Freelance In 40 Days [Day 6]: Bookkeeping For Dummies

Posted: August 31st, 2009

Photo by Jonsson (Flickr)

Photo by Jonsson (Flickr)

This is Day 6 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today’s tutorial will cover financial preparation for your freelance business.

The Favorite Chore of Freelancing

Probably one of most feared and neglected aspects of freelancing is keeping track of all that money coming in and going out of your business. We smile in joy after receiving those nice project checks and grimace when we have to shell out for that little thorn in our side called taxes.

The tendency is to “put if off for later” but, make it a habit, and the more your business can be in disarray as a result. The bottom line is you want to know how your business is doing and making sure you are staying out of the red. Plus, you really don’t want the hassle of  spending hours inventing expense receipts come tax time.

Let’s face it. Keeping up with your finances isn’t fun either. Actually, it downright sucks (apologies to all bookkeepers out there). This is a necessary part of any business though. After all, in order to know how your business is doing, you really have to keep track of:

  • Net Income (or Loss): Are you meeting your income goals?
  • Money Pits: Are there expenses you can cut so your net income increases?
  • Tax Liability: The man has to take a cut. You don’t want to give him any more than you have to.

Start With The Basic Accounts

Luckily maintaining your own finances as a freelancer isn’t as bad as it sounds. First, though, we have to set up the basic financial accounts that every freelance business should have:

  • Checking Account: Instead of using a personal account for expenses and to receive payments, it is far better practice to set up a separate business account for these instead. Income and expenses are much easier to track this way.
  • Savings Account: A separate savings account is also useful for depositing taxes you are liable for as you go. Tax laws vary worldwide, of course, but transferring around 30% of your payments into this account will keep you from having to scrape together a huge payment for a tax bill when its due.
  • PayPal Account: Though there is a fee of around 3.5% to receive and transfer payments to your bank account, it’s major use comes from the ability to accept payments worldwide.

Accounting For Freelancers

As for handling your accounting, unless you are an actual accountant/bookkeeper or can afford one, it isn’t very feasible to hire one for your business since they can be pricey. The alternative is to do it yourself (or “put it off for later” which isn’t recommended). There are two tools I personally found useful,which were from a Freelance Switch article on affordable online bookkeeping for freelancers. I also highly recommend them:

  • Freshbooks: Tracks your income by recording client invoices and payments received. Pricing ranges from free for minimal services, then 19 USD/month on up for expanded services.
  • Shoeboxed: Tracks your expenses by scanning, categorizing and keeping sum of your receipts. Pricing ranges from free for minimal services, 9.95 USD/month for basic and up to 49.95 USD/month for premium services.

The Best For Last: Taxes

Since every country has their own tax laws, it would be impossible to cover every single one here. There is likely some online tax resources for your country that can be found through a simple Google search. It is highly recommended, though, for you to consult with a local tax professional. It is not unheard of that they can sometimes pay for their service through savings on your tax payments.

For those in the U.S. there is a great tool in Outright (also in the Freelance Switch article) which can integrate with Freshbooks and Showboxed mentioned above and is free of charge. Turbo Tax is another easy to use tax tool for those from the States.

One little tip is if you are allowed deductions for expenses, is to have a look at Wise Bread’s 101 tax deductions for freelancers and bloggers. Although these apply mainly to U.S. taxes, it doesn’t hurt to check if these expenses can reduce tax for those in other countries.

Your Homework For Today

It will definitely take you more than a single day to apply everything in this tutorial to your freelance business. It is important to have these in place before you really start your freelance work though. So take the time you need to, but have these all in place:

  • Set up your business checking account.
  • Set up a business savings account for saving 30% of received payments for taxes.
  • Set up a PayPal account.
  • Set up a method of bookkeeping whether hiring an accountant, using Freshbooks/Shoeboxed or another method of your choice.
  • Utilize a local tax service (or use online service for U.S. taxpayers).

Freelance In 40 Days [Day 5]: Become Your Inner Coca-Cola

Posted: August 28th, 2009

Photo by ElektraCute (Flickr)

Photo by ElektraCute (Flickr)

This is Day 5 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today’s tutorial will introduce you to personal branding for your freelance business.

Branding 101, Do I Really Need One?

I’ve been freelancing for a number of years without a brand thinking I didn’t need one. Then one day, many years later, that cheap 5 watt light bulb went off in my head. I came to realize that I was known as that “Johnny” guy who is a web programmer whenever I was passed a referral. I was branded and I didn’t know it.

Then I thought about how much new business I might have lost by not coming up with a brand way back then. D’oh!

You see, when getting your business “out there,” it’s more difficult for people to recognize a full name. Think about that for a second. Let’s ask ourselves, for example, out of all the blogs that you read on a daily basis, how many can you name out by their blog name?

