Ask any freelancer out there their least favorite thing about freelancing and chances are pretty high that most answers will have to do with ‘money’ in one way or another.
In the world of freelancers, money can be, ‘inconsistent’, as a friend of mine, quite bluntly put it once.
Whether it’s managing your overall expenses, tracking and supervising your budgets or having your clients pay up after completion of services – it’s no wonder freelancers are not very enthusiastic about this side of their business.
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As a freelancer in today’s ever-changing economy and with the competition getting tougher by the day, it’s crucial you know how to manage your money – and not make these (pretty common) money mistakes…
Mistake # 1 – Not being mindful of your taxes
Taxes can be complicated and frankly too boring – but not being on top of them is by far the most common money mistakes made by freelancers. If you do it right, you (usually) pay less when tax time arrives.
Usually what happens with new freelancers is that they don’t give enough consideration to quarterly, or simply don’t know / forget about them all together. At the end of the year, when the tax bill (bigger than expected) actually arrives – it can turn about to be quite a nerve-wrecking experience.
Here it’s important to note that you enjoy further success in your freelancing business – and your earnings grow – so does your tax bill.
Taxes are no fun. But setting aside extra money each month will make keep you safe from unnecessary tax bill shocks.
Mistake # 2 – Not realizing that you’ll (almost) never get paid on time
It’s not easy being a freelancer.
In our world, money just takes longer than usual to arrive. Call it unfortunate, but that’s a real-world reality. Ask any freelancer who’s freelanced long enough and he’ll describe numerous occasions where his client(s) didn’t pay on time (or worse, didn’t pay at all).
How do you deal with such situations?
First off, always remember to be polite – yet firm. Be as professional as possible when inquiring about your payment. Always make sure to put agreements in writing (or email) so to use them as leverage when faced with late payments.
Have a safety net of at least 6 months (living expenses). This will get you through, in case of a late-payment emergency. Note that late payments can easily turn into ‘no-payments’ if you’re not careful. But you need to go one step further from only setting aside extra money – having a diverse income stream is also a ‘safety net’, so to speak.
Mistake # 3 – Not keeping track of your expenses regularly
It’s pretty simple. You won’t know what you can write off if you don’t keep a regular track of your expenses.
Being a freelancer doesn’t automatically mean you can forego recording your expenses – doing which, can actually benefit you in many ways. If your freelance business ‘accounting’ includes a few receipts and some notes recorded in a manual register, then it’s time to put up an efficient system in place.
Making your expense tracking automatic (instead of running a manual bookkeeping system) can save you both time and money. If done correctly, several sections of your expenses can be written off, thus lowering the amount you owe for your business.
This is where a freelance invoicing app like FreshBooks can do wonders. It has just about anything you could ever need for managing your freelance business—including some of the best freelance invoicing app features around – from time and expense tracking, invoicing, payments, reporting and overall project management – you name it.
(And there’s also the brand-new feature called ‘Proposals’ which helps freelancers win new jobs faster with professional-looking proposals)
FreshBooks is a lot more than just an invoicing and client billing tool; It’s everything you need to run a service-based business.
You can try FreshBooks out, for a FREE 30-day trial. The best part? You don’t even need to put in a credit card to try their service.