5 Simple Finance Tips for Freelance Copywriters
This guest post is written by Tom McCallum, Senior Content Manager at FreeAgent.
Working as a freelance copywriter might seem like a dream job but you might be put off when you discover the financial responsibilities that come with being self-employed.
If you’re just starting out, or if you’ve been struggling with the financial side of freelancing for a while, don’t worry! There are plenty of ways you can take care of your responsibilities to make sure they don’t spoil your career as a freelance writer. From tracking your time efficiently to using accounting software, here are five tips to manage your finances better.
1. Don’t Be Lax on Tax
If you plan to earn over £1,000 in a tax year from self-employment you need to let HMRC know that they should expect a Self Assessment tax return from you. You have to submit your tax return the year after you receive the income – for example, if you invoice a client in the 2019/20 tax year you will have to declare this on your tax return which is due at midnight on January 31st 2021.
This gives you plenty of time so don’t leave it until the last minute. Starting your return a few months early can give you the time you might need to get it right and ensure you don’t get fined for filing late.
The deadline for submitting your tax return is the same deadline for paying your tax bill so don’t forget to have enough money in the bank to cover that. Want to know more? This guide on Self Assessment from HMRC will let you know everything your have to do.
2. Account for All of Your Time
Many freelance copywriters make the mistake of tracking only the time that they work for a client and calculating their rates from there. Few take into account the time spent on things like getting new clients, marketing activity or travelling to meetings. If you don’t account for all of your time, not just billable, you may well find that you’re not paying yourself a fair hourly rate.
The way around this is to track all of your time, whether it’s work for a client or other business-related work, and calculate a rate to charge for billable time that will give you a good salary for all of the hours you spend working.
3. Set Terms in Your Invoices
Having to chase money that’s rightfully yours is one of the biggest frustrations for freelancers. If you’ve worked hard on writing copy for a client it’s only right that they should pay you in full and on time.
A great way to minimise the risk of late payments is by setting zero-day terms. It may seem obvious but clients will be more likely to pay you quickly if you issue invoices that are due on receipt, rather than, for example, due within the month. Some freelancers also find it beneficial to state legal terms on their invoices to help nudge pesky late-payers by placing the repercussions of non-payment front of mind.
4. Consider Using an Accountant
If you’re a sole trader with income below the VAT threshold you might be comfortable managing the financial side of your business. However, if you end up over the VAT threshold, decide to set up as a limited company or have more complicated financial situation for any other reason, it’s best to seek out a professional.
An accountant can not only help you stay compliant with the taxman but can also offer your business valuable advice that can improve your cash flow and make your tax more efficient saving you both time and, potentially, money.
5. Use Accounting Software
Using accounting software, such as FreeAgent, is a lifesaver when it comes to managing your freelance finances. With the ability to see when your tax bills are due and how much they’ll cost, track both billable and unbillable time and send professional-looking invoices that you can schedule to send and chase themselves, you’ll be able to automate a large portion of your business finances and get on with writing copy.
If you use an accountant you can also work closely from the same account on separate devices enabling you to have better conversations about where your business is heading.
There you have it – five simple tips that will hopefully take some of the stress away from self-employment and allow you to focus on the reason you became a freelance copywriter in the first place.
Header image by Marco Verch.