a field guide to freelancer finances

8/17/2019 A Field Guide to Freelancer Finances

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PRACTICAL FINANCE TIPS FOR FREELANCERS BY

DESIGNERS, DEVELOPERS AND FREEAGENT

Get paid fasterLearn to price

Relax about tax

UNIVERSAL EDITION

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Table of contents

Using the break-even point to price

How I take the uncertainty out o ixed-price projects

My biggest pricing mistake

My best pricing tip

Creating a stormproo invoicing process

My invoicing terms

Credit control or reelancers

How I chase late payments

8

11

16

18

20

21

28

30

34

Anna Debenham

Daniel Howells

Field report

Field report

Anna Debenham

Field report

Matt Perkins

Field report

Welcome

A word from the editor

About the authors

Setting off

3

4

5

7

Building shelter

Table of contents



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Overcoming a ear o inances

Accounting reports and what they tell you

How to plan your cash low or holidays and long breaks

About FreeAgent

About A Field Guide to Freelancer Finances

37

43

46

50

51

Paul Boag

Reerence guide: Emily

Coltman, FCA

Paddy Donnelly

Keeping warm 36

Table of contents



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WelcomeWorking as a reelancer means that along with doing the work you love, you also need to

explore unamiliar territory, like balancing the books and dealing with tax. When I started

out as a reelancer, I ound mysel ighting with complicated spreadsheets and conusing

tax returns - it was easily the worst part o working or mysel. I thought there had to be a

better way, so my co-ounders Olly, Roan and I set out to build FreeAgent, sofware thathelps you manage your business inances and tax.

Here at FreeAgent, we want to help reelancers take control o their business inances.

Making great sofware is key to that, but we like to help in other ways too - that’s why we

wrote this guide.

In this guide you’ll ind practical tips and advice or managing your inances, reerence

guides and real lie stories rom other reelancers about what they’ve learned rom their

own journeys.

Sae travels!

Ed Molyneux CEO and co-ounder, FreeAgent

Welcome

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A word from the editorWelcome to the universal edition o A Field Guide to Freelancer Finances!

FreeAgent was started in the UK but we have happy customers all over the world, and

we’ve made this edition o the Field Guide or web designers and developers operating

outside o the UK.

Many o our examples are still rom the UK, and we’d love to continue updating this edition

with voices rom all around the world - i you want to add your own ield report to the

book or are interested in authoring a chapter, drop me an email at

[email protected]. I’d love to hear rom you!

Happy reading!

Danae Shell

Editor , A Field Guide to Freelancer Finances

A word from the editor

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About the authors

Anna DebenhamAnna is a reelance ront-end developer living and working in London.

She works with a range o clients to help build ront-end prototypes, style

guides and websites. In 2013, Anna was awarded net magazine’s Young

Developer o the Year.

Daniel Howells

Daniel is a web designer and developer who specialises in both websites

and applications. Daniel is the ounder o siteInspire, one o the largest

and most well-respected showcases o web design and a directory o

agencies and reelancers.

Emily Coltman, FCA

A graduate o the University o Cambridge, FreeAgent’s chie accountant

Emily has been working with small businesses since the year 2000 and is

passionate about helping their owners lose their ear o “the numbers”

and the taxman. She is the author o three ebooks, “Rereshingly Simple

Finance or Small Business”, “Micro Multinationals”, and “Very Awkward

Tax”.

Matt Perkins

Matt has worked with many small business owners and reelancers

at Business Link in London as an adviser and or PayPal UK, where he

planned and oversaw the implementation o their UK SME engagement

strategy.

Paddy Donnelly

Paddy is an Irish illustrator and designer currently living in Belgium. Hecreates apps or kids with Wee Taps and has worked with clients such as

dConstruct, Foursquare and Mobile Vikings.

Paul Boag

Paul is a user experience consultant, author and speaker. He helps not-

or-proits such as the European Commission, UCAS and Doctors Without

Borders adapt to the digital world. He reocuses them on user experience

and engaging with a new digitally-savvy audience.

About the authors

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://www.maban.co.uk/http://www.siteinspire.com/https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_try&utm_content=uni_v1_chapterauthors_articleauthors_footer_textphttp://www.weetaps.com/https://boagworld.com/boagworkshttps://boagworld.com/boagworkshttp://www.weetaps.com/https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_try&utm_content=uni_v1_chapterauthors_articleauthors_footer_textphttp://www.siteinspire.com/http://www.maban.co.uk/https://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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Setting off Pricing your work might eel as daunting as

setting off into the wild - you’ve heard plenty ostories about how others do it, but you’re not

sure how it’s really going to work or you.

In this section, you’ll ind some practical adviceto help you evaluate your approach to pricing.



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4,416m

LOFTY PEAK

SUMMIT

ABOVE SEA LEVEL

Using the break-even point

to price Anna Debenham

We all love the reedom that being reelance gives us. But at the end o the

day we also all need to make money. Being the best designer or developer in

the world sadly won’t help you i you can’t make enough money to survive,

which is why the igure called the “break-even point” is so important or

reelancers.

Your break-even point is the point at which your business is making enough revenue to

cover all your costs (without net loss or gain) and anything you make on top o this is

lovely, lovely proit. You’ll be able to send out quotes conident that you’re ensuring your

own inancial security and building up your business - the key to uture success! To get the

ball rolling, you need to work out the costs associated with your business over a year.

