Business Planning Process Planning & Strategy

Rules for Freelance Business Owners Who Want to Avoid Getting Burned

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Being a freelancer can be a little scary. Unless you’re incredibly successful and can afford to hire support staff, you’re mostly on your own. You have to fend for yourself.

Unfortunately, it is a big, bad world out there. Not only do your competitors want to squash you, but regulators can make your life a misery too. In short, going it alone is a challenge.

For this reason, freelancers have to abide by a set of golden rules to keep themselves safe. If they don’t, they open themselves up for litigation, financial losses, and downright abuse.

Rule 1: Hire an Accountant on Day One

If you’re a freelancer, it’s a bad idea to arrange your finances yourself. While the government provides the option to file independently, it is better to have a professional by your side to rule out any financial impropriety.

Put it this way; if the government knows you’re doing your accounts yourself, you’re more likely to make a mistake or lie on your return. By contrast, if they know you have an accountant, it is more likely that you’ll pay them the right amount. Your accountant will, for want of a better word, hold you to account.

Rule 2: Create Contracts for Everything

You might feel like you can trust a client to pay you for completed work, but you can never be 100 percent sure that they will. The last thing you want is to find yourself out of pocket.

Many freelancers, therefore, issue contracts to all their clients, whether they trust them or not. It is a form of insurance in the unlikely event that something does go wrong.

Don’t worry; you don’t have to go to a solicitor every time you want to create a new contract. A digital contract creator is a perfectly valid alternative and slashes your costs.

Rule 3: Insure Yourself Up to the Eyeballs

As a freelancer, you’re a small fish in a big pond. For that reason, you’re at risk of being gobbled up, legally-speaking, by somebody with far deeper pockets.

The best defense against this is, first, to avoid breaking the law, and, second, to get comprehensive business insurance.

Be careful here. Some generic business insurance products won’t cover you if you’re in a particularly high-risk industry, so double-check the fine print. Also, make sure that you get sufficient legal cover, preferably up to $10 million. Look for case histories in your sector and check that your policy can meet legal costs if you find yourself in court.

Rule #4: Ask for Partial Payment Upfront

A lot of freelancers take the approach that they should only get paid when the client is happy, but that puts them at their mercy. You can often find yourself investing weeks of your precious time into a project, only to discover that your client doesn’t accept your work.

In these situations, it is a good idea to hedge your bets. Clients can sometimes be unreasonable in their expectations and demand a level of service that you can’t provide. State on your website and correspondence with customers that you bill both before and after.

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