You’ve decided to work as a freelancer. Congratulations! It’s a decision you won’t regret. Working in your own time, with different clients. You can choose the types of projects you embark on. Freelancing can be an enjoyable and rewarding career, but starting out is not easy. It’s tough to know what you need to get started and how to find clients.
But there are so many benefits from financial freedom, to time flexibility, having more control over the work you do, the clients you work with and your income.
We’ve created this guide with QuickBooks to help you over the key areas of working as a freelancer.
The Complete Guide to Working as a Freelancer
- Do I need to set up a company
- Set up a freelancer bank account
- Ensure you’re covered with insurance
- Win your first clients
- Tax rules you need to know
- Managing a project
- Delivering your work
- Getting paid
- Managing your bills and finances
1. Do I need to set up a company?
The short answer to this is that you don’t need to set up a company to get started. You have options. Depending on the country you are from, generally you have two options:
- Work as a sole trader / self-employed person. The definition varies between countries, but essentially you are getting paid into a personal bank account; legally the buck stops with you, and you will have to file a tax return at the end of a financial year declaring your earnings from work.
- You set up a legal entity, such as an incorporated company in the US (Inc.), a limited liability company in the US (LLC) or a private limited company (Ltd in UK). This means all business goes through this entity, which can protect you as an individual from things like bankruptcy or legal disputes with clients. You will also need a business bank account, to have business insurance and to file taxes each year for this company.
When you hit a certain size, you should definitely set up as a legal entity, as the risks are too high as an individual. For example, if you went bankrupt with large company debts or got sued by a client for a large sum. There are also tax benefits from setting up a company.
When you start out, you may wish to “deal with this later”, which is entirely reasonable. If you do that, make sure you get insurance.
Outside of the US, use LegalZoom.
2. Set up a freelancer bank account
When you set up as a freelancer, it’s best to get a bank account separate from any personal accounts. This will help organise your business transactions and with keep your transactions clear, defining between earnings, expenses and payments. It will also be useful when completing a tax return at the end of the financial year because you won’t have the noise of personal transactions so your figures will be more accurate. It is handy incase the IRS, HMRC or your countries tax authority ask for copies of your bank statements, too.
As a company (Inc, LLC, Limited, etc), you will undoubtably need a company bank account for your business transactions.
A business bank account is also useful when it comes to savings. This is because many accounts provide more competitive rates of interest for businesses. You will also be able to receive credit card payments for customer purchases with services like PayPal, Stripe, Transferwise or GoCardless.
Learn how you can set up a business account in minutes and save £204 a month.
Learn how to separate your finances with a dedicated freelancer account.
3. Ensure you’re covered with insurance
Starting a business without insurance is like going into a live rugby match without a mouthguard. Protecting yourself is so important!
Insurance may seem boring, but it’s crucial to make sure you have financial cover when the “worst-case” scenario comes along. Hopefully, it never will, but it’s best to have it in check.
There are different types of business insurance that will cover you in different ways. What you need will vary, depending on the type of business you have. If you have a building, you will need protection for this and for all of your equipment or stock if an incident happened to cause damage; whereas, if you work from home you may need protection for your works or for customer-related incidents, for example.
The main types are:
Public liability insurance
This is essential to cover you when a third-party has been injured or harmed as a result of your business activity. See our partners here.
Professional liability insurance
If there’s one type of insurance you are most likely to need, it’s professional liability insurance, also known as professional indemnity insurance (in the UK). It will protect you if a customer wants to claim against you for not providing a service to a required standard. There could be many reasons a client wants to do this (though hopefully this will never happen), which could be because of defamation, misuse of company information or simply sloppy work completed.
For more information, check out Twine’s post about why insurance is so important to a successful freelance business: Why it’s critical to your success.
Want to see how a simple mistake can cost in time and money? Check out this freelancer’s unfortunate mistake that cost them: This freelancer almost lost an ENTIRE DAY’s pay.
Office contents insurance
Do you have tools, equipment or an office? This insurance will cover you for these business assets, protecting them from theft, damage or other unfortunate situations. Many freelancers will not have their own office or a lot of equipment to start with, but if you’re an artist or a photographer, for example, you may have.
Breakdown insurance – as the name suggests, your equipment will be covered if it breaks down. Some insurers will include this in the contents or assets insurance policy, so check this out first.
Insurance may never be your favourite part of running your own freelancing business, but you will certainly come to love it if you find yourself in hot water.
To boost your love of insurance, read this inspiring post: How I learned to stop worrying and love insurance.
4. Win your first clients
The challenging and exciting part, but there are 4 things to do before you start winning your first clients:
1. Know what you are selling
What is it that you provide as a service? When starting out, freelancers tend to offer everything to everyone. This never works! Not every client will want everything you have to offer.
“I’m a web designer, that also codes websites and I can make your explainer video too” or “I’m a music producer who also makes wedding videos”.
It may be true that you can do all those things, and do them well, but this can be confusing for clients. Offer only a few services and tailor these to each client.
A client needs clarity and specificity. They want to know that you are excellent at what they need. The rest is not important.
