Are you a freelance filmmaker? If you recently have or are thinking about making the jump to full-time freelancer, congratulations on taking a bold step in your career.
Finding regular clients, networking, and getting that slick website up and running are the staples of any freelancer’s life. However, there is a slightly less glamorous task that needs just as much attention; it goes by a simple name – finances.
Quoting, invoicing, keeping track of your expenses, and the dreaded tax return are all important to running a successful small business. Daunting as they may appear at first, if you have a system in place, it doesn’t need to be a complete headache. So, let’s get stuck into the essentials.
We’ve already covered quoting previously in more detail but here are the basics.
When a quote is requested from a potential client, it is vital you create a standalone document to send them. It should include the following.
- Job code – Something to help you identify the project.
- Cost – Include any expenses, break down your services and be as transparent as possible.
- Terms and Conditions – You don’t need to be too detailed but ensure you include payment terms (30 working days is usually the standard). It is also worth stating the client has no rights to use the video until payment is complete.
- Client Name and Address – This is important for legal and data protection reasons.
- Deposit – If it is a sizeable job, you may wish to request a deposit, which should be noted in your quote.
You can generate free customisable terms and conditions easily online, however, becoming a member of an organisation like FSB (Federation of Small Business) or the IoD (Institute of Directors) will give you access to a wealth of tax documentation, legal support and advice.
Quoting may be a little work, but it is crucial to take the time to get it right, as this can prevent you from being taken advantage of by the occasional bad client.
2. Keeping Track of Your Outgoings
While you are working, you are going to incur expenses, whether it is lunch while on a shoot, travel and accommodation or a new piece of kit. Your costs will be needed to work out how profitable your business is, and ultimately how much tax you will need to pay, so it is important you keep track of all of those receipts.
If you are incredibly organised and have the time, you can take photos of your receipts to store digitally. Alternatively, tax software like QuickBooks can help you get organised and stay in control of your finances.
If you’re using accountancy software, every transaction you make on your debit card will be logged. You will still need to keep a copy of the receipt as the transaction listed with your bank will only detail the vendor at best.
This is one of the most exciting parts of the finance process – the work is done, and you can get paid, maybe.
Invoicing is not only the way you request payment from a client, but it is a way you protect yourself against non-payment.
While an invoice doesn’t ensure you will be paid on time, it does offer documentation that can help you if you need to begin legal proceedings. Your invoice should include:
- Job Code – the same one as the quote
- Client Name and Address
- Break Down of Costs – including any amendments, again, be transparent.
- Terms and Conditions
- Your Business Name, Address and Registration Number
- BACS Details
If a client causes you to take legal action against them, you will need to be able to provide the Quote, Invoice and any communications between you as evidence. You can only bring legal action against the company/individual with their full name and registered address.
All this information may sound scary, but don’t worry; instances of non-payment are rare, but it’s nice to have something to back you up just in case. Also, check out our article on how to get clients to pay on time.
4. Accountancy Platforms
We’ve mentioned accountancy platforms a few times now, but you’re probably wondering what they are and how they work?
Put simply; the software keeps all of your business financial information in one place, where it can easily be accounted for, viewed, and edited. When a quote is sent to the client, they have the option to accept or decline it (and in doing so, accept your T&Cs).
There is no shortage of options for accountancy software that will make your life easier. For example:
The tax software tracks your company bank feed, allowing it to see when money comes in or goes out. You are then able to “reconcile” (match) all in and outgoings to invoices and receipts.
If all this is done correctly, the software can generate profit and loss statements, and help with PAYE and Pension payments. Having your quoting, invoicing, and expenses managed all in one place will pay dividends when it comes to filling your Tax Return as all the information is neatly organised.
5. Tax Return
Perhaps your most critical legal obligations when self-employed, are those towards Her Majesty’s Revenue & Customs.
It is possible to complete and submit documents to the tax man entirely on your own, and the HMRC website offers extensive guidance on every aspect regarding self-employment. The tax submissions you’re required to make, depend on your exact employment status and trading position.
If you decide to set up as a Sole Trader you must register this with HMRC, so they know to expect a Self Assessment tax return every year. They will also expect contributions to Class 2 and Class 4 National Insurance, as well as Income Tax paid on profits above a threshold.
Self Assessments should list how much you earned through your business activities in a given financial year, as well as all your legitimate business expenditures. This will determine how much (if any) profit was made, which in turn determines how much Income Tax you’re required to pay.
Tax & Finances – Wrapping Up
In short, keeping your finances organised and complete is a massive task and one that should be given the time it needs. You may feel that you are an organised person who can handle the intricacies of the task at hand, and you may be right.
However, it is unlikely that you decided to become a freelancer for your love of paperwork. The various platforms discussed here can help you spend more time meeting clients and making films.
Are you a seasoned filmmaker? Let us know your top tips on finances and tax returns in the comments below.