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.

For some freelancers, creating contracts of work can be one of those things you keep high on your priority list and share with every client you have. After all, a well-drafted freelance contract can often support smooth working relationships, align expectations and protect your business in case any issues arise.

We share our tips and tricks on what a freelance contract is, what it should contain and why it’s so important, including agreeing on deadlines, payment dates and legal terms and conditions.

What is a freelance contract?

You’ll normally draw up a freelance contract when you start working with a new client. It’s a legally binding document that details the terms and conditions of the project or the working arrangement.

In a similar way to an employment contract, a freelance contract outlines important information and agreements made with a client so that everybody involved is, quite literally, on the same page.

Your freelancing contract might not need to look like a long and wordy document, and could instead be something as straightforward as an email agreement which outlines what work will be undertaken, timeframes, and costs.

Both the freelancer and the client should digest and sign the contract before working together on a new project or if there are any changes to an existing setup. Each party should have a copy of the contract stored somewhere securely for the duration of the project and after.

Why are contracts important for freelancers?

Although freelance contracts are legally binding, they aren’t legally obligated. In other words, you won’t get in trouble with anybody if you work without contracts in place, providing everything runs smoothly. But if any problems arise with a project or a client, you might regret not covering yourself with a contract.

The benefits of a carefully crafted freelance contract include:

• Providing clarity for both parties on what is expected in terms of things like scope of work and deadlines
• Providing legal protection for both parties in case of any problems
• Helping to ensure you get paid on time and in full, by setting out expectations
• Protecting your Intellectual Property (IP) so your work can’t be used unlawfully or without payment
• Creating and maintaining a professional impression
• Supporting the tricky process of cutting ties with a client if this situation should arise

What should be included in a freelance contract?

Hopefully the benefits of freelance contracts are now clear. The next thing to clarify is what you need to include in a freelance contract to really reap the rewards of having one. The document needs all of the key elements in order for it to be a valuable and functional tool.

Below are the key points a freelance contract should include, whether you’re creating one from scratch or looking to update your existing document.

Personal details

Before you get stuck into laying out all the other information in your contract, start by providing the following information about you, such as:

• Full name
• Business name and address
• Website, if applicable
• Email address
• Contact details

Scope of the project

The first clause you should create in the main part of your contract is the scope of the project and the agreed deliverables. In other words – what are you doing for the client? Don’t be afraid to get specific here – the more detail you go into, the less chance there is of misunderstandings between you and your client.

If possible, itemise the parts of the project you plan to undertake and deliver and give a rough time estimate for each. Not only will this help manage expectations, but the client will also appreciate being able to see where and how their budget is being spent.

Rates and payment terms

The rates and payment sections are arguably the most important part of a freelance contract because it outlines how, when and how much the client has agreed to pay you for your services.

This section of the contract should include details about:

• The agreed rates you are charging by day, hour, flat fee, etc.
• Your preferred payment method and payment details
• Payment terms (typically 30 days), which should match your invoice document, and the details of any late payment fees you might charge
• Whether or not you plan to take a portion of the fee upfront or in installments
• Whether or not the agreed cost includes amends or changes. If not, include information about the additional charges for this.

Agreed deadlines, milestones and timeline

Prior to signing the contract, you will already have had a conversation with the client about the desired timeline and your availability. So, when writing the contract, include what you agreed in a clause about deadlines and planned milestones. You should also provide a date for when work officially commences.

It’s worth adding a line about flexibility around delivery deadlines in this clause. You never know what the future holds, and you may need a certain amount of slack. Committing to a specific date, unless the client really needs you to, too far in advance can cause problems further down the line.

Cancellation terms

In some rare cases, a client may decide to cancel the project before the full scope of work is complete. A cancellation terms clause in your contract will ensure you’re still paid and not left out of pocket.

The cancellation form should clearly state what your ‘kill fee’ is, which is the amount the client will have to pay on top of what they owe so far for cancelling the project midway.

