How to Avoid Rework Across All Your Business Activities

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Categories: Accounting, Business, Freelancing

Avoiding Rework and Stress

Freelancing is a rewarding yet challenging job.  You are in control of your time and processes.  You are also responsible for sales, marketing, accounting and invoicing.  When you’re responsible for everything, it can be difficult to do things correctly and efficiently when deadlines are looming.

Speaking from personal experience, getting sloppy with your processes and work can be a slippery slope you want to avoid. It will come back to you at some point.

If you’re a developer, poor or rushed coding can lead to bugs, rework and/or make updates time consuming and frustrating.  If you’re a designer, not properly laying out your workspaces correctly can make future updates difficult without a lot of rework.

Before you start any project, take the time to get everything in order.

  1. Get the project setup in your time tracking, invoice and project management applications if you use them.
  2. Get your project files setup and organized correctly.
  3. Outline all the steps necessary to complete the project before you start.
  4. Create a schedule of when you’ll work on the project.

Having a game plan in place before you start will keep you organized and allow you to work efficiently.  If you’re not rushing to complete a project, you can take the time necessary to do the work correctly and completely.

The same can be said for all the non-billable work you must do like invoicing, marketing, etc. Setting time aside each week for these activities will help you stay on top of things because even the little things can add up quickly.

Running your own freelance business is has many ups and downs.  Find a process that works best for you and stick with it. Don’t complicate things by being disorganized and rushed, it can lead to rework or work you can’t reuse on future projects.

This topic was taken for our free 101 Simple Freelancing Tips download. If you haven’t already downloaded it, get our copy today.

 

Managing the Ups and Downs of Your Freelance Finance

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Categories: Accounting, Business

Managing the ups and downs of your freelance finance

Managing the ups and downs of your freelance finance can be challenging since most of us don’t receive regularly scheduled payments from our customers. Typically, we start a project with a deposit and do not get paid until the project is completed. This in itself is a challenge for some since projects can go on hold or linger which puts a lot of time between the deposit and payment for remaining balances. This creates a lull in our payment cycle and can cause us to come up short some months depending on how many hours you have out in a project. There are a few things that we can do systematically that can help reduce these highs and lows to level off our payment cycles. Some are easier than others and do take practice to develop good practices.

Project deposits

Project deposits help kickstart our money flow and help get projects off on the right foot. Starting a project off with a 30-50% deposit can quickly put us back on track when we’re experiencing an unusually slow month. The bigger our projects are the bigger our deposits are. I outline the payment requirements in my proposals using Bidsketch, then invoice as soon as I have sign off with Blinksale. For me, a 50% deposit has proven to work well for both myself and my customers. This creates an income boost for me and allows my customers to become invested in the projects. Once the project is complete I’ll bill the remaining balance.

Getting paid

At times customers will take their time submitting payment which can cause money flow problems as well. I typically give my clients 15-30 days to pay invoices depending on whether it’s an initial down payment or a final down payment. If the customer is in a hurry, I’ll ask for payment due upon receipt to speed projects up. When a customer is late on a payment I follow up immediately. I don’t wait a few days with hopes that they pay. I follow up the day after their late to show them that I’m paying attention. Giving them those extra days after the invoice is due says that you may not be paying attention or may not be following your own policies. Following up on invoices promptly reduces the amount of days you’re going to wait to get paid.

Retainer agreements

All of us remember the days when we had regular full time jobs and our checks came every pay cycle no matter what. Retainer agreements are about as close as we can come to this as a freelancer. Retainer agreements are harder to find but are an excellent way to balance our monthly cash flow. They’re typically for a set amount of hours and pay each month, which provides us with a set amount we can depend on. If you don’t currently have a retainer agreement, look at your current customer list to see if any of them are good candidates. Typically a good candidate would be a customer your working a good amount of hours for each month rather than one-off projects. This offers a more predictable amount your customers can budget for and helps smooth out your monthly income.

Forecasting

Nothing is more valuable than planning your finances ahead of time. This requires knowing, down to the penny, your monthly expenses so you know where you stand. If you’ve had an usually busy month, you may find yourself in good shape financially for months to come due to having the extra hours to bill. On the other hand, you may come up short with an unusually slow month which means you should probably start following up with past clients to drum up opportunities for work or you may want to shift your efforts over to marketing to get the work coming in a again. Looking ahead 2-3 months at a time will tell you where you need to spend your efforts. A good tip for marketing though, don’t wait until the last minute. Have a regular marketing plan in place that allows you to stay in touch with past clients and prospects.

Saving

Of all of my tips, I’d say this is probably the most challenging for some. A good method is to have a set amount of savings you’re comfortable with and shoot for that goal. Is it $5,000, $10,000, or maybe more? Whatever the amount, work toward banking that amount over time. Having saved this amount will give you peace of mind that you can cover a gap of slow time, which WILL come eventually if you’re a serious freelancer. You may hover above or below you goal, but try to bank it and leave it. Create a separate account if it helps you separate it from accounts you spend from.