Step 1: Add up all your costs

These might be ixed costs (a cost that stays the same regardless o how many sales your

business makes, or how active it is), or example:




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• Rent/mortgage

• Subscriptions

• Web hosting or your own site

• Insurance

or they might be variable costs (changes with how many sales your business makes, or

how active it is), or example:

• Postage costs

• Taxi ares

• Web hosting or customer sites

• Electricity

Also look at your personal outgoings – how much do you need to take in each month to

pay all your bills? Don’t orget to include anything that will change as a result o beingreelance such as childcare costs, travel and any extra equipment like your own computer

and sofware.

Step 2: Plan your capacity for billable days

How many days do you think you’ll be working every year? Your true capacity is probably

lower than you think. Out o 365 days in a typical year there are 261 working days (Monday

to Friday) - but o course you’re not going to be spending 261 days working solidly.

Take into account public holidays and the number o days you want to take as holidays. As

a reelancer you can have a lot o lexibility around taking time off, but not working means

not earning money, so you need to consider all o this when iguring out your rate.

Also think about the days you need to set aside or maintaining and developing your

business. Invoicing, preparing accounts and tax all take time, as do inding and chasing

leads or new work, project management and correspondence. Tools like FreeAgent can

massively help with this, but don’t orget that in larger businesses this is a role in itsel, so

when you work or yoursel you need to actor in (and schedule) enough time towards this.

You can also allocate time towards your own learning and personal development. This

includes conerence attendance, and time spent reading and studying. I you don’t invest

time in improving yoursel then it will be much harder to stand out rom - or even keep up

with - the competition.

So, let’s say we subtract the ollowing rom your potential 261 working days per year:

Maintaining and developing business: 10% (26 days)

Learning and personal development: 5% (13 days)

Holidays and time off: 10% (26 days)


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Sickness and unoreseen circumstances: 5% (13 days)

= 183 available days to work per year

That means that, in this example, you are not able to charge or nearly hal o the 365 days‘available’ in the year.

Step 3: Calculate your break-even point

To calculate the break-even point on what you charge, divide the sum o your yearly

outgoings by your yearly billable days.

Example: How Jenny works out her break-even point daily rate

Jenny is a reelance web designer who wants to know the amount o money she

would need to charge per day to cover her costs.Total o her outgoings per year (including household expenses): €25,000

Total o her projected billable days per year (taking into weekends/holidays/

possible sick days, etc): 183

So Jenny divides her outgoings by her billable days:

€25,000/183 = €137 per day break-even point

Jenny now knows that she’ll need to be charging her clients at least €137 a day to

cover her costs.

Remember, your break-even point really is your bare minimum. Charging this amount

doesn’t leave any room to build up a cash buffer or to expand as a business, and doesn’t

take into account external actors like market conditions. It’s crucial you bear this number

in mind when you quote or work as you want to ensure that you’re being paid a healthy

amount over this so that your business is proitable and resilient.

Making a proit is key to a healthy business and knowing your break-even point will really

help you to eliminate guesswork when it comes to quoting or work – make sure you know

what you’re worth!

Anna Debenham is a reelance ront-end developer living and working in London. She works with

a range o clients to help build ront-end prototypes, style guides and websites. In 2013, she was

awarded net magazine’s Young Developer o the Year.




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How I take the uncertainty out

of fixed-price projectsDaniel Howells

Spend enough time with reelancers and you’re likely to hear warnings

against charging one total cost or a job. Fixed-price project proposals

can be easier to ‘sell’ and bring less risk to the client, but the reelancer

can ear ending up working or ree or weeks (or months) because o all

sorts o variables and unknowns. Yet despite this, afer almost a decade o

reelancing, the majority o projects I undertake are still quoted on a ixed-price basis.

Why do I do this? I quote a ixed price because I’ve been obsessively tracking my project

time or as long as I can remember, and it’s taught me a lot about how I work, how long

things really take, and how to produce a bang-on estimate that ensures I’m being paid

airly or my time.

Seeing the value of time tracking

Early in my career I worked at a variety o client-services companies. Without ail, everyFriday at 5pm somebody would appear rom nowhere and sheepishly remind us to

How I take the uncertainty out of fixed-price projects



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complete our timesheets. The request was always greeted with protestations, since trying

to remember what we’d done that week and wrangling their archaic time-tracking app

into submission was never a more exciting prospect than being in the pub or Friday night

drinks.

The issue was that these numbers never had any meaning to me. For the most part

they were plucked out o thin air, and never taught me anything about how I worked or

how I could improve. But the moment I transitioned into my reelance lie, there was a

difference: the numbers were relevant. The 30 minutes doing one thing or one client and

two hours doing something else or a different client suddenly made sense, and revealed

that I was either managing one project very well, or another one very poorly.

How I track my time

When I started reelancing, I broke my time down into a detailed list o tasks:

• Proposals and initial meetings

• Creative research

• Functional requirements and documentation

• Wireraming

• Design

• Front-end development

• Back-end development

• Amendments and maintenance

A detailed list, I know, and probably verging on the obsessive. However, this level o detail

was enough to give me visibility as to what I was actually doing on a project.

