Financial issues for freelancers

Posted: 27th March 2019 14:25

Turning to freelance work is an increasingly popular option for many people in the UK. It provides the freedom and flexibility that traditional models of employment can’t match, and it can enable you to pursue unlimited opportunities. Of course, it can also be hard work, and there are a number of specific issues that freelance workers have to deal with, most notably when it comes to finances.
Tax and expenses
This is perhaps the most important financial aspect of freelance work. Whether you are working as a freelance copywriter, personal trainer or undertaking regular nursing contracts for private or NHS organisations, you will be responsible for declaring and paying your tax every year. This means that you need to provide a full account of your income, understand what expenses you can claim, set aside enough money to meet a fluctuating tax bill, and get to grips with National Insurance.
For this reason, many freelance workers opt for an umbrella company model, which can help them to handle their financial commitments, including taxation and expenses, with minimal hassle, enabling them to get on with building their freelance businesses and careers.
Inconsistent workflow
Nothing threatens the success of going freelance like an inconsistent flow of work. Even when you have a lot of work lined up, it is unlikely to provide a steady and consistent income. Instead, your income will fluctuate from one month to the next, particularly if you are a freelancer working on projects, such as web design or computer programming, which will often involve bursts of activity interspersed with quiet periods in which you are looking for work.
Financially, this can be tricky to adjust to, particularly if you are used to being a salaried employee. The key is to accept that your income levels will vary. Check your financial position on a daily basis, and particularly in the early months of freelancing, continually adjust your budget to match your income expectations. Where possible, it is always a good idea to try to put aside a pot of money that will be able to sustain you during periods of less work.
Late payers
For freelancers in many areas of the economy, such as IT or copywriting, chasing up payments can be an issue. The first time that you find a client delaying their payment to you can be a worrying occasion. You may even feel helpless and begin to wonder whether you will ever get paid!
While it is a natural reaction to fear the worst, and it is certainly the case that some clients are slow or even reluctant to pay, in most cases, you will eventually get your money. The best way to deal with the issue of late payers is to first be clear about when you expect to be paid on your invoice. This will usually be 28 days or a calendar month, and up until that time, it isn’t reasonable to chase up an invoice, unless the client had specifically promised to pay earlier.
In addition, you should take the time to research your rights when it comes to late payers and draw up a clear and consistent series of steps to follow in the event of late payment. Try to remain professional throughout the process (however frustrating it may be!), and make sure that, where possible, you have enough money set aside that you can cope with occasional late payments. By being professional yet firm in your pursuit of delayed payments, you will be likely to have more success than if you lose your temper, and you will be more likely to retain the client.
Don’t forget to take time off!
While strictly speaking, this isn’t a financial issue, the pressure to keep working and earning can often lead freelancers to neglect their need to take a break. This is understandable at times when your workload is heavy or you have deadlines to meet, but it isn’t possible to work for long periods without a break, and in the long term, not allowing yourself time off will lead to burnout or a lower quality of work, which could have a significant negative effect on your freelance business.
That’s why, no matter what field of freelancing you operate in, regular breaks are vital, for your health, as well as the long-term sustainability of your work. After all, what is the point of being your own boss if you can’t occasionally give yourself the day off!
While working as a freelancer or contractor brings with it a number of complications, it is important to stay focused on the benefits. Being able to work flexibly, in the way you want, without the need to answer to a manager, and with no limit to your possible income, makes freelancing an attractive option for many, and as long as you take care to deal with financial issues effectively and diligently, you can fully enjoy the benefits and opportunities that come with freelancing.