work for free – no matter the rationale behind it – simply might not be for you. Nobody can force you into doing so.

If you’re still unsure, take a look at the examples below outlining when freelancers might want to avoid offering anything for free.

For clients that aren’t financially secure

Before working with a new client or customer, it’s always a good idea to do some background research on them first. Do some digging into who they are, how established they are, and how financially secure their business is.

There’s a difference between helping out a client with a limited budget, and making yourself vulnerable to customers with no intention of paying.

When the payment they offer for your efforts is “exposure”

In the world of freelance work, ‘exposure’ is almost a dirty word. Experience tells us this is a red flag when negotiating a deal.

Sadly, it’s very rare that the exposure they can offer is worth the work you put in. Of course, this isn’t always the case. There might be times this sort of mutual agreement works well – but keep your wits about you.

If it impacts other billable time, deadlines or cash flow

Only offer free work if you can honestly afford it, and it won’t compromise your paying customers. In some cases (see above about “it’ll be great exposure for you”) it might be worth the gamble as a larger launch pad.

Generally though, spending time on unpaid work shouldn’t mean missing other deadlines, unhappy clients, and a bad reputation.

When you aren’t comfortable with the rates on offer

There may very well be instances when lowering your costs is something you’re willing to negotiate. If so, this must be done on your terms.

Don’t succumb to forceful customers on free work or large discounts if this will have a detrimental impact on your income and mental health.

Deciding whether or not to offer complimentary work is an entirely personal decision, that only you can make. Only ever work for free if it’s your choice and it is something you’re happy and comfortable doing.

Never offer gratuitous services to a customer or client who is trying to force your hand. They’re probably not the kind of business you want to be working with anyway if they’re happy to take advantage of you as a freelancer. Sadly, they’re unlikely to turn into excellent customers later on.

We hope these tips help you navigate the tricky grey areas between what a freelancer should and shouldn’t offer for free. Negotiating with a client isn’t always plain-sailing but stand strong and ensure you’re not being taken advantage of.

The post What a Freelancer Should and Shouldn’t Do for Free appeared first on Freelancer News.