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How to Survive Financially in The Freelance World

20-01-2016, 19:21

How to Survive Financially in The Freelance World

Working freelance can be immensely rewarding but it can also be a tough environment in which to make your way in business. Freelance developers may well have the technical skills needed to set up bespoke websites for clients or lead "non-techies" through the likes of Wordpress. It's not that "non-techies" couldn't work out how to do things for themselves (after all, they've had the nous to set up a business) but it's the time and effort that takes if they haven't had previous experience of setting up a website.

A freelance developer may often have worked for agencies or start-ups before deciding to take the plunge into the freelance world. If that work has been successful and earned good money then it's certainly worth considering moving into setting up and running one's own business.

Before doing that, however, anyone deciding to take that ultimate control needs to set the business up properly and be aware of the essential things that need to be thought through and done, especially when it comes to the financial side.

Plan the business carefully

Developers may know their way around the tech world and worked for some good employers but may not have much experience of how the world of business – and in particularly the administrative aspects of it – really works. It means that good business planning to set out the business's mission and how it intends to achieve that is crucial. It doesn't have to be vast amounts of paper going into every detail but it does need to be clear and coherent so both the new freelance business owner and others who may be interested in backing the venture financially can get an instant overview. Poor planning may lead to the freelance venture not getting very far.

Organise the finances

It's easy to be consumed by a project or projects because that's what good developers do to ensure they provide a high quality service to their clients. It's also easy to let the financial side of things slide but it's essential to keep on top of the finances. After all, that's what pays the bills, the freelancer and any other workers contracted to help with a project.

If planned properly it's not as difficult as it may seem, so here are some areas to keep on top of.

  • Send out regular invoices: any business, whether a sole trader, a partnership or a limited company, needs a healthy cash flow. Without it, the business doesn't have much of a chance. That's why regular invoicing needs to be taken care off and should never be put off. Financial – and other admin can be a time-consuming hassle for developers up to their eyes in creative work, but there are simple ways to make dealing with the finances easier. For invoicing, instead of a developer spending the time and effort to design their own, use a simple invoice template that can easily be found online. Once completed for the particular job in hand, the completed invoice template can be emailed to the clients and terms and conditions can be stated. This can include any penalties for late payment – most businesses understand this – and can make a major impact on the business cash flow.

  • Business records: these are necessary to keep on top of how the business is doing financially so every document relating to the business, whether online or hard copy, must be kept. Business records are the evidence needed for a year-end tax return and if they are organised well they not only make the end-of-year return easier but also mean that it's unlikely that the tax authorities will come investigating. Business records include the business's income, outgoings and expenses as well as information about taxes liable and those paid. It's not wise to ignore this, as a business will only be storing up trouble down the line.

  • Get professional help: freelance developers are not, generally financial experts. In the same way that organisations need web development support so freelance developers often need financial support from someone else. It doesn't have to cost a fortune to employ a bookkeeper with wide-ranging experience or a small business accountant to monitor the day-to-day finances. They can spot problems, advise on a whole variety of issues and, crucially, free up the developer's time to devote to creativity.

Contract issues

Without a contract a developer is at the mercy of the client, and the client may be inclined not to be merciful. It's never a good plan to take on a project without a contract that is as cast-iron as possible, even if there has previously been a relationship between the developer and the client. Issues include:

  • Scope of Work: This defines what the developer will do for the client. It needs to be specific so the client knows exactly what to expect and the developer knows exactly what needs to be delivered, Grey areas can lead to problems so the contract needs to be detailed and clearly understood on both sides.

  • Issues of ownership: these can be complicated and to avoid potential difficulties relating to assignment of ownership or retention of ownership it's worth taking legal advice. It may cost a bit up front but could save a successful developer a lot of money in the future.

  • Changes to the brief: it's almost inevitable that a brief will change at some stage. The number of revisions a developer is prepared to do should be included in the contract and fee, and a cost given for additional ones. It should also be clear as to exactly what "revisions" really means.

  • Deadlines:deadlines often change, but if they disrupt the freelance developer's working pattern the client needs to be aware from the outset (in the contract) that delivery time is also subject to change.

Working as a freelance developer can be extremely rewarding but keeping on top of financial and other business administration means that the opportunities for success are considerably increased. 

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