This is a 4 minute read.
With National Freelancers Day 2017 coming up on June 8th, existing and aspiring freelancers are coming together to talk about the issues of doing it for yourself.
Here’s a prediction: expect to see the web full of blog posts and articles about becoming a freelancer, working from home, maximising your rates, and winning work.
But that’s just one side of things. What happens next? What do you do once you’re up-and-running? How do you handle the money (or lack of it)?
With inconsistent income, feasts and famines, managing your revenue as a freelance copywriter (or any kind of freelancer) isn’t easy. In fact, I’d say it took me six of the eight years I’ve been in the business to get a workflow that worked for me.
And so, whether you’re already freelancing or just thinking of getting started, here’s a little guide to what I did – and what I do now to keep things organised.
Finding the right accounts system
It all starts with your accounting system. Consider the cost of decent bookkeeping an essential cost in your early days.
Unless you’re cloud-phobic, online accounts packages are the natural way to go. You can strike a decent balance between features and costs and, if you’re not trading through a limited company, can usually find a cheap package to get you started.
I use QuickBooks Online accounting software – it does everything you’d expect your platform to do like making pretty invoices and recording incoming payments, and the price is low enough for most people starting out.
But it also includes some more advanced features I’ve started making good use of. Just one is the Location/Class option. While it’s really designed for businesses with multiple retail stores, it lets me break down everything I do into categories – for example, work from agencies and work directly with clients. Just set up Locations for each area I want to measure.
Then, I can get standard reports like Profit and Loss on a Location basis – answering questions like ‘How much of my work comes from agencies?’ – without losing my joined-up, overall view.
It’s a valuable feature for the way I work – but, whichever platform you use, don’t be afraid to choose based on cost and cost alone. As long as you can generate some invoices, you’re onto a winner.
Treating yourself like an employee
For my first five or six years, I invoiced whenever I felt like it. Revenue trickled into the bank account through the month, and trickled out whenever it needed to.
While that seems pretty logical, I realise now I was acting like an insane person.
When you go freelance, it’s natural to want to keep things informal. After all, that’s part of the reason you’re headed into this uncertain, unpredictable way of working.
But while freelancing allows you some freedom in many, many areas, don’t get slack on the finance side of things. Paying myself with all the routine and rigidity of a shackled employee showed me how to be freelance without being stressed and anxious about money.
I set a simple, singular new rule for myself: make payments fall due at month end, and don’t spend anything as it comes in.
So, if I’m invoicing work in June, I just collect the money until June 30. I don’t treat it as available until July.
Part of the way I do that is by tracking every payment – and all my expenditure – in You Need A Budget. It’s really personal budgeting software but, if you’re a self-employed freelancer, it’s all one and the same anyway.
YNAB lets me:
- Mark payments as received, but not available to spend until the next month
- Take off a tax percentage all at once
- See exactly what I’m working with when a month starts – how much can I really spend?
- Put extra money in a budget ’emergency pot’ where I can draw it down if next month is quiet
Crucially, YNAB stops me from making your decisions based on my bank balance. That was, quite honestly, life changing for me.
No longer would I get a big invoice payment and go out and treat myself beyond my means. Because I could see at a glance that, really, that inflated bank balance was 90% already taken by bills, tax, and, you know, eating.
It’s also been an effective way to bring my billing into a structured workflow. I know that halfway through the month (or at a month end if I was using 30 day terms), I need to get those invoices out on time. No more accidentally spending hours on billing here and there. And, if I know anything I bill in the month isn’t being spent until next month anyway, I can prioritise work more effectively.
Structuring billing doesn’t take away the feast and famine. It doesn’t suddenly make your income consistent.
But it does mean you’re equipped with all the information you need to make decisions about work, whether you need to get more work, and how you’re spending the revenue.
Start tracking everything now
I know what you’re thinking – this rigidity only matters when you’re getting regular work. And you’re right.
But, take it from me, there’s little worse than unexpected spikes in business showing you how poorly you’ve handled your financials.
I remember starting out really well. It’s an uncertain, stressful period when you don’t know whether you’ll still be a freelance copywriter in a week, let alone in a year. You don’t think you’ll earn much. You don’t think you’ll need to define a workflow for handling your revenue.
I thought that way. I made my invoices in Microsoft Word and tracked my costs in an Excel spreadsheet. I didn’t have a process.
So when business started to pick up, it was already too late. A lack of planning left me playing catch up on my tax bill, while being unequipped with any sort of structure to take care of my cashflow.
In one of my busiest periods to date, it wasn’t enough to do the work. I had to finally make sense of my finances at the same time. It was too much all at once. And I didn’t like it one bit.
So, if I could go back – and if I could make one recommendation to other freelancers – I’d always assume best case, not worst case. Yes, you might struggle to get things off the ground. Sure, you might not earn much in your first year.
But you just might.
And then you’ll be pleased you had a plan.