In this section, you should also include details about what will happen if you need to cancel the project or if you can’t complete it due to unforeseen circumstances.

Information regarding your IP

If you have any details about your Intellectual Property (IP) terms, you should share these in your contract. It will help make sure your work is being used how you want it to be and will also prevent clients from being able to use your work without paying for it first.

Normally, the freelancer retains the rights to work until the client’s bill has been settled. After that, you won’t be able to use or resell the same work to any other client. It would be worth noting this so the client knows you have considered ownership.

Dated signatures from all parties

To seal the deal, both you, your client(s) and anybody else involved should print and sign the document, e-sign in, or send email confirmation. You will need this for the contract to be officially legally binding.

Staying IR35 compliant

When creating your contract, you should make clear that you’re working in a freelance capacity. This needs to be obvious so you don’t look like you’re an employee in disguise, which would trigger the IR35 rules.

What is an employee in disguise?

An employee in disguise is a contractor (or freelancer) who has been hired on a self-employed basis, but the nature of the working arrangement is more like permanent employment. This is what IR35 rules and regulations are designed to clamp down on.

Disguised employment occurs because employers hire contractors and brief them to work like permanent employees but pay them invoices rather than through payroll. This means the employer gets to avoid paying National Insurance and other contributions and employee benefits.

Non-compliance can sometimes be the result of an honest lack of awareness, but failing to comply with IR35 rules runs the risk of hefty financial penalties so it’s important to ensure you’re ticking all the right boxes.

What to include in your freelance contract

If your relationship with a client is authentically in a freelance capacity and you are operating as an autonomous self-employed contractor, you are what’s referred to as being ‘outside IR35’.

Demonstrate your ‘outside IR35’ status on your contract by detailing your freelance working processes and working arrangements with your client. This will show HMRC that you are indeed a freelancer and not an employee – or a disguised employee.

Head over to our freelancer information hub for more guides, news and advice.

The post A Guide to Writing Up Contracts as a Freelancer appeared first on Freelancer News.

For some freelancers, putting their business’s finances through a business bank account is a legal obligation, but for others, it isn’t (although it could be in your business’s best interest regardless).

In this blog we’ll take a look at the best business bank accounts for freelancers.

Do freelancers need a business bank account?

The answer depends on your business structure. If you’re freelancing as a sole trader, you’re free to do so using your own personal bank account. A freelancer who’s registered as a limited company though, is legally required to have a business bank account.

This is because sole traders technically are the business, HMRC doesn’t differentiate between the two and they can keep all their profits after tax.

A limited company is a separate entity to you as a person – so you’ll need a business bank account to separate your business’s finances from your own.

Why would a business bank account be beneficial for my freelance business?

Many freelancers won’t legally be required to own a business bank account – but that doesn’t mean it wouldn’t be beneficial to use one.

There are many benefits of having a business bank, for example:

• It’s easier to track your business expenses (for example, let’s say you want to claim for fuel you’ve used on a business trip – you don’t want to either forget about the transaction, or claim the wrong costs for fuel you spent that week out with the family).
• It can boost your credibility with suppliers and clients
• You’d be protecting your business’s credit score (because it won’t be associated with any personal credit)
• Opening a business bank account gives you more freedom financially because personal accounts often come with higher restrictions on withdrawals and transfers

We have more reasons over on our blog, do freelancers need a separate bank account.

What should freelancers look for when comparing banks?

While we don’t want to overwhelm you, there are quite a few things you need to consider when shopping for a business bank account! We’ve narrowed it down to the most important things to look at, so if you find something that ticks all of these boxes, you know you’re on to a winner.

What are the fees like?

It’s important to look for an account with no (or low) monthly fees. It can also help if they charge low:

• Transaction fees
• Foreign exchange fees
• Withdrawal fees

Always check out the terms and conditions, as some banks may even waiver fees if you maintain a minimum balance.

Do you have access to credit?

