Financial and business responsibilities for freelancers
As a small business owner and freelancer, your finances and duties will look different than a full-time employee's.
Freelancing in the U.S. is on the rise. As of October 2015, more than 53 million Americans were earning income from freelance work — that's about a third of the American workforce.1 The number of freelancers has increased in creative fields like writing and design, as well as a few surprising industries, like software development, accounting, education, and training.2
Many people take the freelancing route for the same reason that entrepreneurs start their own business: to be their own boss. And as a boss, you're in charge of managing your finances and your time. Here are four duties you can't forget.
Create business systems
Develop business systems that record how you work: the processes you follow, the tools you use, and the rules you set. You can even create systems unique to your long-, mid-, and short-term goals. Write down the types of projects you want to complete and all the steps involved from start to finish, with estimated completion times. Create checklists as a way to track your projects and deadlines. Finally, invest in the tools you need to stay current with prevailing technology.
Creating systems will help you maintain quality control, increase profits, and minimize mistakes by ensuring you keep an eye on all your tasks.
Determine strategies for marketing your services
Create a strategy to find opportunities, and implement it conservatively. To begin achieving your goals:
Identify a few organizations that you want to connect with.
Build a relationship by reaching out daily to someone at the organization.
Aim to find a compatible business with which you can seek work.
Consider investing in an outside sales or marketing professional.
Do something every day so that marketing your services becomes a habit.
Establish your pricing structure
Among other things, the amount you can charge depends on your freelancing specialty, your experience, and the market. Here are some rate options:
Hourly rate: Calculate a reasonable hourly rate by dividing a fair salary by 2,000 hours or the number of billable hours you work. The federal government also has information on the statistical average hourly rate for your peers. Once you settle on an hourly rate, increase it to account for your overhead. Many professionals multiply the initial number by two or three.
Peer rates: If you want to charge what others charge, make sure to get rate information from more than just one source.
Project basis: If you have an efficient operation and a way to minimize your work beyond what was agreed, consider a project-based charge.
Your rate may also increase if your skills or experience justify a higher rate. And consider setting a baseline rate below which you do not accept work. Most importantly, don't be afraid to negotiate.
Track taxes and accounting
As a freelancer, you have to keep track of all the requirements for both your personal and business finances. This includes paying a self-employment tax and exchanging tax forms with your clients. Implement an accounting system to record expenses and revenues. You could hire an accountant or train yourself to handle your taxes and accounting.
To boost your freelance work, learn how to use social media to find new opportunities.
1"Freelancers in the U.S. workforce." Bureau of Labor Statistics. http://www.bls.gov/opub/mlr/2015/article/freelancers-in-the-us-workforce.htm
2"The Top 10 Industries For Freelancers." FastCompany. 2016. https://www.fastcompany.com/3058559/the-future-of-work/the-top-10-industries-for-freelancers