Hands up if you like to see your bank account growing?! 🙋♀️
Rule Number Four in “The 12 Rules of Freelance Writing” is all about the money! Very exciting stuff.
Guess what? As a freelance writer running your own business, you are now responsible for all the bookkeeping and financial side of things. No handy HR department making sure your pay is deposited into your account on a regular basis! It’s all on you.
Show me the money!
I sincerely hope you just did your best Jerry Maguire impersonation there! (I certainly did)!
There are several things you need to do in order to set up the financial side of your freelance writing business.
The first (and one of the most important) steps is to set your rates.
How to set your rates as a freelance writer.
The number one thing to work out here is how you will charge for your services. There are several different ways to charge:
- Per project.
- Word count.
- Set packages or packages tailored to your client.
Personally, I use the per project and the package models the most often. This is because it leaves no room for surprises. If you take a thorough creative brief and know EXACTLY what your client wants, you should be able to provide a quote for the whole project. If you charge hourly, the client may not have a great understanding about how much time it takes to actually finish a project. They may expect you to finish in 5 hours something that usually takes 10. This can cause pay disputes, and we want to avoid that!
Once you have decided HOW you will charge, you need to work out WHAT to charge.
After a lot of research, and asking around, I simply took on a piece of advice by Valerie Khoo at the Australian Writers Centre – charge what you are happy to receive!
A general rule of thumb is to use your normal hourly rate (from your previous or current employment) and add 25%. Why add this extra percentage? Because you are the boss! You need to cover all business expenses, superannuation and tax payments.
So there is an hourly rate…how can you apply that to per project or package rates?
Simple. Work out how long it takes you to write a 500-word blog post or product description and use this to calculate a per-project or package fee.
I earn $40/hr in my usual job. 25% of $40 = $10.
Therefore I would charge $50/hr.
A blog post of 500 words may take 1.5 hours. Therefore you would charge $75 for the project.
This is just an example! Real numbers will vary according to your expertise (as you become more adept and have more clients under your belt you can charge more), turnaround time (I charge more for a quick turnaround) and what you are happy to receive.
My one piece of advice…and I want you to remember this one no matter what….VALUE YOURSELF! Do not settle for being paid peanuts. The reason you wish to be a freelancer and balance parenthood is to contribute to the family finances and still be present as a parent. You cannot do this if you have to take on more and more projects at a lesser rate than you are worth simply to make ends meet. VALUE YOURSELF, YOUR TIME AND YOUR WORK!
Invest in a good invoicing system.
So, you have set your rates as a freelance writer. What next?
Now you need to create a way of sending and tracking invoices, as well as income and businesses expenses.
I used to use a simple excel spreadsheet and an invoice I designed myself in Word. Don’t be like me.
Invest in a proper invoicing system.
I now use Rounded. An Australian online accounting software program that is tailored to freelancers and sole traders. It is exactly what I was looking for! Rounded is simple to use and fantastic for tracking income and expenses. It even has time tracking!
If you are an Australian reading this…I highly recommend Rounded!
Be clear about payment expectations.
One of the most frustrating things about being a freelancer is chasing payments. When I first started out, I felt like I spent 50% of my time chasing up clients for payment. And then I got clear about payment expectations. This had a two-fold effect.
Firstly, it meant any client who was in the slightest bit dodgy was weeded out.
Secondly, I started being paid on time with the right amount!
What did I change?
I started charging an up-front fee for most projects. If it were a client I had worked with previously I accepted full payment at the completion of the project. However, any new client I onboard I ask for a deposit before I start the project.
I also incorporated late fees into my payment structure. I would add a 5% late fee commencing 7 days after failure to pay and accruing for every 7 days the invoice remained unpaid.
But the most important thing that I changed was I became CLEAR ABOUT PAYMENT EXPECTATIONS!
- How to pay (bank transfer, PayPal).
- When to pay – such as 7 days from receipt of invoice or a set date on each month depending on how you packaged your services.
- Up front fees.
- And of course, late fees.
Be sure that your client understands these details so that there is no misunderstanding and you get paid what you invoiced and on time!
How to set up your banking.
Some people will say to use a business account, some say pay into your personal account. What matters is that you are able to track where your money is coming from and what you are spending it on.
I have a personal account that I use, but NO other money goes into it. This is just for my freelance writing business. Rounded has a nifty feature where you can link your bank account to their invoicing software which helps to keep track of your money.
From this account, I set aside a certain amount for taxes and pay some into my superannuation. The rest I use to pay myself a “wage” into our combined household account and the leftovers sit in that account to cover business expenses. Nice and simple!
What about taxes?
I am not an accountant or tax agent…so for in-depth tax advice for your business you are best to talk to a small business accountant.
In Australia our tax requirements (such as BAS, GST etcetera) will be different than overseas, so again you need to research the requirements of your particular area. The ATO is a great source of information and can help guide you to set up the appropriate payments and tax.
The best advice I can give you in regards to tax is:
- Always check your local tax requirements.
- Set aside a certain percentage from each payment received by clients to put toward tax.
- Keep clear and accurate financial records for all income and expenses – both on your computer and hard copy.
How to set financial goals for your freelance writing business.
Giving yourself something to work towards is a great motivator.
However, be sure to set SMART goals.
S – Specific.
M – Measurable.
A – Achievable.
R – Realistic.
T – Time-bound.
In particular, for work-at-home-parents, you need to be REALISTIC. If you can only work 10 hours a week at freelance writing, don’t set a goal of earning a full-time wage from the very beginning. It is a larger goal you can work towards as you gain more experience so therefore can charge more. Or as your children grow and are easier to work around.
The very first financial goal I set was to be able to drop one shift a week from my usual nursing job in 6 months of starting my business. That means I had to earn the equivalent of one nursing shift a week (or 4 per month). It may not sound like much, but to begin with, it was difficult. I was working around a newborn and trying to learn at the same time.
What would your “SMART” financial goal be?
Your freelance writing business financial checklist:
- Set your rates.
- Invest in invoicing software.
- Set out your payment expectations.
- Set up your banking (including a Paypal account).
- Research tax requirements.
- Set your financial goals.