Image Credit: Pexels
Working as a freelancer is a rewarding adventure, but it can be a double-edged sword. Though it is great to have the freedom to do work however you want… it also means that you have to do everything yourself!
One of the most challenging aspects of excelling at freelancing is organizing your time. You have to ensure that you have space in your day to get everything done, both for your clients and for your own business. Processes that would’ve been handled by several different departments now fall solely on you. It is very easy to find this type of schedule overwhelming at times.
A common and significant struggle for many freelancers is financing. In this article, you’ll learn about 8 great tools that can make the business of managing your money much easier. Be sure to stick around for some more general tips at the end!
Table of Contents
- 8 Tools for Optimizing Financing for Freelancers
- General Tips for Organizing Your Freelance Finances
- Final Thoughts on Optimizing Freelance Financing.
8 Tools for Optimizing Financing for Freelancers
1. Online Payment Portals
Using some sort of online payment platform to process your payments and manage invoices is usually far more efficient than the old way of doing things. While making a bank transfer doesn’t exactly take an eternity, the time spent entering account and card data adds up.
PayPal is the most popular platform, and it’s easy to see why. You can seamlessly make both local and international payments, and quickly create invoices, and all you need is the person’s email. There’s also extensive buyer protection, so really, it’s a no-brainer.
2. Accounting
Traditionally, there were two ways you could do your books – either painstakingly (and often haphazardly) work it all out yourself, or pay an accountant to do it. While there’s certainly a lot of value in hiring an accountant, there’s now a middle option in the form of accounting software.
Packages like Quickbooks enable those who are self-employed to manage their books with the help of intelligent digital assistants that can provide estimates and generate financial reports. They remove the human error involved in trying to manage things yourself and are generally highly affordable.
3. Invoice Processing
Processing invoices by hand can take up a lot of time, but invoice processing software can help mitigate the slog.
These sorts of platforms automate many of the processes that take the most time, such as expense categorization, reimbursements, and receipt scanning, and with most options being cloud-based, there’s nothing to install and you can access the relevant services from anywhere and at any time.
4. International Payments
If you deal with a lot of international clients, you’re going to want something to negate the costs and general hassle associated with processing international payments.
Thankfully, there are several different platforms available to help you. Services like Wise and Xoom (by PayPal) make it easy to understand currency conversion rates and usually offer lower fees than your bank would. Importantly, payments are also processed very fast (there’s nothing worse than a backlog due to difficulties processing overseas payments).
5. Business Management
Business management tools are essentially any packages that aim to simplify day-to-day business life. For example, e-signature software like Adobe Acrobat can be invaluable; as a freelancer, you’re likely working with clients that are consulted with online (if not entirely), in which case, you’re going to need a simple way to sign documents collaboratively in the digital format.
Then, you have tools like Trello that help with project and task management, enabling the user to organize multiple tasks at once and see all their deadlines at a glance.
Image Credit: Pexels
6. Budgeting
Another tough area to manage when you’re starting out freelancing is budgeting. Depending on your business, there are often many things you have to buy and services you need to pay for, and managing what’s coming in and going out can be complicated.
Tools like YNAB (You Need a Budget) are becoming increasingly popular for their ability to help people with this stuff. The platform provides an intuitive space to organize your funds and categorize them in a way that’s most useful for you, and the above example and many others sync across all your devices so that no matter where you are, you have direct access to your financial planning.
7. Time Tracking
Time management can be a tough nut to crack as a freelancer, and it’s an issue most self-employed individuals will face at some point. As an employee, for better or worse, you’re at the mercy of the company’s schedule, whereas as a freelancer, you have to make sure you’re staying productive while working from home or your own office, which is much harder than it seems.
There are so many distractions to keep you from getting on with work that it’s easy to have difficulty concentrating, but thankfully, time management software can help. This type of software uses a mixture of smart calendars and timers to keep you on track, and it can also help if you have staff, offering tools for calculating hourly rates for projects and monitoring billable hours.
8. Insurance and Benefits
Finally, there are insurance and benefits to consider. One of the downsides of freelancing is that you don’t get the usual employer-provided benefits, such as health insurance, life insurance, retirement plans, and more.
This can be a major hurdle for those investing in a freelance career, but there are plenty of services out there that can help you. Stride is one of the most popular platforms: it exists to help you find appropriate health and dental care at an affordable rate, and gives you tools for managing tax in how it relates to receiving this care.
Image Credit: Pexels
General Tips for Organizing Your Freelance Finances
Now that you know what tools are most beneficial when it comes to managing your finances as a freelancer, here are some more general tips to get you off to a good start:
Always separate your Business and Personal Finances
One of the most fundamental financial actions you should take is to separate your business finances from your personal ones. It’s a big mistake to mix the two as it’ll be incredibly difficult to track your cash flow and properly manage transactions without errors.
The best thing to do is open a business bank account and use a separate credit card for business operations – the former is often a requirement for tax calculation purposes, so you’ll need one anyway.
Remember to Set Aside Money for Taxes
Given that you’ll be responsible for your own taxes, you need to make sure you’re setting money aside to prepare for any deductions. Some of the tools above can help you estimate what you need to pay before the due date, but no tool circumvents the need to plan ahead and keep money back so that you’re in the clear.
Look into tax rates for the country you operate in and try to keep back 25-30% of your income. The exact amount you’ll need will vary, but this is a good ballpark range to get you started.
Plan for the Long-Term
It’s easy to get so caught up in the day-to-day running of your business that you neglect to think about the financial implications of the long term. One of the most important areas is your retirement: it may be a long way off, but as a freelancer, you don’t have the employee-related benefits that offer the security you need.
You could consider something like an IRA (Individual Retirement Account) to ensure this portion of your finances is accounted for, and more generally, it’s a good idea to have some savings kept back for the future (you never know where you’ll be in ten years’ time).
Budget for Emergencies
On that latter point, it’s also beneficial to have some sort of emergency budget in place. Freelance work is irregular by nature, and unfortunately, you may have to face periods where you have very little coming in – especially in the beginning.
The budgeting tools outlined in the main section of this article will help, but even without those, you should be aiming to have at least three months’ worth of living expenses accounted for if you can. This may be difficult at the start given that your income will be lower, but that’s fine – you can build your emergency budget up slowly over time.
Constantly Analyze Your Pricing
Pricing is, of course, one of the most important factors for any freelance business, and one of the key things to be aware of is the fact that it’s not a static variable; you should be constantly analyzing your pricing to make sure you’re always striking the balance between benefits and fairness for the customer and your own financial security.
Your rates should be increasing over time as you gain more experience, and every month, it’s worth researching current industry rates and ensuring your own rates are in line with them. Finally, it can be easy to be taken advantage of if you’re just beginning: never be afraid of proposing a given rate because you think people will reject you based on it being too high. In many cases, rates that are too low can actually go against you because potential clients end up doubting your abilities.
Final Thoughts on Optimizing Freelance Financing.
Hopefully, this article has given you some food for thought as to how you can organize your finances in a way that’s most conducive to long-term success. Remember: it’ll take a while before things slot into place, but keep at it, and you’ll be running a successful freelance business in no time!