Even if you don’t plan on using credit, it’s always good to have there as a buffer. Look for accounts that offer credit cards and overdrafts – just in case an unexpected business expense comes from nowhere (it does happen!).

Do they offer international capabilities?

If you work with clients overseas, you’ll need to consider accounts that offer multi-currency facilities, international wire transfers and foreign exchange services. Even if you currently don’t have clients overseas – this is definitely worth considering if it’s a goal you have for the future!

Are the payments secure?

Secure and convenient payment processing is a must – think online payment gateways and mobile payment apps. It’s also a bonus if you find a bank that offers things such as payment reminders and tracking features.

Can you speak to someone easily when facing any issues?

We don’t mean to scare you, but things go wrong from time-to-time. When it comes to your money, you need to be assured that you’ll be able to speak to someone who can fix your issue ASAP. On top of that, ensure the banking features are easy to use, and the customer service reps are accessible.

Do they integrate with the accounting software you use?

We saved this one until last, but it’s super important. Integrating with accounting software helps automate your financial record-keeping, which means you can complete your tax returns much easier, and have one very happy accountant! Software such as Pandle integrates with most banks.

Best business bank account for freelancers

There are so many to choose from, depending on your industry and the needs of your business, but here are some honourable mentions to start you on your journey!
 

What is FSCS protection?

You probably noticed in the features column we’ve listed FSCS protection. This stands for financial services compensation scheme. Basically, if the bank fails, you’re covered up to £85,000!

We know this is a tough decision to make, so we’d recommend speaking with an accountant for more advice. You’ve got this.

Find even more advice and guidance for freelancers in our info hub!

The post What’s the Best Business Bank Account for Freelancers in the UK? appeared first on Freelancer News.

Not to mention business owners and self-employed individuals are being hit harder than ever with the cost-of-living crisis, and prices becoming more expensive by what feels like the millisecond.

We know this doesn’t make you any less passionate about your freelancing work, but the vast majority of us need to (at least) pay our bills. It’s even better if our passions do more than simply cover our business overheads. But what can you do to make sure you’re profitable?

The very nature of being a self-employed freelancer means that your income is likely to fluctuate no matter what. To help you stay ahead, we share our tips for maximising your freelancing profits. You can do it, we’re rooting for you!

What are your key expenses?

Some expenses are absolutely key to your ability to freelance. Depending on what sort of services you provide, this might include anything from rent payments, your phone bill, or printing costs.

When we’re surrounded by them every day, it’s easy to overlook some of the costs that might be putting strain on our financial budget. Reviewing and managing our costs can make a massive difference to how much profit we make.

Do you rent out office space?

You may rent out office or workshop space, but do you really need to? With rent prices skyrocketing, especially in city centre locations, it might be time to review how essential that extra expense really is.

Lots of freelancers work from home as a cost-saving measure (and for the sheer convenience!), and might sometimes rent hot desks or meeting spaces to see clients, or even just arrange to meet up in a coffee shop. Remember, you can claim expenses if you work from home too, so all the more reason to set up your own home office!

Technology is also ever-evolving, with online video calls and screen sharing now accepted as the norm. If your premises are more habit than helpful, it might be time to get shut of the space and keep more of your income.

What are your suppliers like?

It’s not unusual to find a supplier and stick with them until the end of time (we’re creatures of habit so a lot of us tend to stick to what we know). But it’s always best practice to check what/who else is out there, so you’re always aware of the best solutions available.

This helps you stay efficient, and can even help you keep on top of your competitors. When thinking about your supplier, keep notes such as:

• What sort of payment terms do your suppliers offer? Are they beneficial for your cash flow? For instance, if you order printing work for a client, does your supplier give you enough time to recharge the customer before paying the printing bill, or does the cost come out of your pocket first?
• You’re likely to have looked around first before choosing your supplier, but have you checked since? Things may have changed since you first had a look, so find time in your diary to review different suppliers. You never know who you might come across!
• If you feel like their fees are a little high for what they offer, consider trying to negotiate with them while also checking out other suppliers in your area. If you go to networking events or have contacts with other freelancers or small businesses, ask if there’s anyone they’d personally recommend. You’ll find people in your industry will have heaps of knowledge to help and guide you through this sort of stuff.

