Even if you’re not self-employed or freelancing today, there’s a good chance you’ve thought about it. For the past few years I've been living that self-employed life - I'm just one of the Millennials that makes up over 40% of our nation's self-employed workforce. In the years I’ve been doing this kind of work, I’ve learned a lot (like, a lot a lot) and I’m here to share the wisdom!
Contracts and invoicing can be so boring, but they are so important. You really can’t understate the importance of having a solid agreement in place with a client and a rigid financial management routine.
When you’re freelancing or running your own business, you are responsible for your own income. If you don’t develop a client base and routinely receive payments from those clients, you could be risking serious financial turmoil! Avoid common pitfalls and develop smart processes that work for you with these tips:
Use a contract, and stick to it!
- Include a detailed scope of work, milestones or deadlines, your standard billing period, invoicing procedures, and accepted forms of payment
- Look to your contract regularly to ensure you’re following it as well as your client
Track your time diligently
- I can’t tell you how many times I’ve been saved by diligent time tracking. Tracking your time ensures that you are paid for the hours you work, and can help keep income consistent by portioning billable hours into your determined billing periods.
- Use a software that allows you to produce a report for your client if requested, and note tasks you’re doing during each time record (because you won’t remember 2 years later when they ask for it!)
- For a few years now I've been using Harvest, and I'm a fan! This desktop platform and mobile app allows you to track time down to the minute, log mileage expenses, and enter reimbursable expenses for every client and/or project. When it's time to bill, just run a simple report and you're good to go!
Choose the right accounting software for you. Consider:
- What reports will you need to hand over to a CPA when it comes to tax time? Make sure you choose an accounting software that allows you to easily run those reports.
- How many entities do you have? If you have multiple businesses, consider a software that allows you to easily switch back and forth between them.
- What’s your budget? While accounting software is important, think about how complex yours really needs to be as a self-employed professional. If you can cut back on some of the bells and whistles, you can save a lot of $$! Personally, I've had a great experience using Wave as a free accounting software designed for small businesses.
Schedule time for a monthly finance review
- Don’t fall behind in bookkeeping! It’s one of those things where once you’re behind even one month, the mental mountain you have to overcome to get back on track is overwhelming and it snowballs!
- Use your monthly check-in as an opportunity to ensure that you’re spending within your means. Make sure to note tax-deductible expenses and track that you’re not behind on estimated tax payments.
Invoice on time, for the right amount of time
- Choose a set billing period that you’ll follow every month, for every client. Stick to it! If you do this, your clients get consistency and are more likely to pay when invoices arrive. Extra perk? After a few billing periods, you’ll be able to gauge when payments will arrive and plan accordingly.
- When you make invoices, run a report using your time tracking software to ensure that you invoice for the exact amount of hours you worked in this billing period.
- If submitting an invoice with reimbursable expenses, include scanned copies of your receipts! It’ll ensure that your invoice is processed quickly (and you get paid faster.)
Are you freelancing and/or starting a consulting business? We’d love to hear your tips! Log in to Ticco and participate in our Discussion on this topic here to share your unique insights and see what others are saying.
Katie Rispoli Keaotamai is our CEO here at Ticco. When she's not with us, she's hard at work as a consulting project manager. In her consulting work, Katie works with real estate developers, local governments, companies, and private property owners to plan and oversee building relocations. Since 2014, Katie has relocated multiple historic buildings, including the world's first Taco Bell.