So during the call I asked participants, can Billy do more to help you succeed in business than just provide you with great software? And the overwhelming answer was YES, we want more.

Poll results told us that online video training and a chance to get specific questions answered by a CPA would be of most value.

That’s exactly what we did with Billy University, which launched this Tuesday. We already have 20 members enrolled and hope everyone using Billy will consider the value of having a financial education. For a fraction of the cost of an MBA, or even keeping an accountant on retainer, members go through monthly video training on a variety of business finance topics geared specifically to help you succeed, no fluff or theory. They also get to ask our resident CPA genius, Naomi, any question they want.

As part of this educational series, we’ll be hosting a different guest expert each month for a live video call. All Billy users can watch those live trainings. But only Billy University students will get access to the recording archive.

Next month’s expert topic will be on small operational loans and business credit, when to borrow money and when not to. Be sure you’re on our newsletter to get that invitation.

To learn more about Billy Universities curriculum and pricing, Click HERE. 

The post Introducing Billy University appeared first on Billy Accounting.

A Google search will bring up scores of articles that offer a general formula to figure out your rate, as I’ve written about previously:

(Living Expenses + Work Expenses + Profit) ÷ Billable Work Hours = Estimated Hourly Rate

Some sites might even have a handy rate calculator if you don’t want to do the arithmetic yourself.

But, in practice, these estimates will barely give you a ballpark figure, and that’s only if you’re very aware of the expenses your freelancing business will have and the hours you’ll actually want to work. Especially if you’re just starting out as a freelancer, these calculators won’t help you.

Let’s get real about freelancing.

If you’re trying to figure out your rate, it probably means you are just embarking on your freelance journey. So, working backward from the annual salary you eventually want is fairly unrealistic. That’s like planning a path across the Pacific before you learn how to sail a boat. In reality, when people start freelancing, they are in a transition. They’re often coming out of school or from a 9-to-5 job or trying out a career change. Let’s take this in stages.

Stage One

A friend knows you’re good at video editing and offers you a paid project. “What’s your rate?” he asks. You don’t know, but you’re a smart cookie, so you browse over to a site like Upwork and see what the general hourly rates are for video editors. It’s a pretty wide range: anywhere from $30 to $100 an hour. You guess $40 is fair, but you really don’t have any idea. Maybe $50 would be fine?

Here’s a better approach: ask for a project fee.

For a beginning freelancer, an hourly rate can be hazardous. If the project takes longer than expected, your first client may be upset at the increasing cost. If the project is too short, you haven’t made much money at all. Setting a project free up front instead is a safety net for both parties so they feel confident, and is especially good for the newbie freelancer still learning how long the actual work may take.

So, how do you set a project fee? Well, you still need to have an idea of how long you think the project will take and estimate an hourly rate. But we haven’t just gone in a circle; again, a project fee for your first few freelance assignments is the best way to get paid what you’re worth and protect the client if you’ve misjudged. At this stage in your freelance career, when this is probably not make-or-break money, it’s all about making your clients happy.

Stage Two

You’ve got two or three clients now. It’s not just beer money; you’re nearly paying rent off freelance work. You’re thinking about quitting your day job, quitting your other side jobs or making this your full-time career. You might even change your LinkedIn job title to “Freelance Video Editor.”

You’re also seasoned. You have a good idea of the time and effort a certain project will take. You’re getting repeat business. You’re even becoming the go-to person for a couple clients on their projects.

Now’s the time to transition to an hourly rate.

The benefit of going hourly is really apparent when you have ongoing relationships with your clients. Negotiating per-project fees quickly becomes a hassle, and as the projects grow in size and complexity, it’s harder to estimate their worth, anyway. Going hourly may also mean more regular paychecks instead of waiting until after a big project ends to invoice. And, perhaps most importantly, charging by the hour makes your clients respect your time. If they want to add in an extra tweak or put you on an hour-long call, they’ll have to pay for it.

Here is where that equation up top starts making sense. Now with some experience, you have a much better understanding of what expenses you’ll have on a monthly basis and how many hours you can realistically work. Factoring in health insurance, taxes, equipment, software and taxes, $40 an hour is now looking to be on the low end of the spectrum if this is going to be your sole source of income.

Stage Three

At this point, you no longer need to be reading this blog. You’re juggling six to 10 clients, and you’re actively turning down work. You’re living the dream! But I’ve got one last piece of advice for you.

Go back to a project fee or employ tiered package rates.

Why? Hourly is working great. However, as Lindsay Van Thoen from freelancersunion.org puts it: “You shouldn’t be penalized because your skill level enables you to provide high value quickly. The client is more likely to accept your proposal of $200 for a project (that you know will take you two hours) than they would be to accept a proposal for $100/hour. Hourly rates have a ceiling.”