Never feel like you’re stuck with one supplier, there are plenty of friendly professionals out there offering great prices!

And lastly, remember it’s business and nothing personal, so don’t feel tied down to a particular person for fear of hurting their feelings, especially if it could be damaging your profitability.

How efficient is your business?

As a freelancer you need to ensure you’re making your work life as streamlined as possible. After all, you’re running the whole show!

• Try to track how you spend your time, and where you use up resources. For instance, are there any processes you can change to make them easier or avoid duplicating work? If you’re active on social media a lot, could you plan and schedule more of your posts? Having them scheduled a couple of weeks in advance can make a huge difference to your workload, rather than coming up with content and posting it ad hoc.
• Can you schedule follow-up emails for your clients? You can set up personalised emails a couple of days (or hours if you prefer) after client meetings to check in and thank them for their time, and add any bits of info that you normally would. Personalising these emails is usually pretty easy, and you can set up trigger points to stop anything being sent if they email you first (so it doesn’t look like you’ve automated anything!).
• If you spend a lot of time manually entering bank transactions into your bookkeeping or invoicing clients, it might be worth researching what software options are available to do more of the heavy lifting for you.
• If you create or sell products, is there a way to use up leftover or surplus materials? Do you spend time answering the same questions with each new client? Maybe you could prepare an onboarding guide, or even just write up an email template to deal with them more efficiently.

These are just a few suggestions, but it completely depends on what it is you do. It’s well worth getting a pen and paper to record your day, and see if there’s anything you can do to relieve those pain points!

Are you under-pricing your goods or services?

When starting a business, most of us are worried about putting clients off. So, instead of charging what we’re worth, we massively undersell ourselves and usually end up out-of-pocket rather than making a profit!

Whether you sell your services or products (or both) you need to think of the following:

• The qualifications you needed to get to where you are today

• How much time it takes you to provide these goods or services, and what your time is worth
• The time you’ve taken to practice your craft to reach this level. For instance, it might take you ten minutes to do something, but that’s because you have ten years’ of experience doing it!
• How much it costs you to provide your goods or services. For example, if you’re a freelance wedding photographer, how much do you spend acquiring bookings, meeting the client, visiting the venue for a walk through, travelling to the job… and so on!

Always do your research on what other people in the industry are charging – especially your nearest competitors. This will help you decide whether it’s time to put your prices up. We know this can feel difficult, but with time you’ll become more comfortable deciding how much you should charge your clients. Always remember your own worth!

Good bookkeeping

We’re not being dramatic when we say bookkeeping is absolutely essential for every business – freelancers included!

It’s super important for many reasons, from helping you stay organised, to identifying any issues putting strain on your finances – such as repeated late payments from clients.

Keeping on top of everything and get paid quickly

Keep on top of the jobs you’ve completed, the hours you’ve worked and the invoices which have or haven’t been paid. Having everything so visible will help you keep track of what you need to pay, and who still needs to pay you.

You can even use this information to send payment reminders to all your clients, helping you to get paid faster, and review the ones who regularly miss their payment date. This way you can decide whether you want to continue working with these clients, or whether it disrupts your cashflow too much and therefore isn’t worth the stress.

Spot trends

If you have a good bookkeeping system, you can check your income, outgoings, clients who pay the fastest, and services or products that are the most popular. This way you can keep on top of who your best clients are, what services or products they’re loving, and what areas may need a revamp or some marketing.

Have your tax and expenses under control

Did you know you could claim tax relief on some of your expenses as a freelancer? For instance, this might include your travel costs to see a client, or a mobile phone you use for work. The list goes on, but by being aware of what you’re entitled to, and logging it all in your bookkeeping, you won’t be left second guessing what expenses to claim back in your tax return.