Managing cash flow is always a big topic for freelancers. It’s a challenge for all of us, but an issue worth conquering for the opportunity to be a freelancer. This is how any business runs and we shouldn’t treat our freelance businesses any differently. Money comes in and goes out and some months are leaner than others. This is the nature of our work and we must embrace the change to be successfully long term.

This topic was taken for our free 101 Simple Freelancing Tips download. If you haven’t already downloaded it, get our copy today.

Managing Scope Creep

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Categories: Accounting, Business, Freelancing

Managing Scope Creep

Managing scope creep on any project can be challenging.  It can happen on both sides.  Many clients push the boundaries of the contract and/or ask for things that seem simple and quick to implement.  Our the other side, you want the client to be happy and/or want to try something new to learn additional skills.  Regardless of the reasons, letting project scope go beyond what is outlined in the contract will impact your profit margin.

Pushing the Boundaries of the Contract

When a client asks for something beyond what was outlined in the contract, you should consider these four things.

  1. Would the request be simple or complex to implement?
  2. Is the client easy to work with?
  3. What type of long term relationship do you want with the client?
  4. Did you miss something important in the contact?

I’ll be honest, if the client is easy to work with and reasonable with their requests, I will jump through a few hoops to get it done. If that same clients starts asking for more and more work though, I’ll let them know what the extra work will costs.  If they push back, I can reference the earlier “free” work I already did.

If the work is more complex and would take more than a few hours, I’ll go back to the client with an estimate for the extra work.

If the client has been difficult to work with, doing extra work on any level could lead to more and more requests.

I  try to consider what type of long term relationship I want with the client before making any decisions.  Doing free work sets a precedent. Charging for every little request sets one as well. Finding the perfect middle ground will be different for every client and every project.

Every so often, I miss something in the contract.  Sometimes there are things we talked about that didn’t make it into the contract.  Other times, I didn’t account for a key piece of the project in the contract. Either way, I do the work.  It isn’t the client’s fault I missed it in the contract.

Learning New Skills

Sometimes, I’ll spend extra time to try new things are beyond the scope of the contract.  I rarely share this with the client though.

A Slippery Slope

Once you start doing extra work for free, you open the door to more and more requests. In most cases, it is best to stick to the contract.  There will be times when it is in your best interests to let things “slide”. When those times arrive, consider the four items outlined above.

This topic was taken for our free 101 Simple Freelancing Tips download.  If you haven’t already downloaded it, get our copy today.

Getting Payment Before Starting a Project

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Categories: Accounting, Business, Freelancing

Getting Payment Up-front

I’m always reading stories of people not getting paid for their work. When you’re just starting out on your own, this can really hurt you mentally and financially.  The solution is fairly simple though. You should always have a contract and some up-front payment before you start a project.  In some cases, an up-front payment is more important than a contract.  A contract is vital, but nothing says commitment more than money.

Typically, the initial payment is somewhere between 25% to 50% of the total project investment.  What I expect is based on total investment amount and the time it will take to complete the work.  For large projects, I break the payment into thirds or fourths.  For smaller projects, it is 50%.

I learned the importance of contracts and up-front payments the hard way a few times early in my career.  Unfortunately, I was burned by this recently as well…

When a client is ready and willing to write you a check to get started, you know you’re working with somebody that understands business, understands the value of your time and wants the work to get completed.  If the client isn’t ready or unwilling to write a check (or swipe their card), you should be questioning their commitment to the project.  On a few occasions early in my career, I either needed the work and/or was so excited to get started I didn’t ask for an up-front payment.  I got burned when the client backed out of the project.

I was also burned by this recently when I didn’t prepare a contract or ask for up-front money from a long standing client.  I wrongly assumed that our past relationship combined with the small value of the project negated the need for a contract and up-front payment.  Things didn’t work out and I was out the entire project amount.  Besides my obvious mistakes, I learned that when the client has nothing to loose, they are much less willing to work with you when disagreements occur.

Having a contract in place is great if you’re willing and able to get a lawyer to enforce it.  Having money in the bank is even better.

It doesn’t matter who the client is, how big the project is or how much you need/want the work, get a signed contact and more importantly, an up-front payment before you start.  Besides saving you a few headaches, it tells the client you’re a professional and take your business and their business seriously.

This topic was taken for our free 101 Simple Freelancing Tips download.  If you haven’t already downloaded it, get our copy today.

The Importance of Tracking Your Time

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Categories: Accounting, Business, Freelancing, Web Apps

The Importance of Time Tracking

Today I’m going to talk about the importance of tracking your time.

If your in business to make money, you need to know how long it takes to perform all your tasks.  That could be how long it takes to reconcile your monthly income and expenses to how long it takes you to design a logo.  If it takes you twice as long to complete a task, you just lost money.  It doesn’t matter whether that is a billable task or not.  The more time it takes to complete non-billable tasks reduces the time you can spend on billable work.

Dennis and I both use time tracking apps to monitor how we spend our work hours.  It can be an eye opener to see just how long it takes to complete tasks.  If you’re finding a wide variation for the same task over time, it could indicate that you’re getting distracted and maybe need to turn off Twitter or the background music.