Now, out of those same blogs, how many names of their actual authors do you know? Maybe a few, but ALL of them?

It doesn’t matter whether its blogging or your freelance business, a brand means recognition. Recognition translates to more awareness of your services. More awareness can lead to more work and you’ll see the dominoes start falling in place.

Branding 101, How Do I Come Up With One?

Coming up with a word or two as a brand name that you are glued to for your entire freelance career is probably the most head-wracking thing you could do at any moment. Oh my, the choices…

The possibilities are endless but a brand should adhere to some simple guidelines:

  • It should reflect your personality and services
  • It should not be offensive or in bad taste
  • It should not be excessively generic or overused (i.e. A-1)

Here are a few ideas to get you going:

  • You can try: action verb + random noun + service, i.e. Hopping Donut Web Dev.
  • You can go traditional with: color + object that has nothing to do with the color + service, i.e. Blue Carrot Marketing.
  • Look around you wherever you are. I just came up with Dusty Lampshade Coders. Ok, maybe not the choicest, but you get the idea.
  • Relax for 15 minutes or so, clear your head and take back an adult beverages and just let it come to you.

Your Homework For Today

You guessed it. Come up with your own brand  that you want the whole world to know about, then do the following:

  • Reserve a domain name. If it is not available, try appending it with your service. For example, is still available. It’s my idea though, so don’t steal it.
  • Create accounts with your brand name in Twitter, Stumbleupon, Linkedin and Digg. You don’t worry about doing any activity in these accounts either, unless you feel so inclined. That will be for later on.

For some more insight, in case adult beverages aren’t working (or not a drinker), check out Pamela Slim’s awesome post and video on creating a smoking personal brand.

Freelance In 40 Days [Day 4]: Create Your Business Plan

Posted: August 27th, 2009

Photo by Gurdonark (Flickr)

Photo by Gurdonark (Flickr)

This is Day 4 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today’s tutorial will take you through setting goals for your freelance business and forming them into a personal business plan.

Alright, Time For The Business Plan!

You’ve probably noticed so far that we aren’t getting into the meat and potatoes of freelancing just yet. You know, learning how to find freelance work then getting your ass out there and finding it. Don’t worry though. We’ll get to that soon enough. The goal early on is to define your purpose and goals and document them to do two things:

  1. Mentally prepare yourself for the challenge that lies ahead of you.
  2. Create something concrete to look back on to sustain that focus while starting out.

Yesterday in Day 3, you created a USP which is your purpose as a freelancer. So today we’ll define your goals and put them together as a business plan.

If I didn’t scare you off already, we are not going to cover how to create a 100 page, professionally written and printed, with hundreds of neat little charts type of novel. This will be one be your own personal  document which you can refer back to chart the progress of your freelance business.

While not essential for freelancing, it helps immensely to know right from the beginning where you want to be down the road. Plus, it helps to check back periodically to see if you are on your way there.

The Personal Business Plan

Since we are essentially compiling and organizing your goals as a freelancer, creating your own personal business plan isn’t as hard as it sounds. All it takes is setting aside some time to really think hard about how you want your freelance business to be. This can be broken down into four parts:

  • Business Goals: What do you envision for your freelance business? How about growing a certain percentage every three months or designing and developing 15 websites in the next year? Better yet, close your eyes and describe exactly what you see yourself doing as a freelancer a year from now.
  • Business Values: Some examples of business values are honesty and integrity, along with delivering the highest quality work possible and providing unmatched service to your clients. What are values that you will have that will allow you to grow and prosper in your freelance business?
  • Income Goals: What is your ideal income for the year as a freelancer? Don’t get carried away here, but don’t sell yourself short either.
  • Expenses: It is very important, as well, to have expense goals as a freelancer. After all, you don’t want to spend more than you earn. What is your budget for business expenditures or, if your planning on full-time freelancing, what will you budget for expenses each month?

Now don’t get me wrong about this business plan. This is not a do or die mission nor set in concrete. We are simply writing down your goals, expectations and values to use as a starting point so we have something to aim for. You may or may not even reach the goals you set. If you don’t happen to reach them, it doesn’t mean you suck and its the time to call it quits.

Sometimes you will have set a target too high to reach. Say that your target income will not quite reach the number you predicted. All that is needed is simply to adjust your goals to be more achievable. The key to goals is to make them a challenge but within reach and make adjustments when needed so they do not appear unattainable.

Your Homework For Today

Create a business plan outlined above. Write it in pen and paper or use Word and print it out so you have easy access to it later. Don’t skip this task, either (I’m watching). Your commitment to freelancing will reflect in what is contained in this document.

Also, don’t just let it sit there collecting coffee stains and ashes. Take a look at it once in while. Make adjustments and print it out again, if necessary.