Speaking of which, good bookkeeping will also help you keep on top of your earnings, so you can begin to put money aside ready for your Self Assessment tax bill!

Keeping on top of the books will help you spot opportunities or issues in your business. The best part is that some providers offer free bookkeeping software, so that won’t be another thing you’ll have to pay for.

Do you need to look at how you’re promoting your business?

In an ideal world, we’d create a website with our services displayed, and customers would come flooding in, leaving us busy until retirement. Unfortunately, though, that just isn’t the case.

While marketing may be a little scary, it’s vital for getting your name out there. Don’t let the name put you off! Marketing can be anything from handing business cards out to your mates in the pub, to advertising your services in a LinkedIn post.

Before you go to the time and cost of setting up a website, do you actually need one? In some cases, you might just need to set up a sharing link to your portfolio. If you do need to use a website to promote your services, but you’re not too sure where to start, you could take an online course or even hire help from another freelancer.

Without help or training, we don’t want to know where we’d rank in Google. And let’s be honest, we could all hide our deepest and darkest secrets on page 3, and no one would know.

What else can I do to promote my freelance services?

• Have happy customers? We love to hear it! It’s a great feeling, and you should be super proud. If a customer is reaching out to you because they loved your service, ask them to leave you a review! It’s free promotion you should never miss out on if the opportunity arises. Even the way you deal with negative reviews is an opportunity to show everyone what it’s like to work with you.
• Look at your marketing strategy. As a freelancer, you need to find what works for you. You could advertise yourself on social media, meet people at networking events, or even reach out to your existing or previous clients. Word of mouth recommendations are a powerful form of marketing! Test what works for you and don’t be afraid to try new things.
• Follow up on any dead ends. It happens to us all. You give someone a quote, they say they’ll get back to you, and then it’s dead silence. Have a follow up email template ready for any quotes, letting your clients know you’re there if they need you. You’re not being rude, sometimes people just need a little chase.
• Remember to be patient. Great things take time, so patience will be required when seeing out a new marketing strategy or building up your customer reviews. It’ll all be worth it in the end.
• Contact previous customers. Getting in touch with people you’ve worked with before might lead to repeat custom, or at least help you understand why you might not be getting repeat business.

The main thing to remember is not to be so hard on yourself. It can be extremely difficult being a freelancer, but once you learn how to take action and when, the more your hard work will pay off.

Get more advice and news over on our Freelancer Hub!

The post How Do I Make Sure I Earn a Profit? 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.

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.

In this blog, we’ve gathered together some of the key financial information that all freelancers should know. On this page there are some of the most important things you can possibly learn before you start your freelancing career, and if you’re already freelancing and you’re not totally clued up on these topics, now is a great time to learn!

These day’s we’re so lucky, we live in a digital age and there are thousands of online resources to help you get to grips with things. There are plenty of entrepreneurs and developers out there trying to make our lives easier.

Without further ado, let’s look at how to manage your finances as a freelancer:

How Do I Pay Myself as A Freelancer?

So you’ve just finished a big project for a client and got your first lump sum, let’s say it’s £500.

But hold up, that’s not £500 in pure spendable wages!

Now you’re a business, you need to think of your Gross Income vs. Net Income, and very importantly, all of the working benefits and taxes you’d normally have covered by payroll.

These can include things like:

• Income Taxes
• National Insurance Contributions
• Pension Contributions
• Student Loans

But as a sole trader, it’s also important to remember that in the eyes of the law, you and your business are the same entity. That means your income must also cover your business expenses – this is where Gross vs. Net comes into play.

That £500 you got from Joe Bloggs Ltd. needs to account for any expenses that went into creating the work you did for them. If you’re a designer this might be things like your Adobe CC subscription, the price of digital assets, or even your web hosting. There will be expenses directly related to the job, and continuous expenses like your energy bills and home office supplies.