To measure my time, I simply used the stopwatch on my phone and logged it in an

invoicing app afer I inished each task. When I completed a project, I could see exactly

how and where my time was spent, and this showed i I went either under or over my

ixed-price proposal.

My working day is typically seven hours, give or take hal an hour. On an ideal day, the sum

o time I’ve dedicated to project work should land somewhere around that mark. I by the

end o the day I’ve logged only a measly three hours, clearly I’ve wasted ar too much time

on Twitter or Reddit. The next day I’d hope to make up this discrepancy, but thankully

the cold hard numbers encourage me to be disciplined enough to only slip a ew times

a month. I I went over the hours I’d proposed, well, that meant my next proposal or a

similar project needed to be adjusted accordingly.

What I’ve learned

With all this gathered data to hand, what did I learn?

My design time varies much more than development time. Working in both design




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and development, tracking my time made me realise that there can be huge variances

between different types o tasks even though two projects might be similar. Because

design is so subjective, I ound that I would spend a lot more time to-ing and ro-ing with

the client on design changes, whereas development is more objective and usually doesn’t

normally overrun.

I could use my historical time information to more accurately build contingency time into

my proposals. Fixed-price project work is usually criticised because the only way you can

be certain o not losing money is by padding the proposed cost out with extra hours, days,

or weeks just to make sure. That is indeed ofen the case but adding in a contingency o

time isn’t deceitul, it’s just good planning; remember that a beneit o the ixed-priced

project is that the client only has to deal with one number, and i it works within their

budget, its composition is moot.

Having archived project records right there to reer to makes it considerably easier to

quote and plan or contingencies. My projects are typically consistent in nature; normally

the design and development o a website. There are variables, o course, but or every new

project I’m always going to have a past project that’s similar in nature. Using that as a base,

I’m able to cost up my proposals ar more accurately than pulling igures rom thin air.

I’m getting faster over time. My timing data also revealed some interesting trends. I’m

neither a ormally trained designer or developer, but I have noticed that over the years

the time I take to design a site, or develop responsive templates, has decreased, either

because our tools are getting better or because (I’d hope) I’m learning and becoming more

proicient. That’s perhaps predictable, but seeing the inormation in ront o you is very

motivating and rewarding.

Refining the time tracking process

Translating the results o your time tracking into accurate ixed-price quotes might seem

daunting at irst but take it rom me – it does get easier. Afer nearly a decade o evaluating

my time and reining my quotes, I’m able to estimate my ixed-price projects with almost

dead-on accuracy, and you’ll easily become more proicient the more you do it. In act, I’ve

only recently had two projects go over estimate, both were or reasons outside my owncontrol and they’ve taught me to look out or the same potential situations in the uture.

This year, I’ve simpliied my time tracking to just three categories:

• Design

• Development: both ront-end and back-end, combined into one category

• Project management: including everything rom proposals and meetings, to general

organisation

I still give my clients a detailed breakdown o the project at the estimate stage, but afer




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years o tracking my time, I’ve been able to reine the level o detail that I need or my own

records.

My tips for fixed-price pricing

I you’re considering quoting or a ixed-price project, here are some tips that can help.

Give a detailed estimate: I’ve ound that the more detail you can give at the estimate stage

or a ixed-price project, the better - it helps set expectations early on about exactly what

the client is paying or. Make sure you’ve captured in writing everything you’ve discussed

about the project, every template that needs to be designed, every unctional eature that

needs to be included. You can be certain that new additions to this list will appear during

the process, so you need a single source o truth about what you agreed to do or a given

cost. Everything else should be scoped and costed in addition, and the client should

understand that.

Show discounts on your invoice: Occasionally I offer a discount or projects that look

particularly interesting or challenging. I I discount a project, I always issue an invoice

or the ull amount that I would normally charge, then apply the discount agreed on the

invoice. It serves as a reminder to the client that I’m doing them a avour and it certainly

helps rein in any scope-creep.

Be honest when tracking time: When you’re reelancing there’s nobody breathing down

your neck anymore, and you needn’t udge the numbers just to make sure the timesheet is

submitted on time. It’s or your beneit that you’re tracking the time, so ind a method thatlets you accurately track tasks and stick with it or as long as you can to get an honest view

o where you spend your time.

Track your personal projects: Like a lot o people, I have a ew side-projects that I do

or my own personal needs. I track time on these too, since I ofen get new business off

the back o them. Knowing how long it took to create a website that had no proposal or

commissioning client means I can create a similar proposal in the uture more accurately.

Daniel Howells is a web designer and developer who specialises in both websites and applications.

Daniel is the ounder o siteInspire, one o the largest and most well-respected showcases o web

design and a directory o agencies and reelancers.




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Turn time into money

When a project is inished, you can simply import your unbilledtimeslips into an invoice and send it to the client in a jiffy.

Flexible timesheet reportingIt’s easy to generate reports so you can see how your time is being

spent across different projects - you can even email them to your

clients to give them visibility o progress.

Always up to dateSeamlessly switch between mobile, tablet and desktop - i you’re out

and about just record your time on your mobile device, and switch to

your desktop to inish the job. Everything stays in sync.

Want to become amaster of time?

Take the guesswork out o billing like Danielwith FreeAgent’s online accounting sofware or

reelancers.

FreeAgent makes it easy to track all the time spent

on projects, so you’ll have an accurate record o just

how much work was involved and will know what

you should charge.

