Matters of money and time
Speaking for myself, I think visually creative people don’t naturally have the knack for anything mathematical let alone managing bank reconciliations or confidently asking clients to pay according to the value of work.
We love what we do but at some point, if you are thinking of freelancing in a creative field it’s going to be necessary to adult effectively in terms of earning enough to eat and to maintain a roof overhead.
Get comfortable being uncomfortable.
Now, I’m going to list a whole pile of things that may seem like a blanket of information likely to smother that passionate entrepreneurial spirit that’s roaring but I’m here to tell you they’re all doable, oh and if you’re planning on running a business most of them are required by law. There are quite a few new skills you are about to learn on the road ahead but there are plenty of tools available to keep you supercharged and on track.
The setup
I know I am organised and have a head for logic and structure, I can do basic account keeping but I know it’s not my strongest skill and need the help of someone to check anything I do. In the early days when setting things up, I spoke to a book keeper that gave me a great checklist so I could set everything up in the right way from day one. This book keeper also gave me the contact details of a very helpful accountant where I can get answers on the big stuff.
Here’s some of the key things on the golden checklist*:
Set up an ABN (Australian Business Number) and/or an ACN (Australian Company Number). This is important. At this point you will need to know if you want to operate as a sole trader or a company. Do some research on the benefits of both and seek advice from your bookkeeper and accountant to see which suits you better. Also, find out if you need to register for GST, you must be registered for GST if your annual GST turnover is $AUD75,000 or more.
You will need to register your business name with ASIC, you will need this for domain name registration if you plan to activate a website for your business.
Set up an ATO Auskey, it’s the best way to lodge your quarterly BAS forms.
Set up a business bank account separate from your personal bank accounts, I also set up a second business account for tax and super.
Choose accounting software to manage your business finances. I use Xero accounting software, it’s user-friendly and the interface is logical for my visual brain. You will need to contact your bank about setting up bank feeds that link to your business bank accounts.
If you are freelancing full time you are now responsible for your own superannuation, talk to your accountant and work out a plan and then inform your super company before you make any lump payments.
Business insurance. To be totally honest I’d never even thought about this one, you will need business insurance for public liability, professional indemnity and possibly work cover in place.
Work out what you can claim deductions on. This might include costs associated with your car if you use it for business purposes including registration, insurance, fuel and parking costs. You should be able to claim office equipment and your mobile phone. If you own your own home, you can consider home office running costs which include a percentage of your electricity, home phone and water bills. Talk to your book keeper and once you have discussed your own situation they will let you know what you are able to deduct. Good news, the cost of your book keeper and accountant is also deductible.
Time is money
Yep it’s one of the biggest clichés of all time but there's usually a reason why clichés are clichés, they're just true. The management of time is something that can make or break any creative project. I have talked about the Photoshop time portal in a previous post and trust me it’s a thing. From a business perspective, we operate on the commodity of time and we need to be able to measure it. To spend 50 hours on a poster design when payment for it equates to one or two hundred dollars means you are going to have financial trouble at some point. So, it’s time to get practical, work out an hourly dollar rate for your work and start aiming towards balancing the equation of your client’s budget, time spent and what you are earning from each project.
I've worked in various design studios for a couple of decades now and every employee is responsible to account for time spent on each and every job. If I didn’t, the client would not be invoiced according to the time spent and my employer would not be paid sufficiently. How long can that last in any sized business?
When working for yourself, time is something that has the power to induce a cold sweat. My advice? Start valuing ALL of the time you have in a day, that includes working time AND down time. Put a value on the time you spend working, record all time spent on individual clients (even your own admin work) and you will soon find yourself being able to see a project from both a creative and a business perspective.
Unfortunately, the accounting software I use for my freelance business doesn’t come with the capability to track time, there is software that works as an add-on to Xero called Maxflow but for me, I didn’t want an additional subscription cost so early on so I hunted for alternatives. I found a great tool for tracking time, it’s called MyHours and the non pro version is free.
If you have other time and money management tools that you use that you know will be helpful to other freelance designers, make sure you leave a comment on this post. We'd all love to hear from you.
*The contents of this list are specific to Australia so if you’re not from OZ you should look up business requirements in your country.
Illustration © Julia Nielson 2017. First published Mar 15, 2017