It is a bold and exciting decision to make money from your talents or hobbies. Having to be your own boss can be fun too. However, running your own business is more than working under your rules. There are responsibilities that have to be met for your business to run smoothly.
With the birth of the “gig economy,” you need to be ahead of the curve in running your business. Freelancers are popping up in almost all industries, and the best will be the ones taking the bread home. Running a business needs so many moving parts harmonized and attended to, such as leadership, cooperation, and management. This article has put together a few pro tips you can live by to keep your finances in check.
1. Freelancer Budget
Everyone knows the importance of budgeting for personal spending. The same idea goes for you and your business to create a freelancer budget. A budget helps you better manage your finances but having no budget has more devastating effects. Running a business without a budget will have you wasting a lot of money and losing track of your spending and purchases. Also, operating without a budget exposes you to overspending.
You could find a system where you create a budget either monthly or weekly. Assigning money to various activities gives you a clearer picture of how best to organize your money further. It is best to remember that budgeting isn’t particular to having loads of cash. You should budget that little pocket change to help you manage more money.
The prioritized items on your budget can be utilities, travel costs, miscellaneous costs, and bills. Always remember to separate your home budget from your business. It is easy to mix up the two since you are, after all, the boss. A successful entrepreneur should respect the need to separate the two. Another benefit of budgeting is that it helps you adjust your spending to achieve maximum use of available funds for maximum profit.
2. Chase Payments
When you’re an employee of a company, the organization handles all payments, and all you have to do is withdraw your salary. But as your own CEO, you are left with the enormous responsibility of keeping track of your payments from clients, vendors, distributors, contractors, and other freelance employees. The Chase Pay app makes your work easier by sorting out your payments via email addresses.
Chase Pay is a digital wallet from Chase Bank that helps freelancers manage and schedule their payment arrangements. With the app, you get to receive payment and send payment with no service charges. All you need is to reply to your email notifications. However, you may need to pay your service provider’s standard rates to maintain the app’s services.
3. Bookkeeping
As stated earlier, it is a wise decision to separate personal and business finance. Remember, you become the jack of all trades when you embrace the freelancer lifestyle. Bookkeeping is a fancy way to say ‘keep your financial transactions in check,’ by tracking all the money going out or coming in. As your own accountant, you can set yourself a salary and deposit it in your account.
You can also outsource bookkeeping skills if you have too much on your plate already. Remember, no one said being your own boss is easy. You could hire CPA experts or digital finance tools such as Xolo to keep your financial books in check. Many online bookkeeping platforms aim to help you connect your accounts and give you access to track your finances daily. It is a safe and inexpensive way to ensure your finances are sound.
4. Secure Income
As a freelancer, there is always a starting point no matter which field you are working in. Being a freelancer is rewarding and adventurous as you start your practice. You get to collect valuable experiences and lessons on the ups and downs of being the boss. You get to experience what it takes to manage yourself and how difficult you are as your employee.
The best way to secure income as a freelancer is to accept small projects to build experience, learn how to collaborate well with others (clients, contractors), and grow your brand. You can move on to accepting more significant and long-term projects also to make you grow your craft. In addition, you should market yourself to older and new clients applying for jobs meeting your interest. Sort out long-term collaboration with clients to secure long-term income.
5. Invoicing
Invoicing is simply writing receipts for clients’ purchases, but it is essential that you know how to create invoices as a freelancer. You write the product, quantities and agree on prices for your products or services. Invoices are essential for stocktaking and monitoring the product flow of your business. An invoice also makes your bookkeeping responsibilities easier and almost enjoyable.
Proper invoicing will help you make predictions on product flow and potential losses or profits. There are endless benefits of invoicing, and therefore you must do it right. Moreover, an invoice can serve as an insurance policy when or if the need arises. It helps you maintain honesty and improve customer service when a client wants a refund or warranty, among other things.
6. Financial Savings
Since you are your own CEO, you need to understand the importance of saving as an individual and an entrepreneur. There are different reasons why saving is a significant financial decision, one being that you don’t want to work forever. Financial saving is not easy, especially with the temptation of handling your money.
For employed folk, they can easily tell the employer to cut some percentage of their income. You can set aside a goal to achieve either monthly or weekly. Create a savings account and regularly deposit money. Savings come in handy in case of emergencies or unexpected events such as health issues. A savings account will save you from dipping into the business’s working fund to handle unplanned costs.
You could save up for long-term benefits such as a retirement nest. It is unnatural to desire to work till your last breath. It would be best if you found time to relax and enjoy life in your old age. There are financial classes you can take online to help you save your money for either a rainy day, vacation, children’s education, or for your retirement. You could also look into insurance policies that meet your requirements.
7. Tax Residency
There’s nothing certain in life except for death and taxes. As you live, you need to remember that you must pay taxes. The earlier you accept it, the better you will be.
However, most people don’t remember a kind of tax, and that is tax residency. This kind of tax requires you to pay some foreign tax depending on the time you stayed there. Some freelancers sure travel a lot and should remember to check on tax residency to avoid unnecessary fines. You could establish a domicile and a residence to minimize the confusion.
Tax residency is vital since the law treats residents and non-residents differently. It would be bad for your business to suffer a blowback because of missed taxes. You can create a tax account and deposit a percentage of your monthly income for the estimated tax payable annually.
Managing Finances As A Freelancer
Being a freelancer is a fantastic experience and the future of business. Grasping the concept of being a successful business owner is even more rewarding. Which of the above buzzwords will help you get to the apex of your career?