Freelance In 40 Days [Day 3]: Define Your USP

Posted: August 26th, 2009

Photo by Txmx 2 (Flickr)

Photo by Txmx 2 (Flickr)

This is Day 3 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today’s tutorial will explain the importance of  the USP and why you should have one.

The Real Reason You Are Freelancing

Its easy when you have the itch to get started in freelance to want to dive in right away and look for work. Its also easy to develop second thoughts later down the road and think “why am I doing this?” when you encounter a hiccup or two early in your career. Ask any freelancer and they are sure to tell you this has happened at some point in their own career.

Whether you continue on or ultimately decide to wuss out and quit is usually dependant on one single teeny weeny factor:  your purpose.

Why is such a small thing so important you might ask? Well, if you hit a lean period where there isn’t much work or went through a day where a client decides to tell you what an idiot you are, then its easy to lose track of the big picture. Go through enough days like these and you can lose it entirely.

That’s why it is important for the freelancer to have a purpose, or in a term related to our careers, the USP, or unique selling position.

The USP Explained

The USP is common knowledge among the sales and advertising community. It is a sentence or phrase which summarizes your business. Sometimes it includes a mission statement and other times it includes a catchy slogan. The main point of it, though, defines your freelance business and purpose for the services you provide.

I’ll give you an example. At the top of the page, you’ll see my USP for this blog, “Hell… anything goes here.” When I created this blog on freelancing, I knew there were other really good, popular blogs that I would be joining company with. I wanted to be different, however, by injecting a little more humor and edginess by writing in a casual, unbusiness-like voice, even swearing here or there once in a while.

One hundred plus posts later and I’m still happily writing this fucking thing. This is despite the fact that I was ready to ditch this into the graveyard of failed blogs several times over the past year. I owe it all to that USP that I keep in the back of my head too. Therefore, I wouldn’t be writing this particular tutorial if  I didn’t think it would help you in freelancing either.

You Homework For Today

Create your own USP. Come up with a phrase or sentence which captures the true purpose of your freelance business and takes into account the following:

  • What makes you unique from other freelancers?
  • What do you offer that other freelancers may not?

It is best to make it something memorable, humorous or catchy rather than generic. For instance, “I am a freelance graphic designer with low rates” is pretty generic and not something that could be considered a purpose.

“Super cool graphics, awesome service or your money back,” on the other hand, contains your purpose (creating super cool graphics) and sets you apart from other designers (offering awesome service or your money back).

You may want to also consider using your USP as a slogan in your business. The more of exposure it has, the more you will stay true to every word of it.

Freelance In 40 Days [Day 2]: Know Thy Market

Posted: August 25th, 2009

Photo by Lepiaf.geo (Flickr)

Photo by Lepiaf.geo (Flickr)

This is Day 2 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today we’ll cover targeting your market and finding a special skill sought within it which you can provide as a service.

Market Research… But I Already Know What I Want To Do!

Yes, I know, nearly all soon-to-be freelancers have an idea of the type of work they want to do whether writing, programming, web development or whatever pays these days. Given the recent demand for freelancers, even during the past recession, it seems that there is plenty of work available, too, no matter what you do.

One other benefit to the demand for freelancers is the nigh number of projects available within practically any field. In fact, there are so many that they can be broken down further to a myriad of specialties. So, for example, instead of wanting to freelance as a writer, you can as a copywriter, web content writer, tech writer or write dialog for adult movies (ok, kidding).

Therefore, a key to finding work is to research the types of jobs available in your field, focus in on a particular type that suits you best. Then base your skills and services around that. Ideally you want look for a particular skill that is in high demand as well as a good match for you.

Advantages of Having A Specialized Skill

By narrowing your focus of work and finding a specialized skill within your field, you offer yourself a few advantages:

  • You develop your skills faster by focusing on a narrow set.
  • You earn a reputation as a specialist and have the potential to find work easier.
  • You become more efficient in your work completing more projects in less time.

One thing to note is that it is common for new freelancers to want to branch out and offer an array of services to appear more marketable. While it is a good idea, when you are more experienced, it is far better to concentrate on one specific service (or a few related services) when starting out in freelance. Developing your skills, reputation and efficiency should be a higher priority at first which helps grow your business faster.

Sometimes A Change Is Necessary

You may come to find that your knowledge and skills may not quite fit the type of work that is in demand at the moment. Plus, there is the possibility that other jobs within your field, but just outside your skills, have a higher demand or are more lucrative.

Take, for instance, you may be an applications programmer only to find that there are a zillion more opportunities in web programming. Maybe you actually do write dialog for adult movies but discover that writing sales copy pays a helluva lot more.

It is always worth it to update your skills and go for the change of scenery in your profession. This is especially true if you remain in the same field but are taking on a new challenge within it. Constant growth and learning are a part of being a freelancer so it is best to get used to it.