Never lose a minute againEnter timeslips or use the built-in stopwatch to accurately record every last

minute o your time as you work, so you’ll always be on the ball.

“Thank you for making my time tracking, invoicing and accounting so easy, from one happy customer :)!”

Jason Coombes, @databasejase

Try FreeAgent or ree


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My biggest pricing mistake Field report: UK freelance designers and developers

Getting your prices right as a reelancer is ofen a case o trial and error and it’s easy to

make a ew mistakes as you ind your bearings. To help you avoid some o the most

common pitalls, here’s a ew words o warning rom experienced reelancer designers and

developers as they relect on the pricing mistakes they’ve made in the past.

“When you start out, one o the hardest

things to do is price your products – but

don’t price yoursel too cheap! Not only

will you be working or next to nothing

but it can also make potential clients

think the product is cheap and not

good quality.”

Julie London, Designer

“My biggest pricing mistakes were ixed pricing

and ailing to review and communicate. I’ve

always elt that developers tend to use ixed

pricing – where we estimate up ront, give a price

and stick to it. Whereas most designers I knewwould give a price per hour, so i the project went

out o scope, they would get paid.

“With ixed pricing, I should have always been

reviewing to ensure the project is on track and

on budget, but it’s too easy (or me) to let this slip

and then end up paying mysel. In the past, I’ve

been paid the original ixed ee or a project that

doubled in time.”

Remy Sharp, Developer and ounder o Lef Logic

“I once agreed to do a project at a token

ee or an allegedly cash-strapped

charitable cause I really cared about.

The joke was on me. Every conceivable

exploitation o my time and labour

ollowed. I later worked out that I

had done the job or a raction o the

minimum wage. Lesson learned: no

matter how allegedly cash-strapped

your cause is, make them pay you what

you’re worth.”

Heather Burns,Digital law specialist and web designer

“I write cross-platorm apps and made a mistake

with one o my irst projects where I wasn’t clear

on the amount o work required or each platorm.

Typically I’d expect to achieve 90% code share

between iOS and Android – but in this case it

was a ixed price or both – the client ended up

abandoning Android and as a result elt they owed

me hal. Because I wasn’t clear I lost a good amounto money – now I’m VERY clear.”

Jason Kneen, App developer

“There is no worse eeling than having

to continue on a project when you are

making a loss. Hourly pricing is vital in

my cost management.”

Aaron Wheeler, Developer


“My biggest pricing mistake is allowing mysel to

be haggled down in price. You start the project

with a sense o resentment which is no way to

begin.”

Steve Folland, Video creator

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://www.tpdigital.co.uk/http://leftlogic.com/https://webdevlaw.uk/http://www.bouncingfish.com/http://www.stevefolland.com/http://www.stevefolland.com/http://www.bouncingfish.com/https://webdevlaw.uk/http://leftlogic.com/http://www.tpdigital.co.uk/https://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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“In my irst ew jobs I was charging

next to nothing as I just wanted the

business. I agreed a ee or the ull job

with a client, but it worked out to be

less than hal o the minimum wage.”

Andrew McSparran,

Graphic and website designer

“I’ve made a air ew mistakes in the past,

biggest one has to be giving a ixed cost or a

WordPress build which took ten times longer

to build than estimated. As it was on a ixed-

cost project, my hands were tied. I’m not one

or giving up and bailing on a project mid-way

through so I saw it to the end and chalked it up

to experience. Moral o the story? Avoid ixed

costs.”

Anthony Killeen, Front-end developer“I made a mistake in giving a quote

without a ull understanding o my client’s

background, budget and expectations.

In my case the quote was too low and

my client was quite disappointed as hethought I wouldn’t work hard enough on his

project. I missed a really good opportunity.”

Barbara Marcantonio, UX/UI designer

“My biggest pricing mistake has been to

underestimate the effort needed to add a new

WordPress plugin to an existing WordPress

website that already had many custom plugins

and commercial plugins. The custom plugins

had not been developed very well and they

conlicted with my new plugin. I had committed

to making the delivery so I had to debug the

custom plugins as well as trying to make my

own plugin more robust.”

Clive Verrall, Developer

“Losing hours afer a project is done is a

mistake. Everyone wants to be nice to existing

clients in the hope o repeat business, but six

months later when a subordinate asks or a small change or update, it might only take

you ten minutes, but you get sucked into a

ew hours o back and orth than you can

never bill or.”

Brian Suda, Developer

“I once had a client ask me prices on the

phone and I panicked and made up both

a day rate and an hourly rate. Afer I got off

the phone I realised my ‘day rate’ equalled

only three hours based on my ‘hourly rate’.

Unsurprisingly, I’m still waiting or them to call

back.”

Michael William Lester, Designer and illustrator

“Earlier in my career not having the

conidence to ask or the value I provide. Not many people like talking

about money, but a good designer

makes their client more proitable.

What you ask o your client is a raction

o what you make them.

“It’s even more important to get pricing

right when you’re a reelancer so you

can pay yoursel or administration,

and when things are more quiet.”

Zach Inglis, Developer and designer


“We’d love to hear reelancer experiences rom

all over the world. Email us at fieldguide@

freeagent.com and let us know your biggest

pricing mistake or a chance to appear in the

ebook.”