And yes, the cost of biscuits can usually be offset as an expense.

The good thing is, even though these things cut into your profit, they also reduce your personal taxes. If you used money to pay for biscuits as business-y subsistence, then they’re a business expense, not a personal purchase.

This is why it’s really important to have two bank accounts when you’re a Sole Trader freelancer.

Why Two Bank Accounts?

One bank account, is your business bank account. This ensures it’s clear to you, and more importantly, to HMRC, that your business income and outgoings are not related to your personal income and outgoings.

Otherwise, you’ll have an accountant’s worst nightmare on your hands at the end of the year – sorting through thousands of transactions individually to categorise them by personal or business.

It also then becomes tricky to justify expenses like travel if you’re audited. You’d have to provide proof that the expenses were business related.

Keeping track of proof of business expenses in the form of receipts is essential. Luckily there are plenty of apps where you can log them.

Calculate Business Debts and Savings

The next thing you’ll want to do is work out a sensible payment plan for your business debts; for most freelancers these costs are quite low because we tend to work with business assets that we already have, such as computers and home offices, but you may have made a few essential tech purchases that you’ll need to account for.

Decide how much, or what percentage, you’d like to put away each month to cover these.

It’s also wise to put away some business savings each month, this will help tide you over in times of uncertainly, and if you have a business problem such as a legal complaint, or if you need to replace or upgrade and essential piece of kit.

How Much Do You Need?

Once you’ve looked at your overheads and costs, and made a sensible estimation on business debts and savings, it’s time to start thinking about your actual pay.

The first question to ask yourself of course, is how much do you need?

If freelancing is your side hustle and you’re covered by your day job, this is a bit easier. Otherwise, you need to think about your core living costs – housing, food, bills and travel at the minimum.

Of course at first, you might not be able to cover this fully, it’s important not to go full-time with freelancing until your core costs are covered so you can live to a reasonable standard. It’s advisable whilst Freelancing on the side, you put away as much as you can into savings so you have a safety net at times when income is inconsistent.

Once you’re at a confident stage, you’ll need to think about more than just the bare minimum. Most financial sources recommend that no more than 45% of your total income should go on rent an utilities, so consider this in your equations.

Making it Work

So now you have a figure in mind, how do you keep track of everything so you don’t overspend?

Well let us let you in one of the most valuable tips you’ll ever be given; accounting software.

Spreadsheets might strike fear into your heart – we’re not all accountants by nature, but there are plenty of businesses out there who recognised the struggle of small businesses and sole traders.

The concept is really simple, you get an app on your phone or software on your computer and you log all of your financial transactions into it. This can be done daily, weekly or monthly, but the more often you do it, the easier your life will become.

You can even link most solutions to things like Paypal, your bank account, or whatever you use to process transactions, and it will automatically import all the data. That means it’s just day-to-day business expenses to log!

With a little simple video training, you can learn to use these solutions to file your taxes and accounts every year, but what we really recommend is that you hook yourself up with a virtual accountant.

A remote accountant can use the data you log into your software to manage everything. Including your monthly pay.

That means you can focus on what’s really important; running your business.

It’s really that simple! Let us know in the comments below if you’ve got a burning question about paying yourself as a freelancer, and we’ll do our best to include the answer the next time we update this article.

The post A Guide To Paying Yourself as a Freelancer appeared first on Freelancer News.

Develop passive income streams

If you can produce books, videos or anything that you can monetise or sell, then bingo: you have a passive income stream. Anything that you can produce and then go on to earn from again and again, with little or no further input from you, is a bonus. Passive income streams may not always earn you a fortune, but that steady trickle of money still adds up and means there’s still money coming in even if you have no work for a while.

Play to your strengths

Think about what type of work earns you the most money; what type of work you enjoy the most; and where your specific expertise lies.

