5 financial promises freelancers must make to themselves
A topic often forgotten by freelancers during the quiet months is the financial tidying up of your business. This is necessary to ensure all will run smoothly and economically once business starts to pick up. Darryl Howes suggests five promises you should make to yourself.
All freelancers experience times when, despite our best efforts, work is slow in coming. Most industries have their peaks and troughs and the creative sector is no exception. It’s important to use this time productively.
Here are five promises you can make to yourself to declutter your finances and improve and maintain your business’ financial health. Apply these to your own business and you’ll enjoy an easier, hassle-free financial year.
1. Make sure you get paid on time
Make sure you get paid on time by checking your standard invoice template.
All invoices should include essential wording such as the name and address of your business and points of contact, e.g. your name, email and telephone number.
If a limited company, the registered office and company number should be shown. If you are VAT-registered, then the VAT registration number should appear.
- An invoice number and date
- The name and address of the business you are invoicing
- Their purchase order number, if there is one, and the date the products or services were provided. This will assist your client’s accounts department
- Full details of the products or services and itemised pricing, with an overall total (with net, before VAT, and gross, after VAT, figures as appropriate). This helps to resolve questions over what you did and why – a reason sometimes used for delaying payment
- Payment terms, highlighted for ease of reference, and the method by which you wish to be paid e.g. quote your bank account name, account number, sort code and bank address, stating if you wish the invoice number to be included to cross-reference.
As well as reducing the chances of delayed payment, this simple check will also make you more popular with your accountant. Making their life easier also justifies a reduction in fees.
It’s also worth bearing in mind that HMRC offer a range of videos, webinars and email alerts to help business owners. See the HMRC website for details.
2. Cut back on regular payments
Review the list of regular payments being paid from your bank account i.e. standing orders and direct debits – such as that redundant gym membership.
Check this carefully for any which are no longer required and cancel these accordingly. Most online banking and smartphone apps allow you to do this quickly and easily.
Take advantage of any interest-free balance transfer offers.
Also check for any that are paid via credit card, known as Continuous Payment Authorities. These may require a call to your credit card company.
As well as advising the card company if you wish to cancel, it’s also good practice to advise the originator (i.e. the beneficiary) of the payment.
3. Pay attention to your bank account
Have a quick look at your bank balance and think about cash requirements over the quiet period. If you can, use your credit card wisely to obtain interest-free credit in the period between purchase and full settlement when the monthly bill comes in.
If your account is going to dip into overdraft, better to ask your bank in advance – you’ll have an improved chance of them saying yes, as you’ve taken the initiative to plan ahead. You’ll also avoid the stinging interest rates and fees that come with unauthorised overdrafts.
Be clear with your bank on how much you need, what it is for, how long you need the facility and the source of repayment.
On the ‘how much’ question, it can be a good idea to add in a contingency of, say, 10 per cent for any unforeseen expenses.
If your borrowing request is declined, all the main banks are part of a small business initiative, which allows you to appeal the decision within 30 days.
Quite often the fact that you are aware of this procedure is enough to focus the mind of your lender. Further details can be found on the Better Business Finance website.
4. Be cautious with credit cards
Credit cards are one of the most expensive methods of borrowing. Some years ago, the CEO of a major bank made the headlines when he advised his family members not to have one!
A slowdown in work might tempt you to seek comfort from discretionary spending, such as extra daily visits to the local deli or coffee shop
If you have plunged into the plastic for any reason, make it a target to reduce balances as quickly as possible. If you can, make sure there is a fixed amount direct debit set up to pay the monthly bill.
Credit card companies are obliged to do this as part of their commitment to responsible lending. Alternatively, take advantage of any interest-free balance transfer offers.
But bear in mind that you need to keep paying down the debt, otherwise you are just deferring the day of reckoning.
5. Stay away from indulgences
Be aware that a slowdown in work might tempt you to seek comfort from discretionary spending, such as extra daily visits to the local deli or coffee shop.
According to the How to Start a Coffee Shop website, coffee retailers can achieve profit margins of over 92 per cent on a simple latte!
Add in the cost of that mouth-watering flatbread and you are talking about a serious monthly bill for your daily indulgence.
Think about how you can have a healthier alternative to the coffee hit and stave off the munchies with water and simple, inexpensive snacks.
Darryl Howes has run his own consulting company for over seven years. He writes, speaks and advises on strategic business networking, helping people to develop their careers and business objectives. Before this, he spent over 25 years in corporate and commercial banking. Find Darryl on LinkedIn and Twitter.