Danae Shell,

Editor, A Field Guide to Freelancer Finances

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://www.stagandstone.com/http://mrqwest.co.uk/http://grarighe.co.uk/http://www.cliveverrall.com/http://suda.co.uk/http://michaelwilliamlester.com/http://www.zachinglis.com/mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=http://www.zachinglis.com/http://michaelwilliamlester.com/http://suda.co.uk/http://www.cliveverrall.com/http://grarighe.co.uk/http://mrqwest.co.uk/http://www.stagandstone.com/https://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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My best pricing tip Field report: UK freelance designers and developers

Now you know the common mistakes to avoid, but you still need to ind the pricing sweet

spot where both you and the client are happy. Here’s a range o opinions rom reelancers

who have been there and done it all beore.

“Don’t charge or your time; charge

or your impact. As a consultant, eight

hours o my time can save a company

tens o thousands o pounds. I don’t

want to charge them or my eight

hours - I want to charge them or my

knowledge.”

Harry Roberts,

Consultant ront-end architect

“Make sure that you break your prices down

rather than just quoting a large round number.

Scope out projects thoroughly and put a

cost, and timescale, down or each stage.

Initiation, Planning, Design, Development,

Implementation...whatever it entails. Clients aremuch more likely to go or the option where they

are clear on what they’re getting or their money,

rather than a vague number. I there will be a lot

o project management involved don’t be scared

to include that in too.”

Jen Thomson,

Designer and ront-end developer“Look into the client and gauge their

company size and budget. I it’s a limited

company, you can ind its age and key

inancial statistics such as turnover and anydebt or ree online.”

Martin Bean,

Developer and consultant

Michael Merritt,

Virtual technology support

“When considering how I might charge clients

or my services, I decided to use a day rate,

rather than an hourly one. This is consistent

with what others in my ield were charging,and besides, the type o projects I work on

typically span a number o weeks. The day is

a clearer and easier unit o time to work with

in that context.”

Paul Lloyd,

Graphic designer and web developer

“Try packaging your services. Packages

contain a clearly deined group o tasks

to be completed each month. The client

pays you upront so there is no chasing

invoices and since they are paying or a

skill not your time, you no longer have to

track your hours.

“You can also create an à la carte list o

your services or those months the client

may need more o something than your

package(s) provides. Package, package, package!”

My best pricing tip

“I you love your client, charge what seems

air. I you know it’s going to be a nightmare,

charge what makes it worth it to you.”

Camilla Grey, Strategist

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://csswizardry.com/abouthttp://upcloseandpixelated.com/http://martinbean.co.uk/https://paulrobertlloyd.com/http://www.camillagrey.com/http://www.camillagrey.com/https://paulrobertlloyd.com/http://martinbean.co.uk/http://upcloseandpixelated.com/http://csswizardry.com/abouthttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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“Pricing must be bespoke to the customer,

services (or goods) being provided and

situation. Factor in a premium or likely

difficulties dealing with clients, or waiting

or sign off or approval. Offer a discount

in return or prompt payment, or better

working conditions. Your best and worst

clients should not be paying the same rates.”

Steve Kirtley, Developer

“Transparent pricing - always break down

the cost o each o the products or services

your customer has bought rom you. Forwebsite design invoicing we break down the

services into graphic design, content writing,

website domain name, website hosting etc.

That way clients can see exactly what they

are paying and eel like they are getting a

good deal.”

Julie London, Designer“I have a spreadsheet or each project in which

I keep a track o the hours worked per day and

the eatures delivered. When I need to estimatethe price or a new job I add up the days

spent on similar projects rather than trying to

calculate the cost o each development detail.

For similar projects, I ind this approach quicker

and more accurate than getting too much into

the details.”


“My best pricing tip is to always ollow

your gut. It’s easy to estimate a project

based on hours you think you’d spend

but your gut knows better. I it eels like

a three week job but you’re only costing

or two, then more ofen than not, you’re

setting yoursel up or a mountain o

stress. A rule o thumb that some use

is to price a project, double it and then

add 10%.”

Anthony Killeen,

Front-end developer

“Use some kind o reelance pricing sofware/

proessional invoicing sofware. There are

many to choose rom online. DON’T undercut

yoursel. I you are producing great work,

charge airly or it. You went reelance or a

reason, don’t sell yoursel short. Remember,

the client you work or now may recommend

you to a new client and also state your prices,

i it’s a similar job you will eel obliged to

honour your previous pricing structure.”

Ronnie Pye,

Developer and designer

“Have a ‘get out o bed igure’ in your

head and don’t be araid to use it. I get

lots o enquiries and lots without proper

brie/specs – over time you get a gut

eel or how big a project could be – so

the best thing you can do to eliminate

time-wasters is go back with ‘This will

be a minimum o X’ – it will have the

immediate effect o either identiying

their budget (which you could then work

to) or eliminate them as time wasters.”

Jason Kneen, App Developer

My best pricing tip

“We’d love to hear reelancer experiences rom

all over the world. Email us at fieldguide@

freeagent.com and let us know your best pricing

tip or a chance to appear in the ebook.”

