So, you’ve finally taken the plunge and decided to go it alone as a freelancer. You’ve landed a client or two, and you’re hard at work putting your talents to good use. When the job is done there’s only one thing left to do: it’s time to get paid.
This can be the difficult part for many first-time freelancers who are used to the simplicity of having a paycheque deposited into their bank each month without having to hassle for it. As a freelancer you need to know how to create a professional invoice, advocate for yourself if you’re not being paid on time and how to account for deductions such as taxes and pensions.
Setting a rate
It can be difficult to set a rate for payment, but with a few simple calculations and a bit of research it becomes a lot easier. Start by considering the overall annual salary that you are aiming for. Plug this into an online salary calculator to get an hourly rate and a day rate.
Whatever number it gives you, add an additional 50% to account for things like taxes and pensions payments (some people even suggest doubling it). Voila: you have your rate. It’s worth quickly looking online to check that the amount you’re considering is in line with what other similar freelancers charge.
Taking about pay
When bringing a new client on board, it’s always worth having an upfront conversation about how their payment processes work and when you would expect payment after a job. You can keep it informal and light, but having the conversation early on will avoid nasty surprises later.
Sending an invoice
Your client wants to know that they’re working with a professional. Having a smart and practical invoice template will help to give the right overall impression and secure you repeat work. You can create your own invoice template pretty easily, using software such MS Word. Here’s what to include:
- A header with your logo if you have one
- Your full name or company name at the top
- Your address
- An invoice number and the date
- The total cost
- Details of how you would like to be paid and bank details
- Payment terms – such as a payment deadline
- VAT number if relevant
Then it’s just a case of sending the invoice on to your contact at the company. For more prolific freelancers with several different clients, it may be worth using a service such as Xero to manage this for you.
Chasing payment
Your can politely chase a payment by sending a reminder email, simply restating the payment terms and asking your client to confirm that they have received the invoice.
It’s worth setting yourself some general rules as to how quickly and how often you will send these emails. You can even create a template to use. This helps to keep emotion out of the process.
Tax and pensions
These topics could be separate guides in their own right, but within the context of getting paid the key thing to remember is that you’ll need to set aside some money for taxes and, ideally, start paying into a private pension. The government’s ready reckoner can help you calculate your tax obligations, so you can determine how much to set aside each month.
For a pension, the general rule of thumb is to take the age at which you’ve started your pension and half it to get a contribution rate. So if you’re thirty years old and just starting to build up your pension, you should try and set aside 15% of your salary.