Your Homework For Today

Today’s task is to do a little digging and research the market in your field of work. Then find a special skill sought within it that suits you and which you can provide as a service. There is a little trick you can do, too, which will make this easy for you though you may want to set aside time to do it.

First, head go on over to Elance or oDesk (from these links). You’ll notice on these pages that projects available are categorized by fields or skills. Go ahead and browse through the job postings in your field and take notice of the following:

  • Is there a particular demand for any one type of service?
  • What is the budget placed on the project (not always listed)? Take notice of opportunities that can pay more.

Another little trick is, inside the project descriptions on each site, you can view a list of freelancers who bid on each project with a link to each of their profiles. Click on to their profiles and you’ll notice a list of projects completed with a description and amount collected for each. If you check out enough profiles you can get good estimate of what is being paid for particular services.

Hopefully that will be enough to get you started. Let me know how it goes by leaving a comment below.

Freelance in 40 Days [Day 1]: Full Time Or Part Time, That Is The Question

Posted: August 24th, 2009

Photo by Joan Thewlis (Flickr)

Photo by Joan Thewlis (Flickr)

Welcome to the first day of the Freelance in 40 Days series.

Some of you may already be freelancers with varying levels of experience. Others may be on the verge of saying “what the hell” and giving it a try. Either way, we’ve all probably stared down at a common dilemma:

Should I take on freelancing part-time or full-time?

Every freelancer knows this is important to decide before you even begin. Today we’ll go over this question in depth.

The primary factor in making this decision is if there is a source of income or savings that you can fall back on while you are getting your feet wet. While this isn’t an absolute requirement, it definitely adds a crucial level of security since not all careers start out with projects lined up left and right waiting for you in your inbox.

It is more common to maintain a job and freelance part-time which has it’s benefits as well as some drawbacks. For example:

  • Benefit: Less stress and worry if your business isn’t quite taking off as you hoped.
  • Benefit: You can concentrate on other important, non-paying aspects of your freelance business, such as marketing yourself, rather than having to take on projects right away to earn an income.
  • Drawback: You are prone to burnout with the added freelance work.
  • Drawback: The free time you enjoyed before gets eaten up in a hurry.

Meanwhile, freelancing full-time also has it’s pluses and minuses:

  • Benefit: You can fully dedicate your time and energy to just your business.
  • Benefit: You have more free time outside of your work and the freedom to schedule around it.
  • Drawback: Like many new businesses, it may take time to earn your desired income.
  • Drawback: The stress of not earning enough can overwhelm a new freelancer enough to quit entirely.

Therefore, when choosing whether part-time or full-time is best for you, it helps to ask yourself the following questions:

What is your current level of preparation?
Those who start out full-time tend to have some indirect knowledge of freelancing, clients available right from the start and/or enough savings in the bank to cover expenses for several months. On the other hand, freelancing part-time, with a job to fall back on, gives you the time to develop your skills and obtain a client base over time instead. Plus, this is without requiring experience and savings from the start.

What is your level of commitment?
Part-time freelancing allows you to test the waters and see if it suits you in case there are any doubts. Freelancing full-time requires a serious commitment and a realization that you may have to get through financially lean times early in your career.

How much time can you afford?
Working a full-time job and freelancing on the side takes a serious toll on your time and can be difficult, especially if you have kids. Making the jump full-time to freelancing or possibly cutting back your regular job hours may be needed for you to continue.

Your Homework For Today

You may have already made up your mind about freelancing full-time or part-time. If you are still undecided, though, now is the time to weigh your options and decide. Each has it’s own benefits and drawbacks but there should be one that clearly suits you better.

For more insight and tips to help you get a better feel of full-time and part-time freelancing, check out the following resources:

Freelance In 40 Days: Introduction/Table of Contents

Posted: August 21st, 2009

For a little while now, I’ve been planning on doing a series of tutorials on the ins and outs of freelancing. The problem is where do you start? It made perfect sense to start from the beginning and continue in a natural progression, a la just make a big goddamn tutorial.

I have to give credit to ProBlogger after completing their brilliant 31 Days to Build a Better Blog and Skellie’s awesome post on 30 Days to Be a Freelancer for helping me get the ball rolling on this. For the record, there is no intention of taking Skellie’s post and “sprucing it up” but rather use the daily format which, in my opinion, makes for a better tutorial. I’m adding ten days more anyway so nyeh.

Setting aside one day to learn a subject, then doing a small specific task eventually adds up to getting a lot done after forty days. Freelancing can be overwhelming at the start but taking it day by day and task by task can get you a real jump on your career before you know it. I’ll even give you the weekends off so you can Twitter and drink beer or be a good student and catch up on the tasks assigned to you.

Table of Contents:

The Week In Freelance: August 17th

Posted: August 20th, 2009

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