Danae Shell,Editor, A Field Guide to Freelancer Finances

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://www.thinkingdifferently.co.uk/http://tpdigital.co.uk/http://www.cliveverrall.com/http://mrqwest.co.uk/http://ronniepye.com/http://www.bouncingfish.com/mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=mailto:fieldguide%40freeagent.com?subject=http://www.bouncingfish.com/http://ronniepye.com/http://mrqwest.co.uk/http://www.cliveverrall.com/http://tpdigital.co.uk/http://www.thinkingdifferently.co.uk/https://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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Building shelterOnce you’ve got a healthy amount o cash

coming in, you’ve got a roo over your head andcan start to relax. Unortunately, building up thatcash low isn’t always easy - some clients seem to

always pay late, and some just don’t pay at all.

In this section you’ll hear rom other reelancersabout their own techniques or getting paid, and

you’ll also ind practical tips or handlingworst-case scenarios.



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Creating a stormproof invoicingprocess Anna Debenham

I really hate asking or money. Maybe it’s because I’m British, or that I ind

it weird that people are paying me money or doing something I enjoy, but

sending and chasing up invoices is one o my least avourite things about

running a business.

Over the years, I’ve reined an invoicing process that helps protect me rom

non-payment and also reduces the awkward step between doing the work and getting

paid. Here’s how it works.

Before you start working

To weather a storm, you need to make sure that your shelter is solid, and this means doing

some preparation to make sure an unexpected gust o wind doesn’t blow everything down

and leave you shivering.

Creating a stormproof invoicing process



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Credit checks

It’s important to make sure that the organisations you rely on to pay your bills are… well…

going to be able to pay your bills. A quick way o assessing this is to check their credit

score. In the same way that you can check your own credit score, you can also check

another company’s and there are a ew different online services that do this. Matt Perkins’‘Credit control or reelancers’ gives lots more inormation on credits checks and setting

credit limits in advance.

Payment terms in your contract

To make sure that you and your client are on the same page beore work starts, you should

include a section in your contract (you do use one, right?) about payment terms. There are

a ew important things you probably want to speciy, such as:

• Whether you’re asking the client or any retainer or deposit beore you start working

• I your project isn’t ixed cost, whether you’re going to bill them or days booked thatthey don’t end up using

• How much you’re billing them over what period o time

• Whether the amount you’re billing is inclusive o VAT or sales tax

• What currency you’re billing them in (particularly important or overseas clients)

• What ormat o payment you accept (see note about payment methods)

• At what point you will send them an invoice

• What you agree to deliver beore and afer the inal invoice is paid (some reelancers

will only make the site live once inal payment has been made)

• How many days beore that invoice goes overdue• What you will do i that invoice goes overdue

It’s important that your client understands and properly acknowledges these terms

because money is so ofen the thing that causes disputes.

Note about payment methods:

A while ago, I had a couple o clients who insisted on paying with cheques. This is less

common now, but it was a real pain to queue at the bank and pay them in, and there was

also a higher ee on my account or paying in a cheque as opposed to a bank transer. My payment terms now insist on paying by bank transer. I I ever get a client who wants to pay

me a cheque again, I can put in the payment terms that I’ll have to charge them a small ee

to cover my costs o paying it in.

Payment terms and when to invoice

By deault, I want clients to pay me within seven days o receiving my invoice, but it’s quite

rare I can implement that; afer some negotiation, my payment terms ofen end up being

14 days, which is still better than the usual 30. Some larger companies have accounting

departments that insist on 30 days and they won’t budge on this, so you might need to

make a concession.




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This does make cash low more o an issue, so i you’re in this situation, you could ask to

invoice at the end o every week rather than every month so you have a more consistent

low o income. Invoicing (and thus getting paid) regularly will balance out those nerve-

wracking east and amine spikes in your income.

Writing the invoice

First, it’s good to double check that your invoice has the ollowing important inormation:

• The word “invoice” clearly displayed

• Your company or trading name, with your address and contact details

• The name and address o the company that you’re invoicing

• A unique invoice reerence

• A summary o the work you’ve done

• The date(s) that you provided the work• The amounts you’re charging or each piece o work

• The VAT or sales tax amount you’re charging (i applicable)

• The total amount due

Here are some other tips:

Payment details: Don’t orget to put your payment details on your invoice so your client

can pay you straight away - this includes the name o your bank, your account number

and sort code i you’re accepting bank transer payments, or your PayPal details i you’re

using that.

Payment terms: It’s also important to add the due date so your client can see when the

payment needs to be made by.

Summary of work: Your summary should be really clear so the client knows exactly what

they’re paying or. In FreeAgent, I hook my invoices up to my timesheets so I can show

details o what I did each day I was working on the project.

Project references: Some clients ask you to include a PO (purchase order) number or the

project owner’s name so that their accounting department can see what it applies to.

International payments: Since working or clients in other countries, I’ve also added

my BIC (also known as SWIFT or SWIFTBIC) and IBAN. These are needed or me to make

international payments. Even i you don’t currently have international clients, it’s good to

ask your bank or these details now so you have them to hand i you need them.

Invoice references: Invoice reerences need to be sequential, but i you’re just starting out,

it may look unproessional or your irst invoice to be numbered 001. One option is to start


https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_try&utm_content=uni_v1_chaptersettingoff_articlestormproofinvoicing_top_textphttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_try&utm_content=uni_v1_chaptersettingoff_articlestormproofinvoicing_top_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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with a random number to make it look like you’ve been on the block or longer, or you can

give each client their own reerence (Widgets Incorporated would be WI001, WI002, and

Acme Corp would be AC001, AC002).