2. Read up on your clients
Get a clear understanding of what your target clients want. You can do this by finding out about them first. Do they have a nifty website or do they use marketing videos?
If they do, you know that they understand the value of using these as part of their marketing strategy. If you see that they started a blog a year ago, but it hasn’t been updated since, perhaps they need help with their blog. Someone like you who provides that service, maybe?
Knowing the clients you want to with will help you understand what they need and you can tailor your offering accordingly.
3. Make yourself look amazing
Now you know what you are selling, you need to present yourself. Twine has an inbuilt portfolio that you can use. We will be expanding our portfolio functionality over the next few years to make it more and more useful.
If you are selling multiple services that are not related, you may consider setting up different portfolios on Twine for each of those services.
Create your portfolio by using samples of your best work to upload on your portfolio page. This should include a good image or screenshot, a title and brief summary of the project you worked on. If you want to, include the company or client you worked for. If you have video or audio work, you can also add those files to your portfolio.
Make the format uniform to make it easy for a potential client to scroll through. If you have different projects, there are ways of categorising your work to make it even easier.
4. Sell yourself
You are trying to win business from your prospective client. You need to give them a reason to choose you over another freelancer. Always answer these 3 questions:
- Why would you be good for this job?
- What makes your service or product stand out?
- What relevant experience do you have?
Introduce yourself, whether online, by phone or in person, in 20 words or less. This keeps it really simple for the client to understand what you can offer.
Twine has a job board of freelance work. We also have private jobs that you can get invited to, so it’s best to get as much information on your portfolio as you can. Include a summary of what you do so that clients see it straight away. Use a professional profile image of yourself. These will help get you more enquiries and onto the path of finding work.
Other services to find work:
- Pro Blogger
- Five Squid
There are plenty of jobs available for freelancers to apply for. When you get replies to the proposals you’ve submitted, be prepared to ask the client questions about what they are looking for. Keep your emails clear, concise and professional; then explain what makes you a good fit for the particular task that needs to be done.
5. Tax rules you need to know
Possibly slightly more boring than insurance, tax basics is a topic every freelancer needs to take seriously. The tax office people do not play around. This includes knowing how much you need to pay and how to calculate it.
Calculating profit, loss and storing expenses
Remember all those tools and resources you invested in to use in your business? Whether it’s a laptop, printing ink or a software subscription, keep a record of receipts. You won’t need to pay the tax on expenses, but do keep a record of receipts so that if anyone asks, you can prove what you have spent. When working out how much tax you owe, first take off the cost of your expenses from your earnings.
Please be aware that even if you don’t end up earning enough to pay any tax, you will still likely need to declare it to your countries tax authorities (IRS, HMRC, etc).
The great thing is there are many simple tools like QuickBooks, to keep on top of all your bookkeeping of expenses and invoices.
Tax In the US
In America, freelancers need to complete the 1099 every year, a self-assessment form used to declare earnings. The great thing is software like QuickBooks, can help you do this, making it so much easier.
Companies will have to file tax returns. We recommend you get a tax advisor to ensure you do this correctly. The IRS are notoriously harsh when people break any rules, so do it correctly.
Tax In the UK
As a UK freelancer, if you’re self-employed, you will need to register with Her Majesty Revenue and Customs (HMRC) under your business name. If you don’t have a business name yet, you can simply start by using your own name. You can usually register when you have your first client.
If you have set up a limited company, you will need to find an accountants to submit your accounts and your corporate tax return.
You’ll need to complete a tax return every year to say how much you have earned for that year. The tax year runs from 5th April – 4th April for self-employed, and for companies it will all depend on your “company year end”.
You can now earn £1000 in a single year without paying any tax on it. After that, it’s a 20% rate that you pay on all of your self-employment after expenses.
If you’re self employed, you will need to register to complete your self-assessment online or on a hard-copy document. (LINK). The deadline for each preceding year for paper tax returns is July 31st, while you will have up until January 31st to complete the online version.
Many people opt for the online version because it’s easier and provides an instant calculation that tells you how much you need to pay. It also means you don’t have to wait for a hard copy to arrive in the post and you get a bit more time to complete it.
VAT in the UK
If you earn over £85,000 per year, you need to be registered for VAT. At this point it is important you use accounting software like QuickBooks to ensure you are charging the right customers VAT. The rules change depending on whether they are in the UK, in Europe or worldwide.
UK Tax Assessment for Contractors – IR35 (UK)
There is something to be aware of if you’re a contractor hired by an agency to work for a company. Under a tax legislation called IR35, there are rules about ensuring that tax and national insurance are paid by the individual and not avoided by being set up as Limited company.
6. Managing a project
Okay, so you’ve got your first assignment from your very own client. You need to manage it and see it through to delivery. This is different from managing an employer’s project. You have no manager watching over you or giving you deadlines. You need to set your own deadlines to meet your client’s so it takes discipline to get the work done.
How to manage your project or job very much depends on the type of work you do. However, you should always be organised. That’s why Twine has partnered with Monday.com to help you manage your freelance jobs – check out this post about easy ways to manage your freelance projects.
