Buffer’s “transparent pricing” inspired me to share my expenses and net profit. Here’s what I made and spent in the 2013-2014 Australian tax year working part-time as a freelance writer.
Overall Expenses for 2013-2014
|Item||2013-2014 Tax Year|
|Professional Services (other)||$39.95|
|Meals & Entertainment (other)||$77.00|
|Taxes & Licenses||$250.00|
|Taxi & Parking||$287.78|
My biggest expenses included Consultants in green. Consultants included bookkeepers, web coders, and graphic artists working for my own business.
Another large expense was virtual office space. I opted into a small business incubator at The Nest in Victoria Park from Jan 2014 to Dec 2015. I gained tremendously from the networking, and consultants I hired through the shared space. I consider the virtual office space as money well spent.
My postage and printing were spent on business cards, and promotional training guides. I did not consider this printing as a Cost of Goods Sold (COGS). I printed and mailed the guides as part of my overhead.
|Jul '13||Aug '13||Sep '13||Oct '13||Nov '13||Dec '13||Jan '14||Feb '14||Mar '14||Apr '14||May '14||Jun '14|
The biggest issue with my freelance writing business has been the period around Christmas and New Years. I tend to have a rush of projects before the holiday, then businesses are slow to pay during the period from late November to early January. This leaves me with a surge of collections on open (unpaid invoices) in January.
My income lags because I have net 30 payment terms. January is slow. I do not start collecting income on my writing projects or website training projects until February.
Bad Debt and Slow to Pay
I am a cash-based business. If I invoice — and the client does not pay, I cannot count the money as a loss. I don’t have the exact numbers, but I tend to find that clients with projects under $200 AUD who do not pay within 30 days are more likely to become bad debt.
I do not report bad debt to credit agencies, but have considered reporting unpaid invoices. I have had between $200 and $300 AUD per year in slow to pay (more than 60 days, or partial payments stretching as long as 120 days). I have had 1 bad debt of just over $320 AUD, that I wrote off when the company went out of business.
To mitigate the risk of poor cash-flow:
- I bill at mid-month and at the end of the month
- I do not book or go to future appointments when there are outstanding invoices
- I call on the phone to collect
- I warn my fellow colleagues if I’m having trouble collecting so a bad client doesn’t churn through my business network
This coming tax year (2015-2016) I am considering amending my Terms and Conditions to require a deposit on jobs under $300 AUD.
How Much Did I Make That Tax Year?
Consider my 2013-2014 Tax Year a hybrid of a start-up business, and a part-time business. This is the year I started to get serious about returning to the workforce after taking several years to raise my child.
Should you become a freelancer?
My expectation of full-time freelancing is billing 60% of the 1900 work hours in a year (1140 hours per year). 40% of my time is unbillable. The 760 of unbillable hours are consumed by:
- Administrative time (bookkeeping, sales, marketing, administrative, travel)
- Cancellations or rescheduled work
- Unbookable fragments of time
In the previous year, I supplemented my freelance work as a temporary employee for an agency. There was a temptation to go from temp employee to permanent employee, but I love the adventure of working for myself.
How much money did I make in the 2014-2015 tax year?
I will share my progress over the past 4 years in the next article. I’ll follow on with an article about how much I made in the 2014-2015 Tax Year (Jul 2014 to Jun 2015). As you read my articles, please share privately by email, or publicly in the comments:
- What have your self-employed experiences been?
- How do my expenses differ from a company with partners, or multiple employees?
- What do you do to reduce expenses and get better margins?
- Transparent Pricing (Buffer.com)
[ https://open.bufferapp.com/transparent-pricing-buffer/ ]
- How Much Should I Charge (Freelance Writing Tips)
[ http://www.freelancewritingtips.com/how-much-to-charge-rates-contract/ ]
- Shauna McGee Kinney – Writing Fees and Rates
[ http://www.smk-writer.com/fees/ ]
- Employment Agency? Ad Agency?? Freelancer???
[ http://www.smk-writer.com/ad-agency-freelancer-employee/ ]
- Compare Prices for Technical Writing
[ http://smk-writer.com/blog/compare-fees-writing/ ]