Sending the invoiceI used to hand craf an email to my client every time I sent an invoice, but that would ofen

put me off sending the invoice in the irst place because I couldn’t think o anything to say

other than a long, awkward version o “Uh, hi! Here’s my invoice. Please pay it!”. So having

a boring but to-the-point template email that accompanies my invoice makes the process

a lot easier.

That said, I do customise these messages a little depending on whether I’m sending them

directly to the client, or to their billing department (I assume that the billing department

doesn’t really care that I had a wonderul time working on the project and that I hope to

work with them again soon).

I I’m sending an invoice to a billing department at the end o every week, I add the project

name and reerence in the subject so it’s easy to see what it reers to, and just add a short

note explaining what period the work I’m billing is or. This hopeully makes their jobs

easier as they don’t have to chase up the project owner or more details.

Subject: [project_name], invoice [reerence]

Hi,I’ve attached my invoice or the work I’ve done on [project_name] in the week

ending [invoice_date].

Kind regards,

Anna

It’s as simple as that. I I’m sending my invoice directly to the client I’ve been working with,

I tend to be more inormal. And i it’s a one-off piece o consultancy and I enjoyed working

with them, I ask up ront or more work.

Subject: invoice [reerence]

Hi [contact_irst_name],

I’ve attached an invoice or the [project_name] work I did with you. It was a really

un project and I hope you’ll ask me back in a couple o months to review what

you’ve been working on.

Kind regards,

Anna




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Chasing overdue invoices

I an invoice goes overdue, I send a short email a couple o days later to prompt the client

(avoid sending it last thing on a Friday, it will inevitably get lost). I like to say “this is an

automated reminder” even i I send it manually, so it looks less like I’m personally chasing

them up, rather that my system is.

Subject: Invoice reminder: [reerence]

This is an automated reminder to let you know that invoice [reerence], sent

[invoice_date], is now overdue. I you’ve already paid this invoice, please let me

know as there may have been a problem with the transer.

I it’s still overdue a couple o days afer that, I send another email:

Subject: Invoice [reerence] overdue

Hi [contact_irst_name],

I’ve just been going through my accounts and I noticed that invoice [reerence] is

showing up as overdue. Could you have a look into this? I the invoice is still unpaid

in 3 days, my system will start charging the base rate o interest on top o the total

amount due.

Let me know i it’s already been paid so I can chase it up with my bank.

Kind regards,

Anna

Again, I’m reerencing “my system”. I don’t want to be too personal, not yet. Usually it’s just

someone being a bit orgetul, or there’s some paperwork that needs signing off irst, and a

gentle prod is all that’s needed.

Chase early, chase often

I send my chasing emails once the invoice is only a couple o days overdue. I’ve ound that

I’ve had the biggest problems with payment when I’ve only started chasing up an invoice

several weeks afer it’s gone overdue, so I recommend you chase up early and ofen.

When they don’t pay

I’ve been very lucky with getting paid on time and I’ve only had a couple o times where an

invoice has gone signiicantly overdue, with one that I’ve had to write off. In one case, I was

on a long-term contract and I told the client I would suspend working or them until all my

payments were up to date, which was enough to get all the outstanding payments made.

I things really turn sour, you can hire a mediator who will attempt to settle a dispute out o

court, or you may opt to take your client straight to a small claims court – sometimes justthe threat o doing this is enough to settle a bill. Fortunately I’ve never had to do this with




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a client, but it’s an option i multiple reminders are being ignored and you’re not keen to

maintain a positive relationship with them.

Another alternative is to sell the debt. This means that a debt collection agency will

attempt to collect the money rom the client themselves, such as by sending in bailiffs.This is a handy option to know about i you’re desperate or the money.

I the overdue bill is small enough, or you know there’s very little chance you’ll be able to

recover the money (such as i the client goes bankrupt), you may decide to cut your losses

and write off the debt. This means you accept that the payment is never going to be made,

and it gets recorded in your business accounts as an expense.

The ideal situation is to not have an invoice go overdue or any work you’ve already done.

Some reelancers insist on being paid upront or all the work they do. They will invoice theclient every week or the ollowing week’s work, and i an invoice goes unpaid, they don’t

do the work. The client is effectively paying to book in that person’s time.

It’s not always possible to negotiate this or the entirety o a project, but it’s not unusual

to ask or a deposit beore starting a new project, especially i you’re paying expenses like

travel or accommodation upront. Afer all, it’s one thing i a client doesn’t pay on time or

your services, it’s another i it’s or expenses.

Be proactive and get into a routine

I think that the most important part o invoicing is to set up a process that helps you getahead o any problems that you may weather down the line. In particular, a good weekly

invoicing routine to prevent potential cash low problems and a ew pre-written emails

that you can conidently use to chase payment can make a big difference to helping you

get paid.

Anna Debenham is a reelance ront-end developer living and working in London. She works with

a range o clients to help build ront-end prototypes, style guides and websites. In 2013, she was

awarded net magazine’s Young Developer o the Year.




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Automatic invoicingBilling a client or your time is easy - just import your timeslips into an invoice, or

even set up recurring invoices that import any unbilled time and send themselvesautomatically. Once the invoice is sent, you can create your own automated reminder

schedule to make sure you get paid.

