In my past two articles, I went over how to charge what you’re worth - starting with my pricing formula, and then going through how to estimate out your time. Now, I’d like to talk about the fun part - getting paid (cha-ching)! This article is going to be full of practical advice. I’m going to take you through all the things I do to stay on top of my finances.

Invoicing

Getting paid usually starts with sending an invoice to the client for completed work. I let the client decide how they want the work distributed on the invoices. How they originally asked you to estimate the work will probably determine that.

If they asked for hourly pricing, they might ask you to send them an invoice weekly, bi-weekly, or even monthly. If they asked for an up front project estimate, they will probably want the invoices broken down by project. Either way, make sure you are both clear on what’s expected. The more prompt you are on sending invoices, the better for everyone. If a client asks for an invoice, I will put this at the top of my list of priorities.

As a helpful tool, I’ve included a free invoice template for you here. This is exactly what my invoices look like, and I’ve used this template for years.

Banking

Now that you’ve been paid (probably by direct deposit or check) you need to handle your banking. I have two accounts with Chase:

1. Small Business Checking

2. Small Business Savings

All you need to set these up are an EIN number and identification, which you can get by applying for an LLC. You will need to go to Chase to set up these accounts in person, but it only takes about an hour.

I recommend 2 accounts because the money can be deposited into your checking, and then you can set aside money for taxes in your savings account. Each time I’m paid, I transfer 30% of the profits into my savings account to pay taxes. This is as simple as a click of the button using the Chase app. By setting aside money for taxes, you can ensure there are no surprises. Whatever you decide to take as salary can be moved from your business checking to your personal accounts. Just make sure you have enough money left in there for expenses (employees, supplies, services, etc). You will also need to make sure you have enough in there to meet the account minimum.

Expenses

I can’t recommend a small business credit card enough. I use the Chase Ink card (BTW - Chase is in no way sponsoring this post, I’m just a big fan). Anything you buy that could potentially be used for your business should be purchased on your small business credit card. Your credit card will be paid out of your small business checking account. I put office/art supplies on here, mileage to client meetings, certain utilities, and even software (Dropbox, Adobe, & Quickbooks).

Taxes

You’ll pay taxes quarterly. I know taxes can be very confusing, so the number one thing I can recommend is to hire an accountant. I actually see this as more of a requirement if you have your own business. If you have an accountant, you don’t really need to know how it all works. They will tell you what to do. Taxes vary from state to state, so your accountant is your best resource for learning how to file. An accountant can make sure you are expensing all of the right things, and that you aren’t doing anything to raise red flags. You accountant should only cost about $300-$800 per year, and they may even make up that money and more in savings on taxes.

The second thing I recommend is to sign up for Quickbooks, and link your business checking, savings, and credit card. This will allow you to see how much profit you’re making. Also, how much you are spending. You can also use Quickbooks to categorize your business expenses, making it easier for your accountant. It’s well worth the small investment to stay on top of your finances.

FAQs

Some of the toughest parts of running a freelance business are figuring out what to do when things go wrong. Here, I’m going to go through some common questions I get, and what you should do in each scenario.

1. I have a client that won’t pay. What do I do? HELP!

I’ve only had this happen once, and it was in my first year of freelancing. This tends to happen with smaller clients, who have smaller budgets.

If you have a sinking feeling you aren’t going to get paid, I would first urge you to be patient, and to assume the best. Send a very nice note making sure they saw your invoice. Even though I wasn’t paid only once, I’ve had to send countless reminders throughout my freelance career. Usually, the client has just forgotten, or missed your original e-mail. If you are working with a well-known larger client, you can probably just assume they need more time. For these large companies, invoices can take months to make their way through accounting. A lot of times, it’s out of the client’s hands. The more patient you can be, the better. When starting a project, I would just assume you won’t be seeing the money for months. That way, you have a laissez-faire attitude about it, which clients will appreciate.

The second action I would take is to send a gentle reminder that you will have to charge a late fee if the invoice isn’t processed. When working with smaller clients who don’t have big budgets, I always put a clause on my invoice that says this - “All Invoices are due within 30 days of project completion, unless otherwise discussed. If payment is not received within 30 days of the due date, the Designer will not proceed with any new work for the Client until payment has been received. The Client will also be subject to a late fee of 5% of the amount overdue.”

If the client still won’t pay, I would suggest setting up a payment plan with them. Can they pay you a little bit spread out over the next few months? I would kindly note that if something can’t be worked out, you’ll need to work with a collection agency. Just use this threat as a last resort. Once you start talking like this, the client won’t want to work with you again, so you should be on the same page about wanting a clean break.

If nothing seems to work, you may just need to cut your losses. With small clients, I always try to have them pay for a percentage of the work up front, so hopefully you at least collected on this. Definitely don’t do more work with someone who doesn’t pay you. Even someone who’s consistently sketchy with payments, I would say goodbye to. It’s just not worth the stress and extra trouble!

2. How do I know when it’s time to hire people?

You’ll know it’s time to hire people, when you’re constantly turning down work. Even then, it might not be the right move for you. You won’t be doing as much creative work once this happens. You will be more of a project manager. If that’s okay with you, go for it! I would recommend starting small, and hiring other freelancers by the hour at first. That way, nothing is permanent, and you can have a nice trial run to see if you like having employees. If you don’t like having employees, the alternative is just to raise your rates!

3. How do I pay taxes?

Since this varies by state, you’ll need to check with your accountant. Most taxes are paid quarterly, and you can pay them online through your state’s website. You will pay federal and state taxes. At the end of the year, you may get some money back or you may owe more. Your accountant will let you know.

4. How do business expenses work?

You can expense anything having to do with your business. Common expenses include office supplies, art supplies, business related utilities, office space, equipment, business books, client meals, mileage, software, classes, and conferences. You expense things by putting them on your business credit card, and marking them as expenses in Quickbooks. You can also do it the old school way, and save receipts. These will be handed over to your accountant. A portion of the money you spend on business expenses will be taken out of your taxes owed. It’s a big mistake not to expense things, because it’s like flushing money down the toilet. Your accountant can give you more specific info on the best things to expense, and also the kind of things you should not expense.

5. I despise invoicing and accounting! Do I have to?

This is so me, which is why I thought I’d include this question :) The short answer is YES, unfortunately you do have to! BUT, you can definitely make things easier on yourself. In the past, I’ve done invoices on Fridays at a coffee shop to make it more fun. I don’t leave until my invoices are done (this was pre-Covid). Just try to reward yourself for doing the tedious work. Most creatives don’t enjoy this aspect of running a business, so you aren’t alone. Just accept that you will never like it, and try to make the best of it.

You can also enlist help. Maybe someone (probably not a creative) in your life actually likes this stuff? My husband loves all things accounting and expenses, so he helps me a lot with Quickbooks and working with our accountant. I repay him by handling other things in our home. Your accountant will be a great resource too. This all comes back to your hourly rate - what is your time worth, and can you hire out help with things you aren’t good at?