I wish there had been a resource like Money & Mimosas when I first started my freelancing career to help me navigate the financial side of my business. You live and you learn, but if I had known what I know now I could have saved myself a lot of time, frustration and money. That’s why I’m sharing this with you so you can avoid some of the steps I took along my journey. When I chat with new freelancers, I hear them making choices that I know will cause major headaches for them in the future. Keep reading for the seven money mistakes new freelancers make.
Disorganized books. Keeping your finances in one place is super duper important as a freelancer. This is one area that many freelancers avoid, resulting in massive headaches in the future. I recommend using a digital bookkeeping program, but if you prefer old-school methods, Excel or a file cabinet could work as well. Whichever one you decide to use, keep all of your receipts, invoices and transactions organized in this one location. It will help you stay on top of your finances, make tax filing way easier and ultimately allow you to reach your financial goals with a lot more ease and grace. Click here for the five best accounting software programs for freelancers in 2020.
Not sending out invoices. It may seem crazy, but there are so many freelancers who do not send out timely invoices. When I was the Controller for a company, I managed the payments for freelancers and sometimes I would have to follow-up with our independent contractors asking them to bill us. Your clients will only pay you if you give them a way to pay you. If you have clients on retainer, schedule your invoices to auto-send within your bookkeeping program. If it is a one-time arrangement, be sure to send the invoice as soon as the project is wrapped.
Lack of contracts. This one is tough, because I totally understand the desire to get a project going without waiting for the formality of a contract. Some of my current engagements are simple agreements via email. While it may help for it to be more formalized, ultimately it works for me and the client(s). There are other clients where I have a very formal agreement in place. Whichever is the case, it is important to have something in writing to structure your agreement with your clients.
Not getting in touch with your client’s AP department. In most cases, your point of contact will not be the same person who pays you. I’ve learned this the hard way where I’ve had delayed payments because the right hand was not talking to the left hand. When you begin your engagement, ask your point of contact who will be the one administering your payment and be sure to gather their contact information. Usually this person is in the Accounts Payable department. I like to introduce myself to them and confirm when they run payments so I can be prepared.
Charging by the hour. While it is ok to occasionally charge by the hour, I would recommend making this the exception not the rule. Instead, charge a flat monthly rate. This allows you to more accurately manage your cash flow and it helps you avoid any potential issues with invoicing. For example, let’s say you were charging by the hour and one month the bill doubles because the workload took twice as long as the previous month. Your client may push back on the fee because they were not prepared for that cost. You can avoid these friction points by charging a healthy monthly fee that they will always be prepared to cover.
Paying high fees for payment processing. If you accept credit cards or PayPal as payment, there will be fees associated with it. The fee is 2.9% + $0.30, which can start to add up. To balance this, I ask my clients to set up my payments via ACH or Bill.com. There is no fee charged to you, allowing you to keep all of your hard-earned money.
Not investing in their money mindset. Practicing an abundant mindset is a daily effort. Whether it’s enrolling in financial education programs or reading books about money, it is imperative as a business owner that you invest time, money and energy into nurturing a healthy money mindset. You can start by subscribing to my weekly newsletter where I share even more insightful money tips.
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha. A former NFL cheerleader turned entrepreneur, she started blogging as a way to combine all of her passions into a career. Money & Mimosas is now enjoyed by tens of thousands of readers in over forty countries with the same dream of achieving financial freedom without living frugally.
