2021 will be a challenging year for freelancers in many ways. But even if the economy declines, it's not all bad news. Just like during the global downturn of 2008, brands will turn to individual freelancers rather than more expensive, overhead-laden agencies. And so there'll be exciting new opportunities for independent contractors and small businesses.
In short, this could be the greatest year ever for your freelance practice, as long as you grasp the nettle. And an important part of that means getting a handle on your finances and maximising your potential earnings and income.
We've teamed up with online accounting software Xero, which helps freelancers automate and manage their finances, to bring you ten practical tips. Covering everything from raising your rates to getting paid promptly, this advice will put you on the right path for the year ahead.
1. Know your value
Many freelancers stick to the same rates for years on end. But that makes no sense because the longer you work, the better at your craft you'll become, so you should be charging more. Recognising this is the key to raising your rates confidently. This means that if existing clients baulk at the new rate, you're willing to walk away and find others.
As Ben Veal, founder and MD at Second Mountain Communications says, "Know your value and what your expertise is worth in the marketplace. Don't be afraid to turn down work if this value isn't appreciated by someone else."
2. Test the market
How do you know when to raise your rates? It's partly a question of trial and error. You'll only find out if clients will be willing to pay more if you ask them. Lakshmi Padmanaban, a copywriter for brands, says: "I've been following a thumb rule for raising my rates: if four back-to-back prospects agree to my rate without any negotiations, then it's time to raise it."
3. Sell your rate rise
When you're raising rates, put yourself in your client's shoes. If they're going to be shelling out more money, what are they getting in return?
Matt Lamont, director of Out of Place Studio, recommends that: "When raising rates, write more about your specific offering in the proposal. Talk about the process, milestones, strategy, benefits, etc. And always send a nice PDF proposal specifically targeted at them. Show you value the client, as much as they should value your time."
Designer and artist Sally Wanless adds: "I have found if clients want something quicker, that's a surefire way to increase the money you can charge them."
4. Control your costs
Of course, raising your rates is only one way to make money as a freelancer. Freelance video/audio producer Steve Folland suggests you also look at the other side of the balance sheet. "You can also make more money by checking your overheads, and making sure you're not wasting money on things you no longer need," he points out. "So keep a close eye on your expenses."
5. Anticipate payment obstacles
There's no point in getting your clients to agree to a higher rate if you're then crippled by cashflow because your invoices aren't being paid on time. Usually, this isn't done for malevolent reasons, but because of organisational inefficiencies. So get in front of that from the start, suggests illustrator Antony Hare.
"I open up a frank dialogue with the art director or project manager about the challenges of timely payment," he explains, "and inquire whether there are any steps I can take to make the process go more smoothly. Often delays in payment are related to logistics versus bad client behaviour."
6. Craft detailed invoices
It's easy to blame the client. But many invoices fail to get processed on time because important details are missing. "Make sure everything's correct and included on them so there's no way they can delay by querying," urges Steve Folland. "I also add a 'project lead' name so they can approach the person who hired me directly if there's a query."
7. Send invoices consistently
Just as important is the invoice itself is making sure you send them out in a timely matter. "A controversial view but many freelancers make things worse for themselves with invoices that lack detail and don't arrive at a consistent time," says Ben Taylor, founder of HomeWorkingClub, a portal for freelancers and remote workers.
PR expert Stacey L. Vaselaney agrees. "Be consistent when sending out invoices - don't be late in sending them out," she stresses. "I bill on the first of every month for services rendered in the preceding month."
8. Automate your finances
We all tell ourselves we're going to keep on top of invoicing, but life gets in the way. And when you're overwhelmed by freelance work itself, staying on top of the money side often takes a back seat. That's why the overwhelming majority of freelancers use online accounting software to take away the stress and ensure that nothing important gets missed. It helps if that accounting software integrates with the other apps you use too.
"We have clients sign up to Go Cardless, which is integrated with Xero," says Penni Pickering of Kabo Creative. "We send automatic monthly recurring invoices from Xero, Go Cardless takes the money on the due date. No late payers."
9. Incentivise upfront payment
Many freelancers avoid problems with late payment by charging part or all of the payments upfront. But if you're not yet confident to insist on this, perhaps give clients an incentive to choose this voluntarily. Jewellery copywriter/consultant Siobhan Maher offers an example to follow. "I've bundled my key services into pre-paid 'packages' on my website," she explains. "I did this to be more accessible for designers, but it also means I get paid upfront. For services outside of this, it's always 50% upfront and no more than 14-day terms."
10. Charge late fees
Almost every creative we asked believes that you should charge client late fees for untimely payments, and make this clear in your initial invoice. "This should incur interest the longer it goes unpaid," explains artist and graphic designer Michael Christophersson. "I always maintain that if a client gives you a deadline for delivery, you can insist the same for payment. It can also be a good idea to withhold the master version of work until you get that payment."
Try Xero for free!
Online accounting software Xero is great value starting from just £10 a month. And you can try it out for free for 30 days, with no commitment required – not even a credit card! This simple and intuitive software is changing the way creative freelancers organise their finances, so don't miss out. Sign up for a 30-day free trial here.