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Freelancing: How to Manage Your Finances Effectively

PUBLISHED 03/22/2018

If you have recently taken the decision to go it alone as a freelancer, congratulations! You are about to enjoy the UK’s most fulfilled independent workforce that is growing bigger by the day.

Signature Works in Liverpool is a dedicated flexible office space provider located and we provide a wealth of support for freelancers to boost their success. Taking the plunge to become a freelancer doesn’t mean that you have to be on your own. There are close to 2 million self-employed people in Britain and that number is rising and so you’re actually part of a rapidly growing trend.

We endeavour to support our members as much as possible and providing useful information is just one of the ways we can help.

 

Expenses

 

It is very important for freelancers to keep a record of any purchase they make in connection with their job. This is mainly because you are now going it alone and so you won’t have the resources of an employer to use to get your work done. Whatever you spend on materials and work-related expenses should be noted so that you can get some of it deducted from your tax bill.

You also need to know this information so that you can set a realistic hourly rate. This can be another problem for freelancers who don’t want to make their services too expensive but have to balance that with what they need to survive.

When you’re pitching for business you will undoubtedly come across other freelancers who are getting away with charging both lower and higher rates. Whatever decisions you make in terms of how much you invoice your clients, you have to base it on realistic work-related expenses rather than guesswork.

This process of evaluating expenses might seem arduous, but don’t worry, there’s tech to help. Shoeboxed allows you to photograph receipts and store and organise them online. Come tax season, you can simply send your digital copies to the tax man or input them into popular tax programs like QuickBooks. Shoeboxed also automatically creates expense reports from your receipts. You can use these to track your own purchases or bill clients for expenses incurred during your contract.

 

Planning Ahead

 

Creating a budget for your first year of freelancing is a great idea and there should be three components to consider: the money you’re being paid, the expenses you are paying out and of course, profit.

Based on your first six months of income you can create a projection for the year after by taking your lowest monthly figure and using that as a basis for the calculation. That way you get a conservative idea of your income for the next year with a very good chance of exceeding the amount, and money left over for savings.

Planning ahead allows you to protect yourself from unexpected expenses and emergencies. You have to remember that you will not get sick pay as a freelancer and so it’s always a good idea to have a contingency fund to take care of your expenses during those times.

 

Account Separation

 

Although it can be a good idea to combine your personal and business bank accounts and it certainly saves money and time, it can lead to a big headache further down the line. Trying to work out what costs are work-related and what is strictly person is much harder when all your funds are in the same place.

It’s recommended to set up a business account as your main account if you are freelancing that you can use to receive and make payments. You can transfer a certain amount from your business account to your personal account each month to take care of your regular expenses and it’s much easier to see exactly where you are.

It’s also worth remembering that it’s not a good idea to use your personal credit card to make any work-related purchases. This is because it further complicates matters which you won’t really worry about until it comes time to sort out your tax return. Having all your expenses in one basket is never a good idea if you want to keep on top of your finances as a freelancer.

 

FREELANCE SUCCESS: GET THE SIGNATURE ADVANTAGE

 

Signature Works is dedicated to providing full support to its growing membership based in Liverpool. Working from the city centre’s stunning Bling Bling Building, Signature Works co-working members have the advantage of some pretty significant membership benefits including:

  • FREE Membership of the high-tech Signature Fit Club in Liverpool
  • A Privilege loyalty card that offers a wide range of discounts and offers
  • Access to business advice from industry leading professionals

 

Working for yourself can be extremely rewarding but also very lonely. Come and join our collaborative community in the heart of Liverpool and you will be on a fast track to success in your chosen field. Signature Works is more than somewhere to rent a desk or hire a private office in Liverpool, we have a commitment to our members that is catapulting them to success.

FIND OUT HOW SIGNATURE WORKS IN LIVERPOOL CAN JETTISON YOUR BUSINESS AND CONNECT YOU WITH OTHER SMALL BUSINESSES YOU CAN GROW WITH BY CALLING OUR MEMBERSHIP TEAM ON 0151 558 1566 TODAY!

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