March 24, 2019

What are some resources for managing freelancing finances?

Matt Wojtowicz @MWoj

Any suggestions for places to get business information in general. Looking to set up separate bank accounts for my freelancing gigs. I was wondering if anyone had suggestions. Books,Blogs, SaaS

  • Bank reviews
  • Invoicing services
  • How to manage money in the company (paying myself, where to save emergency funds)

My googling has only turned up generic content that almost seems auto-generated.

  1. 2

    Been freelancing over 12 years and I may be pretty relaxed by now but...

    • set up a separate bank (don't need to be a business account). I used Simple Bank as it has a high yield savings account at 2%.

    • use the simplest invoice software. This is a rabbit hole that ends up wasting time if you keep looking. Your client don't care about your software, just make it as easy for them as possible. The two main features is tracking that they opened it, auto nagging so it will send again if they haven't paid and having all pay options.

    • I set up an auto pay from my Simple bank account to my daily spending. It's no magic number. Just keep in mind you want to have a 6 month runway at minimal. I'm working freelance-like salary job at the moment so I don't pay myself anything from my freelancing on the side.

    Hope this helps, feel free to reach out if you want to chat more.

  2. 2

    I've been freelancing for several years now. Here's an overview to my setup:

    • My business is simply a dba with pass-thru taxes (I'm in Oregon). LLC with S-Corp is only really a tax advantage if you do the majority of your revenue with a SaaS.
    • I use and absolutely love Harvest for time-tracking, invoicing, and keeping tracking of expenses. It's good enough for bookkeeping that I can simply send expense category summaries to my accountant when we need to calculate taxes.
    • One key lesson I learned the hard way is to keep my personal and business finances separate. I have business checking and savings accounts with my local credit union. To keep things simple, I set aside 50% of my monthly revenue towards taxes and SEP-IRA contributions. Any excess of this set-aside is a fun bonus after I've actually paid my taxes.

    Happy to take any specific questions you might have, either here or via email.

  3. 2
    • I use Xero, I love the simplicity and receipt scanning app for my phone. I hoard receipts and scan them in downtime like long train journeys.
    • Just a tip for any invoicing system - it's worth changing the automated invoice order numbers so they're not counting. If a client receives "invoice no. 2" it looks like you don't have a lot of experience. I personally make the invoice number the date I'm writing the invoice, e.g. "Invoice 25032019"
    • My personal rule is to always, always immediately transfer the right amount of an invoice payment into a separate bank account to cover tax. I've been stung with this before! Your tax rules will be dependent on the country you're living in so worth checking it out. If you're in the UK, be warned that the first year you move to being a sole trader, you pay 12 months retrospective tax and also 6 months tax in advance. This completely surprised me!! If in doubt, get some tax advice. A great way to do this is to find a small business tax accountant and ask them if you can have a chat with a view to working with them. I've got a lot of free advice this way, and then refer a lot of clients to the tax accountant afterwards if they're good to make up for not paying them myself... (sorry tax accountants)
    • I personally choose to have critical illness insurance. If you don't have a company that can pay sick pay, in my opinion this is worth having

    I've never seen evidence that being a limited company is worthwhile from a tax perspective, and have been told by two tax accountants that there wouldn't be a saving. I have other friends who have set up limited companies rather than being a sole trader and claim to have saved loads on tax. Anyone have a view on this one?

    Do you have any more specific questions?

  4. 2
    1. Bank: You can use yours, just open up a diff. account
    2. Freshbooks (ACH, credit card payments, email invoicing, stripe integration, bank integration to get paid automatically, late invoice reminders)
    3. Don't spend anything you don't have to. Pay yourself the bare minimum required for living. There is no need to complicate this.

    Anything else?

  5. 1

    Sounds great! I have difficulty in management as a freelance.