Here are some tips to help you with managing a project:
1. Break it down
To get organised, you will need to break down your project into small tasks. Set yourself mini-deadlines and mark them in a calendar. Set up reminders when a task is due. Monday.com helps you to see clearly which tasks need to be done.
2. Managing time
You’re not being time-managed by someone else anymore: it’s up to you now. Whether it’s the 80:20 rule or splitting your time between short and long tasks, it’s important to find the right way that works for you.
3. Define expectations
Right from the start, speak with your client about what’s expected. How quickly do emails need a response? When are your client’s deadlines for drafts or completed projects? Will you be providing images with any written content? Do you need a compiled app or just code? Does the client need the final animation or all the keyframes? It’s best to know these details in advance so you both know what is expected of one another.
4. Discuss communication
Ask your client about their working hours. Some will prefer to be contacted during working hours, while others won’t mind if you get in touch them during evenings or on Saturdays. Some will like What’s App, while others prefer text.
Send your client regular updates on where you are with the project and if you have any questions. It’s better to ask for early feedback than waiting for it all to be done.
5. Keep files separate
Create a separate folder for your client‘s files so that you can easily find them. Keep them up-to-date every week. If you prefer, you can create a shareable folder using Google Docs or Dropbox, so that you and your client has access to consistently updated documents.
This also applies to emails. Organise these into folders by topic or task. For example, you could have emails relating to a task in a ‘to do’ folder, and transfer them to a ‘completed’ folder when done.
We’ve also partnered with Talkroute. Read 4 Ways Freelancers Can Go Pro with a Virtual Phone System.
If you’re a filmmaker or animator read how you can cut client feedback cycles in half with Frame.io.
7. Delivering your work
Get your work done to the highest quality you can. Check it, then double check it, leave no room for error. Meet your client’s deadline. You want to make sure your work is the very best it can be before sending it.
Here’s 3 quick tips to delivering your work well:
1. Increase work efficiency to meet deadlines
Schedule time to complete tasks. Use a timer to see how much you can get done – some people work best when there’s a time limit. Don’t try to do too much at once, or there’s a chance you may not end up completing any tasks.
If you’re a web designer, marketer, learn 3 ways to increase work efficiency.
2. Make your brand stand out
Marketers always need new ways to make their brand or client stand out. Read 3 ways to make your design stand out by combining vector and photography.
Using elements, such as motion or images can make your work stand out, too. Read how to do this here.
Illustrators can read 5 case studies of how they create their work:
- Creating ‘Joking Bird’ in Affinity Designer for iPad
- Creating ‘La Vida Loca’ in Affinity Designer for iPad
- Creating ‘Desert River’ in Affinity Designer
- Creating ‘No Compromise’ in Affinity Designer for iPad
- The making of ‘Create’ in Affinity Designer for iPad
3. Send files securely and safely
Use a secure sending tool, such as WeTransfer to send your work to clients. Not only can this send large files, but it is really secure and ensures that only the person it is intended for will get to open it. You also don’t want to lose content so remember where to back it up.
8. Getting paid
Many platforms like Twine provide a secure payment system once your proposal has been accepted. There is usually an Escrow or a deposit that a client pays, with the rest paid once you have completed the job. This gives reassurance that you will always pay in full and the client gets their job done. Some job platforms charge a commission depending on your earnings.
Another way of getting get secure client payment is by using a secure payment system, such as PayPal or Google Wallet. PayPal charges a percentage of your earnings for completing a transaction, but it canbe worth it for the security it brings and guarantee of getting your payment.
If you’re working with a client directly (not on Twine), then there will be the point where you need to be paid. The traditional way to do this is to invoice your client. If you have never written an invoice before, then we have a guide on what you need to do.
Write an invoice for your client with your business address and name and a breakdown of the dates worked and jobs completed. This should be finalised with a total figure and include any VAT or sales tax. If you’ve had expenses for the job, such as postage, you should include these as a separate section and add these onto your total.
Tired of waiting for your client to pay that invoice? It’s so important for your cash flow that you are paid on time. Here’s a great post about outstanding invoices and how to get a customer to pay.
9. Managing your bills and finances
With your business, there will be tools you want to pay for, upfront expenses or monthly subscriptions you want to invest in. It’s best to manage these from your main business account, so it’s easy to see what’s going out and what each one is for.
Make sure bills are paid on time either through a subscription. In the US you can schedule payments using. In the UK you can use direct debit or setting up a standing order.
Unless you have a regular client that pays you at the same time every month, it can be hard to work out when to pay your bills. Make sure you always keep a minimum amount in your account for your bills to be paid.
To help you stay on top of business finances, it’s worth arranging for a reminder by text or email sent to remind of your account balance and when a bill is due to come out.
This article will help you see where your money is going.
Do figures drive you mad? Once you have a few clients, you may want to consider having a bookkeeper or virtual assistant to help keep your books updated each month. Outsourcing this task may be a monthly cost worth paying for if it takes it off your hands and helps your financial records stay up-to-date.