Basic Finance Care Finance tips
As a freelancer, the last thing you want are financial woes or tax problems; and you most definitely do not want the taxman chasing you down for outstanding payments.
It is possible to work solo and avoid the above scenarios. How we hear you say? Well by employing good bookkeeping practices, of course. And one of the best ways to keep your paperwork in order is by getting paid on time.
It would be lovely to live in a world when coins grow on trees and we can pay our electricity bill with sweets. Unfortunately, the only objects that grow on trees are fruit, and most utility providers would raise an eyebrow if you approached them with lollypops and jelly babies to pay your monthly bill.
When you are employed on a permanent basis, you don’t need to worry about getting paid because your employer does all the financing for you. However, when solo, you are responsible for your own finances. You need to chase your clients for your wage, and issue invoices for the work carried out.
Want to make sure you get paid? Read on.
Issue the right invoice
Most employers, regardless of the industry, will require some sort of invoice. Invoices can vary in terms of structure but fundamentally they all need the same pieces of information.
You must include;
- Your contact details
- Invoice name/date
- Description of work carried out
- Total billing price
- Method of payment
You can find various templates online such as this, and this. Alternatively, why not create your own and put your individual style on it?
One thing is for sure; an incorrect invoice will only give the client more reason to not pay you on-time; so safeguard yourself by sending out an accurate statement.
This is the very first step to getting paid. If the client delays paying you, this is in fact a breach of contract, and gives you the legal right to stop working for them. If you do not receive payment, send them a reminder and then follow this up with a legal action letter.
Put a request in writing of payment within 3 working days, and explain that you will proceed with legal action.
Control the payment day
One method that you can carry out to make sure you get paid is to have jurisdiction over when you are paid. Do you want to be paid weekly, or on a project basis?
Obviously the risks are reduced the sooner you demand payment, but if the whole project is only short-term, it may not be worth being paid weekly.
If the business is small and you have never worked with them before, arrange a process that everyone is happy with.
Please note the average invoice period is usually 30 days’ notice, and most businesses prefer to receive all invoices at the end of the month. Bear this in mind when working out your finances.
Give yourself a safety net
As with anything in life, there are risks but you can minimise the danger of not getting paid by using contracts.
These are legally binding documents that tie both parties together, and give you the legal high ground should a company refuse to pay you.
Is a contract expensive to make? Hiring a lawyer can be costly but you can get free contracts online such as PCG, Freelancer Advisor.
Employ experts
Simply put, one of the best ways you can safeguard yourself to get paid is to hire experts. There are firms that specialise in debt recovery and accountancy.
They can do all the hard work of chasing people for payment, leaving you simply to get on with the job that you are good at.
Do you really want to be spending your valuable time contacting person after person? It can be a very long-winded process. Save yourself time and money by hiring an accountant.
So there you have it; now you should know how to get paid! Make sure you do your research before taking clients on to make sure they are financially credible. You can do this by issuing a credit check, or checking Companies House to see that they are legitimately registered.
(All Images courtesy of Shutterstock)
This article was written by Nixon Williams, the specialists in contractor accountancy services in the UK. Click here for more information on taxes and budgeting advice.