Know who owes you whatYour invoice timeline instantly shows the status

o recent invoices and lets you see what’s been

paid, what’s due and what’s overdue.

Get paid fasterWant to get paid online? No problem. Your clients can view invoices

online and pay by credit/debit card, Direct Debit or PayPal.

Ready to stormproofyour invoices?Put Anna’s advice into action with FreeAgent’s

invoice sofware or reelancers.

In FreeAgent you can design your own invoice or

choose rom our templates, then set up automated

reminders to nudge any late-paying clients.

Customisable invoice templatesWith our gallery o great-looking invoice templates, you can ind

a style that matches your brand. You can customise invoices or

even design your own with CSS.

“FreeAgent’s automated invoice reminders have made invoicing totally hassle-free for me”

Anna Debenham, @anna_debenham



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My invoicing terms Field report: UK freelance designers and developers

How do other reelancers invoice their customers and time their payments? Here’s a

selection o invoicing terms used by other reelancers.

“I invoice private clients every week

and expect to receive payment within a

week. I work or many clients at a time

and so i one client is slow to pay then

I avour the work or my other clients

while waiting or the payment.”


“Regarding invoicing terms, I have different setups

or different clients but it’s usually 10% deposit,

50% o the balance at midpoint and inal balance

on completion. Payment terms are strictly seven

days rom invoice and generally, I don’t havemany issues along the way.

“I a project is a more long-term thing, then I

stagger payment requests. There’s nothing worse

than entering into a six-month build and invoicing

10% at the start and then nothing or three

months.”

Anthony Killeen, Front-end developer

“Depending on the scale and stages

o the project usually 25% initiation,

25% on design sign off, 25% on either

prototype or beta stage build then

the inal 25% on completion. I ask or

payment afer 14 days, sometimes I get

that, sometimes it’s a month. Depends

on the client.”

Jen Thomson,

Designer and ront-end developer

“For ixed-price projects, I’ll request a deposit. The

amount depends on the length o the project. For

example, it would be hard to convince a client to

pay 50% upront or a project estimated to take

six months. For consulting and contracting where

I’m billing a pre-agreed day or week rate then I’ll

invoice weekly. All invoices are due upon receipt.”

Martin Bean, Developer and consultant“My invoicing term is payment upon

milestones. I set out where the projectwill be afer speciied dates and then

demand a percentage o payment

beore moving on.”

Aaron Wheeler, Developer

“I usually ask or a 35% non-reundable deposit

and I don’t start working until that money is in my

account. I then get a mid-project payment and a

inal payment right beore the release. Make sure

the last payment happens beore you give your

clients all the source iles or set their website live!”

Barbara Marcantonio, UX/UI designer

My invoicing terms

https://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textphttps://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttp://www.cliveverrall.com/http://mrqwest.co.uk/http://upcloseandpixelated.com/http://martinbean.co.uk/http://grarighe.co.uk/http://grarighe.co.uk/http://martinbean.co.uk/http://upcloseandpixelated.com/http://mrqwest.co.uk/http://www.cliveverrall.com/https://twitter.com/intent/tweet?text=Download%20a%20free%20copy%20of%20%40freeagent%27s%20ebook%20A%20Field%20Guide%20to%20Freelancer%20Finances%20for%20%23webdesign%20%26%20%23devs%20http%3A%2F%2Fow.ly%2FV4qKG%20%23myfieldguide&source=webclienthttps://www.freeagent.com/fieldguide/try/?utm_campaign=web&utm_source=freeagent&utm_medium=fieldguide_uni_ebook&utm_term=fieldguide_freetrialfooter&utm_content=uni_v1_chapterall_articleall_footer_textp


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“Generally my payment terms are 50%

beore project commences and 50%

upon completion but beore ‘go live’.

Larger projects would have payment

milestones whereby I complete a set

project task by a certain date, the client

then pays that scheduled amount

beore the next step commences.”

Tony Pollard, Developer

“When I draw an invoice up - depending on the

work I usually get a 5-10% deposit, do the work

and keep the client up-to-date throughout the

project with where their money is going. I never

send over any high resolution images, PDFs or

documents without being watermarked – just in

case.

“Keep timesheets. You never know, the client

may ask, and it keeps you right. I have my terms

and conditions on the back – these are really

important! They keep you protected. Research

these and ask or help rom other proessionals.”

Andrew McSparran,

Graphic and website designer

“My invoicing terms depend on the

relationship with the client. Some I take

50% payment beore I begin, some

I only invoice on completion. This is

the good thing about reelance job

sites (like PeoplePerHour/Upwork etc)

where you can request 100% deposit

to be held in Escrow and you’re then

paid within seven days o completion.

Heaven.”

Steve Folland, Video creator

“I seldom take a deposit because my work is such

short engagements (a day or two at a time) that

I don’t have the kind o cash low issues that a

deposit helps with (i.e. a long period o working

without payment). My terms are 28 days, and I

always invoice the client afer the work has beencarried out in order to ensure they’re paying or

something they’re happy with.”

Harry Roberts,

Front-end architect and consultant

My invoicing terms

“We’d love to hear reelancer

experiences rom all over the world.

Email us at [email protected]

and let us know your invoicing terms

or a chance to appear in the ebook”.

Danae Shell,

Editor, A Field Guide to Freelancer Fi

a field guide to freelancer finances

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