For billable work, knowing how long it takes to complete individual tasks and the entire project enables you to create accurate quotes.  If you don’t know, you could end up spending twice as much time as you estimated.  If you’re doing a fixed price project, you just cut your margin in half.  If you’re doing hourly work, you’re going to have one very unhappy client.

There are a ton of time tracking applications (both software and web-based) out there.  I use a web-based solution called Harvest. It has both time tracking and invoicing, so I’m getting two apps in one.  I’ve been very happy with it but I know there are many other great solutions out there, so find one and start tracking your time today.

This topic was taken for our free 101 Simple Freelancing Tips download.  If you haven’t already downloaded it, get our copy today.

How Secure is Tallisto?

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Categories: Accounting, Features, Web Apps

Tallisto Security

When we built Tallisto, security was our primary concern.  We wanted you to feel confident that your private information was never at risk with Tallisto.  To achieve this, we did something different than most, if not all, accounting web applications do. We do not ask for any financial information, not your bank account and routing numbers, not your credit card numbers, not even your banking username and password.

In our minds, the best security is not wanting, asking or storing your most private information, your financial information.

With all the privacy and security concerns with online data and hackers able to breach some of the biggest companies around, should you really trust any online application with your financial information?

We’ve looked through the “Terms of Use” statements for a number of the big web based accounting applications. Here are a few samples, each from a different service provider:

“For all purposes hereof, You hereby grant XXXX and XXXX a limited power of attorney, and You hereby appoint XXXX and XXXX as Your true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for You and in Your name, place and stead, in any and all capacities…”

“By using the Service, you expressly authorize XXXX to access your Account Information maintained by identified third parties, on your behalf as your agent. When you use the “Add Accounts” feature of the Service, you will be directly connected to the website for the third party you have identified. XXXX will submit information including usernames and passwords that you provide to log you into the site. You hereby authorize and permit XXXX to use and store information submitted by you to the Service (such as account passwords and user names) to accomplish the foregoing and to configure the Service so that it is compatible with the third party sites for which you submit your information. For purposes of this Agreement and solely to provide the Account Information to you as part of the Service, you grant XXXX a limited power of attorney, and appoint XXXX as your attorney-in-fact and agent, to access third party sites, retrieve and use your information with the full power and authority to do and perform each thing necessary in connection with such activities, as you could do in person. YOU ACKNOWLEDGE AND AGREE THAT WHEN XXXX IS ACCESSING AND RETRIEVING ACCOUNT INFORMATION FROM THIRD PARTY SITES, XXXX IS ACTING AS YOUR AGENT, AND NOT AS THE AGENT OF OR ON BEHALF OF THE THIRD PARTY.”, 

You’re granting them a “limited power of attorney”.

“However, no system is perfectly secure or reliable, the Internet is an inherently insecure medium, and the reliability of hosting services, Internet intermediaries, your Internet service provider, and other service providers cannot be assured. When you use XXXX, you accept these risks, and the responsibility for choosing to use a technology that does not provide perfect security or reliability.”

The internet is “an inherently insecure medium”.  This from a company that you’re giving your most sensitive and private information to.

Online security is a huge issue. We chose to build a tool that steered clear of that, for our sake and yours.

Quick Tax Primer for Freelancers

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Categories: Accounting, Taxes

Freelancing Tax Preparation

If you’re new to freelancing, there are a few key tax items you need to know about (assuming you’re based in the U.S.).  This is by no means a complete list, but these are the basics.

Do not commingle personal and business income and expenses

If you commingle income and expenses, you can bring business liability into your personal life by piercing the corporate veil. Beyond this, commingling business and personal items can present tax complications if you ever get audited.

To avoid this,  get separate banking accounts for your business.

Keep detail records of all income and expenses

Keeping detailed records will save many headaches when it comes to paying your quarterly taxes and filing your yearly tax return.  Using time tracking/invoicing apps like Harvest or Blinksale will help on the income side of things.  Using an accounting app (Hint – Tallisto) will help with tracking income and expenses as well as generating income statement and income and expense breakdown reports.  Beyond recording all your transactions, you should save receipts for all expenses and any other documentation that supports your income and expenses.

Pay Estimated Quarterly Taxes

Four times a year, you’re expected to pay estimated quarterly taxes for both state and federal.  Besides the government wanting your tax dollars, it also saves you from a big tax bill (and potential penalties) at the end of each year.

File a Schedule C of the IRS form 1040

You must complete Schedule C of the IRS form 1040 to report your business income and expenses. If you outsource work to sub-contractors, report their income using the 1099 tax form.

If you’re just starting out on your own or not doing all of the following, spend an hour on Google and research these 4 items.  Hopefully you’ll never face any legal or tax problems with your business, but if you do, you’ll be prepared.

DISCLAIMER: The advice and recommendations presented here should not be considered an authority for any legal or tax matter.  If you have questions, you should consult with your lawyer and/or accountant.