It’s true. Once you’re an expert, going back to per-project contracts can maximize your income while freeing up time. It may be difficult to transition clients to this model if they’re used to your hourly rate (that’s a topic for another blog post), but it’s a good way to go for new clients at this stage in the game.

As for tiered package rates, this is a good way for you as a seasoned freelancer to work with a variety of clients with different needs and budgets and also spend more time on the aspects of your work you enjoy most. Sticking with video editing as our example, maybe $500 is your fee for an editing project, but it’s $800 if they want post-edit color correction. Being able to tier these projects is definitely a luxury of getting to this point, so take advantage of it.

This article first appeared in Forbes on August 21, 2017.

The post A More Realistic Way To Set Your Freelancer Rate As Your Career Advances appeared first on Billy Accounting.

This stock image cost us $20,000.

The simple answer is that accounting software ultimately saves you money, and even better, saves you time (anyone in business for him/herself will tell you that really is even better). Let’s examine a few ways how this is true for any business.

1. You guessed it. Taxes.

This is probably the first thing that came to your mind, and it’s true. If there was no other reason to use accounting software other than dealing with the headache that is the IRS, it would still be worth it. Say it costs $100/month for a premium software (note, this is very high. Never pay this much). If it saves you at least $1200 a year in taxes saved, even that expensive software would justify its own cost.

Fact: stock photos of taxes always pretend computers don’t exist.

Well, the average SMB spends about 41 hours a year on tax prep. Say you pay yourself an hourly rate of about $30. That’s already $1230 in time-cost right there! Let alone the actual money you’d save by getting every tax deduction possible. And even if you have a tax professional do your taxes at the end of the year, how much do they charge per hour? Accounting software would drastically reduce your bill by cutting down on how much work your tax professional would have to do.

Taxes are boring and expensive. Reduce both of that by being proactive with accounting software.

2. Don’t lose track of a single cent.

No matter how meticulously businesses keep track of all their invoices on an Excel spreadsheet, something always seems to slip through the cracks. A common complaint we hear from SMBs is that it’s a pain to manually keep track of which clients have been invoiced, which have paid, which are late, which need to be reinvoiced with additional late fees, which requested to be invoiced again because their dog ate it; the list is endless. And if that Excel isn’t up-to-date, mistakes can pile up and you may not be collecting all the money actually owed to you.

The entire point of accounting software is to eliminate this aspect of the process. It minimizes human error and automates invoicing and appending late fees. It creates reminders so SMBs, and especially lone freelancers, won’t lose track of any due income. As we wrote about previously, if you’re a freelancer, you will deal with late payments. It’s inevitable. The right software will help you deal with this reality and not let these late payments be forgotten.

3. Tracking expenses = bigger savings.

Tracking your business expenses sounds easy. But most business owners quickly realize how difficult a task it actually is in practice. Receipts get lost, purchases don’t get itemized, credit card statements can be vague, you accidentally buy things with something called “cash,” and the all too familiar thought of “oh I’ll definitely remember this” has a surprisingly high failure rate.

This is the type of dog used for tracking, right? Relevant!

But tracking where your business’ money goes is crucial, not just for taxes, but for simple financial awareness. Without an accurate expense tracking procedure in place, it’s impossible to tell if your business is as financially healthy as you think it is. We asked Carey Young, a professional accountant, why this is so important for SMBs and how this can lead to more savings:

“By tracking your expenses well, you can easily tell how much you are spending with a particular vendor or on a particular type of supply/cost for your business. This will enable you to possibly negotiate better prices/terms with your vendors if you can explain to them your value as a customer. Also, you can more easily determine if you are spending too much in an area and need to look into getting bids from new vendors.”

Your accounting software will streamline this process and make it less of a hassle. Be it tracking monthly costs, or expenses on the road, you’ll have the documentation to save time come tax season as well as full awareness of how best to spend (and save) your money in the months to come.

…..

There are plenty of other benefits to accounting software: ease of access to your financial information, cloud-based access to your data, reduced overhead cost for total accounting expense, easy invoicing, security, automation, and more. For the time and money you will have to spend anyway on accounting, investing in a cost-effective solution is as close to a no-brainer as you can get in improving your business. But hey, if you’re determined to be in the 18% of business owners happy to deal with Excel, more power to you! We’d love to hear how you do it!

The post The Cost of NOT Using Accounting Software appeared first on Billy Accounting.

Appsumo.com is a popular website with more than 1.5 million monthly visits. The audience comprises of entrepreneurial geeks from all over the world, mainly from the USA, Australia, Canada, and European countries. They get a lot of requests from software companies each day. So initially, my application went unnoticed. So I asked my friend Sampath for an introduction. He helped me refine my pitch to Appsumo and that helped us get noticed.