If your answer to all three of these prompts is the same, then deciding where to focus your attention shouldn’t be difficult! If not, you may have to consider what’s most important to you.

Developing a niche can be useful because:

• Your knowledge of an area increases as you focus on it
• Your name and work will become associated with that niche, making you a go-to expert

At the same time, consider ditching the projects and clients that are unrewarding financially and/or intellectually. While freelancers are inclined to try to turn their hand to anything when they start out, long-term, specialising is a better strategy.

Diversify

Diversify? I hear you cry. But you’ve just told me to specialise! To develop a niche!
Yes. But within that niche, diversify.

I know freelancers who started out as photographers and then found the clients they were working for often wanted a few words written about their photos, or even a paragraph. Or more…

They took courses, honed their writing skills and began to offer photo-heavy articles in the kind of publication where they’re appropriate (sport, nature, walking, tourism and travel). Conversely, I know writers who were so often asked for photos to go with their articles that they sharpened their photography skills and began to supply the whole package.

I lost a charity contract once because the charity was looking for graphic designers and writers for children’s leaflets – or people who could do both. They loved the sample I sent with my quote, but… you’ve guessed it. The contract went to someone who had design skills as well and had offered to produce the entire leaflet content.

Consider the type of work you’re often tempted to go for but never do, because you’re aware it requires skills you don’t have. Think about work you are doing and any closely related topics or products; what could you add to your offering to make a complete package?

Pass on your skills

Teaching your skills to others can be another great way to make extra money. Whether it’s giving speeches at conferences, running workshops or seminars, recording audio or video tutorials or teaching your skills to adults at a local college, passing on your expertise and knowledge is a service worth paying for.

Do some research to see how you could teach independently and/or offer teaching to educational establishments or other clubs and institutions.

Have a marketing week (or even just a day)

Review how you advertise your services and what works and doesn’t. What other outlets or methods could you use? Devote some time to developing a new advertising strategy and materials. Create a basic mail shot and then customise it for target groups, such as family and friends who can pass it on to others; potential clients; past clients; and yes, even regular clients, who may only use some of your services and not appreciate all you have to offer.

Spend this time promoting yourself and what you do in every way possible, legal and decent – or indecent, if you prefer! You know what they say about publicity…

It’s easy to stop trying anything new, either because you’ve become complacent or because you are struggling and have become convinced nothing you do will make a difference. But don’t stop! Put your thinking cap on and find ways to use these ideas to boost your freelance income.

Do you work with multiple income streams? Which is the most profitable one for you? Please share your thoughts below.

The post Five Ways to Increase Your Freelance Income appeared first on Freelancer News.

Insurance

The best reason to get a deposit is so you’ve got some insurance in case the client does a runner or refuses to pay. While it might seem like a rarity, clients disappearing without paying is actually pretty common.

There may be disagreements, misunderstandings or the client may have had no intention of paying in the first place.

While a deposit won’t make it sting any less, it will be something at least so you’re not missing out 100%.

Filter out clients

Asking for a deposit will filter out the people who have no intention of paying. One way to tell whether they’re looking for free work is to ask for a deposit first.

If they try and get out of it or are a bit vague when the topic of payment comes up, they might not have even factored you into their budget. Steer clear of these clients!

How much to ask for

If you’ve decided to ask for a deposit in the future your next question might be how much to ask for. There’s no rule really. Some will ask for 10% of the final fee, others will ask for 50%.

Those who ask for more usually have a lot of experience and a solid reputation. Freelancers starting out will struggle to sign anyone on if they’re expecting 50% upfront because they don’t have the experience or authority in the industry yet.

Sticking with your decisions

Some clients will try to talk you down. It’s up to you whether you let them. Just know that if you do it once, you’ll probably do it again. Plus if the client intends to pay you your fee, you should ask yourself why they’re trying to get out of paying a deposit.

When should you ask for a deposit?

