Home Productivity 5 tips to help you avoid freelancers’ typical money mistakes

5 tips to help you avoid freelancers’ typical money mistakes

by Bianca

As a freelancer, you alone are responsible for your income – make sure you earn enough to keep your one-person business afloat and don’t lose money by making these typical beginner’s mistakes.

1. Miscalculating the workload.

One of the trickiest tasks an aspiring freelancer can face: estimating how much time a project will take. Not wanting to seem slow or inefficient, you make a tight estimation for your client– that’s understandable. The problem is, the more hours you end up working, the lower your hourly rate drops. 

Often, new freelancers don’t just underestimate the time spent on delivering work, but they can also forget to factor in time for client feedback and revisions, which can add on to the total number of hours spent on a project.

If you accept projects that bring more work than anticipated, you will only end up selling below your price point.

Solution: Discuss the scope of the project and revision rounds in advance.

Before you accept a job, discuss the number of feedback and revision rounds. This will help you control the workload but also plan your work and other projects: after the agreed rounds of revision, the work is done.  

If the workload grows during the project or the client insists on more revisions, you can revisit pricing again. It might feel intimidating, you are in charge of your income and you can’t afford to be stuck in never-ending projects. 

2. Mixing business money with your personal funds.

Ever find yourself going through account statements wondering what was a private expense and what was related to your business at the end of the fiscal year? You’re not alone. 

Having a separate business account is not a legal requirement for freelancers, and so fearing large fees, many freelancers opt to use their personal bank account for business-related transactions. While this seems like a good way to save money, it makes keeping track of your business’s money difficult and bookkeeping arduous. 

Solution: Open a separate business account.

Getting a separate account for your business funds will make both you and your accountant happier. It saves time and energy, helps you avoid troubles related to bookkeeping or taxes and puts you in control of your business finances.

Here’s the good news: a business account doesn’t have to cost you a thing.. Go for an online banking provider and get an account to match your needs – digital banking for modern freelancers. 

With Holvi, your account can do so much more than just store your money. You can save your receipts, create and send invoices, prepare your bookkeeping or collect payments through an online payment portal. This helps you to save valuable time you can use to run your business instead.

3. Losing your business receipts.

You need to save every receipt that’s related to a business transaction; train rides, business lunches, a new laptop, software licenses – you name it. 

A missing receipt in bookkeeping is just money out the window. You need the receipt to prove that it’s a business purchase to be able to deduct it in your taxes.

Solution: save receipts instantly with your phone.

If a shoebox filled with crumpled receipts doesn’t sound appealing, you can do it the smart way and save the receipts in a digital format. You can do your bookkeeping fully online but the German law requires you to store the original receipts for 10 years, so don’t throw them away just yet.

From the bookkeeping perspective, the easiest solution is to take a picture of the receipt with your phone and save it digitally.  With Holvi, you get a mobile notification when you use your Holvi Business Prepaid Mastercard® and can instantly snap and save the receipt with the correct transaction.

4. You don’t understand VAT.

Value-added tax (VAT) is not a great mystery but can cause some confusion among freelancers. First, you should find out if you’re VAT liable or not. If you’re not, you can go ahead and skip this part.

If you are VAT liable, remember this: VAT is not your money. It simply flows through your account but it’s always the state’s money. The buyer pays the VAT and you just transfer it to the taxman.

You have to track both the taxes you’ve collected and the taxes you’ve paid. And the good part is that you can deduct the VAT of your business purchases from the collected VAT.

The problem is that keeping track of the VAT can seem complicated. This is why VAT causes some panic: Have I set aside enough money to pay the VAT? What if I make a costly mistake?

Solution: A smart account that keeps track of VAT for you.

The easiest way to keep track of your VAT and make sure you get the tax benefit of your purchases: a business account that does it for you. When you have all your transactions (both sales and purchases) in Holvi, you can get VAT reports straight from your account. 

5. You delay sending invoices.

With projects on WorkGenius, invoices are automatically created and sent out for each project you work on, so you don’t need to take care of any invoicing. 

Even if most of your work comes through WorkGenius, it’s likely you will sooner or later be hired for a project outside the platform; in these cases, it’s good to be prepared.

But let’s face it: no one likes sending invoices, which is why it’s so easy to put it off until the last minute. Obviously, you shouldn’t do this – If money’s not coming in, your cash flow suffers, and when that happens, paying your own bills becomes tricky, so you want to make sure you get paid for the work you’ve done, on time.

It can take a while to receive your money after you’ve sent the invoice. First, there’s the payment term which can be from 14 up to 60 days in B2B sales. Second, it’s very common for clients to miss the due date – some might even say right away that the invoice can’t be processes faster than than in 90 days.

After sending the invoice, another typical mistake is losing track of sent invoices and being unsure who had paid and who hasn’t. 

If you’re not properly tracking your invoices, you probably won’t be able to send a reminder on time, meaning your payment is even more delayed. And what suffers then? Your cash flow. In a freelancer’s case, that means your own income.

Solution: Make invoicing easy, and make it a routine. 

Make invoicing a routine. Choose a certain time of week when you bill your customers and stick to it. Before you know it, sending invoices is part of a smooth routine.

There are plenty of invoice templates and invoicing solutions out there, but what you should be looking for is a service that combines creating, sending and tracking the invoice. This makes the sending process easier but also helps you stay on top of the status of each invoice so you can send reminders to your customers on time. 

One such solution is Holvi where you can create, send and track your invoices. Better yet, Holvi does the tracking for you. At a glance, you can see which invoices are paid, which are unpaid and which are overdue, meaning you’re always on top of your cash flow.

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