Extra Income

Commission 101: What Freelancers Need to Know

Around 1.6 million civil claims are brought to the UK courts every year, many of which are freelance workers forced to bring clients to the small claims court. Often this process can be time consuming and costly, and is frankly a hassle that a small business can do without.

So before you start trading, there are a few things you should consider to help avoid these pitfalls and allow your business to prosper.

What to Charge

Putting a price on your services is one of the biggest challenges freelancers face.

One common mistake is to charge too little. In fact, if you put too low a price on the services you offer, you’re giving off the message that you don’t put value in what you do – and if you don’t, the client is unlikely to either.

Likewise, don’t price yourself out of the market. Take into account your experience and skill-set and set your rate accordingly.

To find an appropriate price for the service you offer:

  1. Consider the market
  2. Cover costs: salary, taxes, monthly overheads, rent, etc.
  3. Don’t forget to add profit margin!

Agree Terms Up Front

Come to an agreement on payment terms with your client before you do anything for them.  Make sure that you have both agreed to terms determining:

  • How much you will be paid for your service
  • When you will be paid

Make sure you get these terms in writing, too, so that if there’s any question later on, you’ve got proof to back up your original agreement.

Get a Deposit

Sometimes – and particularly if you’ve never worked for this client before – it will be appropriate to ask for a deposit before you start work. Typically, this should be between 30 to 50% of the total cost of the project.

If you can, make getting a deposit part of your standard practice to ensure you attract clients that won’t mess you around.

When to Invoice

Invoice as soon as you have completed the specified task. The sooner you send out the invoice, the more quickly you will be paid.

Keep Track of Income

One of the most challenging aspects of setting up as a sole trader is getting to grips with managing your own income. Using tools like Ballpark, a business management app, can be really useful.  Ballpark has tools to help its users:

  • Estimate
  • Invoice
  • Track their time
  • Receive Stripe and PayPal Payments

Remember to ensure all records of income are up-to-date, as you will be responsible for reporting all income received on your tax return.

This article was contributed by Laura Moulden, Evergreen Funders on behalf of Nixon Williams, an accountancy company of contractor accountants offering comprehensive business finance advice throughout the UK.

Comments (1)

  • I have never free lanced before but am looking to get into it. Thank you for the tips and recommendations I look forward to implementing them!


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