Many freelancers will only ask for a deposit with new clients so they’ve got a chance to experience the working relationship first. We’re not suggesting asking for a deposit every time a client wants new work if it’s too disruptive but that’s up to you and your personal circumstances.

Other freelancers will make it a policy of theirs to always ask for deposits for long-term projects. Long term projects could mean going a long time before getting any money, not ideal if you’ve not got much work coming in.

Other ways to protect yourself

Another way to protect your interests is to have late payment terms. Plenty of freelancers state in their contracts that there will be a fee for late payment. This will hopefully deter clients from paying late or will filter out those who will anyway. If not, you are somewhat compensated for your wait.

Do you ask for a deposit upfront? Have you ever had a client disappear without paying? Please share your thoughts in the comments.

The post Freelancers: Should You Ask For a Deposit Upfront? appeared first on Freelancer News.

Around half of all businesses that start in the UK end up failing within the first five years. Another study from last year revealed that 8 in 10 businesses fail within the first year.

Findings like these make scary reading for anyone in business, whether you have a limited company or are a freelancer. How do you ensure you’re not one of those statistics?

The importance of having multiple sources of income

One of the most common mistakes that new business owners make is that they throw all their eggs into one basket. In order to achieve stability you need to make sure you’re covered if one source of income is disrupted for whatever reason.

For example, relying on one client either because they’re your only one or they simply pay most of your income is risky.

If that client has a budget restructure and suddenly decides it can’t pay you, then you’re left with nothing. That’s why it’s important to make sure you’ve got different clients and other possibilities for gaining income.

What is passive income?

One way you can protect your income is to set up passive income streams. This involves doing a bit of work initially but you’ll essentially be able to enjoy money coming in without the day-to-day work.

This is no replacement for your normal freelancing work, but it’s a nice stream of income on the side that can help boost your profits or cover quieter periods.

Here are some examples of passive income sources you can use:

EBooks

Take a look at some of the big name freelancing websites out there. So many of them have ebooks you can download for free or for a small cost.

The best part is you only need to write that book once but you can sell your content to an endless amount of people without losing anything. If one book becomes successful then there’s always the option to write more if you think there’s a market for it, potentially building up a strong stream of income for years to come.

Alternatively, many people will release free eBooks in exchange for an email address that they can add to their newsletter which can increase your returns in other ways.

Courses

Have you been freelancing for a while? Think you’ve done well so far? People want your knowledge and expertise and some will be willing to pay for it. Depending on the amount of content or length of the course, you can sell these for much higher prices than an eBook.

You can do this in the form of a series of emails, course materials, through video or podcasts. Make sure that you’re providing value for money so that your students go away and shout about how great your course was.

There are a whole host of websites and courses created by freelancers to help out newbies. Take a look at something like Creative Revolt for inspiration.

Advertising space

If you’ve got a nice steady flow of traffic and have built up a name for yourself, you might be able to sell advertising space which can add a nice boost to your income. The downside is that you run the risk of cluttering your website with adverts which could be a bit off putting for visitors.

So choose wisely if you go down this route. Weigh up the potential damage a load of ads would have on your traffic first to try and work out whether the revenue coming in from adverts would be worth it.

Affiliation links

People love personal recommendations and will often trust them over a traditional marketing campaign.

If you gain a big following on your blog and have people who would happily take your advice, look into affiliate links.

You can get money from companies for writing about/testing out their product or service. You’d generally get a commission every time someone clicks through to the affiliate link and makes a purchase. A good example of this is on Elna Cain’s blog, with this post on how to set up a freelancing website with Bluehost.

While some of these examples of passive income might not seem like the sort of thing you expected to be doing, there’s no harm in adapting. Anything you add to your skills and income sources is only going to strengthen your marketing efforts, your financial situation and your brand.

What passive income generator are you thinking about trying? Have you ever had any success with one in the past? We’d love to hear your thoughts!

The post How to Use Passive Methods to Boost Your Freelancing Income appeared first on Freelancer News.