Over the course of the deal, they sent our promotion out to 900,000 email subscribers twice, after which sold out of our 4,000 lifetime licenses of Billy App.
With the prospect of having support costs for 4,000 new customers with only 2 months worth of cash flow to pay for it, why did Billy take the plunge?

TL;DR

We needed breathing room to operate and more users to refine our product.

Before Appsumo, we had 10,000+ free users but only 100 of them bothered to pay us for the enhanced features, and only 400 of the free users actually used Billy regularly.
As YouTube is learning, it’s nearly impossible to convert free users to paid users. Plus, when something is “free” it’s perceived value is almost nothing.

The freemium model was a mistake my predecessors at Billy had made which we were still paying for. Appsumo was our chance to fix that.

Operating budget

Billy was seeking investment and the popularity of our Appsumo deal did an amazing job proving to suitors that people had a problem which Billy uniquely solved.
Plus, the funds we received from Appsumo has given us more runway as investors begin lining up.

What can we do with our operating budget?

• Hire a new staff member to help us scale
• Improve our website and marketing
• Invest in our operational efficiency
• Host a massive party (optional)

An influx of feedback

With only 100 paying users and 9,500 moochers who never opened our emails, we didn’t have enough data to know how to improve our software.

Appsumo people are very vocal! We love that. For the first time, Billy is able to hit a critical mass of feedback which has helped us focus our product development priorities. With 4,000 new users, we have learned a ton.

Almost every possible scenario, confusing workflow, interface design issue, accounting need and international tax customizations has been explored and reported back to us.
We are so incredibly excited about the future of Billy and where our product is heading right now!

We also learned what the most common support questions are, where people are getting stuck with, and how we can do a better job making people feel heard.

The chance to make people happy

With 4,000 new users, we have a chance to make them outrageously happy. Sure, it might require some product enhancement first.

But we are sure our product is great and when so many people fall in love with it, they will tell their friends! (we hope)

We also hope to capture the stories of our users, real-life examples of entrepreneurs who have saved time and money by using Billy so we can share their stories and lessons with the world.

Our Appsumo deal page is loaded with over 900 comments and reviews, many of them positive and supportive. Others, critical and helpful with our roadmap. That’s 900 organic comments from real people who we can learn from and get better for.

Overall

Appsumo reportedly gets over 800-1,000 requests to get in their program per month, and they pick only 8 of them; 1/100th of a chance to get picked.
We had a rare and unique opportunity to work with them and we’re glad we did.

Not only did we get some cash flow and increase our user-base, the success of our deal proves our problem-solution fit; that indeed Billy solves a real problem for real people.
Most importantly, this experience has given everyone on the Billy team the confidence to know that our product is valuable to the world. Let’s call it an epic validation!

The post Why Billy Launched on Appsumo appeared first on Billy Accounting.

BillyApp: Thanks for chatting with us, Ed! Tell us a little about what you do for work.

Ed Friese: I was a regular 9-to-5 employee working in supply chain for healthcare for years. When I was laid off, I was hired by a consulting company and have been freelancing for about two years now. I assist with streamlining efforts of hospital supply chains.

BA: And what does that entail?

EF: It’s basically getting the best product for the best price to the right place at the right time. The healthcare industry is under the gun to reduce costs as much as possible so every little bit counts. When you’re buying tens of thousands of bandages a month, an extra cent saved per bandage adds up quick. So I help streamline the process, reduce costs, get quicker payments from their vendors, and a few other things.

BA: Two years into freelancing, how do you like it?

What I really like about freelance work is the diversity.

EF: Well I do miss the benefits of a 9-to-5, the health insurance for example. And there’s an uncertainty in freelance work, of course. So in that way, I think there is less stress in a regular job. I knew what I was doing when I get into the office each day. But what I really do like about freelance work is the diversity. It’s not the same every day. You deal with different things all the time. And you’re not trying to always get a promotion so you can do something different. I like that I’m my own man and I don’t have all that corporate stuff to deal with. I can try whatever I want.

BA: A lot of our readers can relate! What brought you to using BillyApp?

EF: I started with Excel spreadsheets to do my finances. With a one-man shop, it’s not too hard to stick with that, but I was looking for something for the long-term. I thought to myself “how do I want to be perceived in the business world?” If I just hand-write or type an invoice, does that portray me as the business that I want to be? Is this going to make the most sense for me two or three years from now?

How do I want to be perceived in the business world?

Billy was a great option and it was the right price.

BA: What do you like most about BillyApp?

EF: The learning curve with Billy is really short. It’s easy to use and the FAQs that you guys have will guide me in the right direction. As you know, accounting should be cut and dry, but there are just so many ways to slice and dice it. Billy allows for that flexibility.

One other thing Billy has that was an advantage for me is having something web-based. I’ve had work where I had to travel a lot, and I don’t have to be tied to just a certain laptop or tablet or phone. I can access Billy from any device, so it really adds to the flexibility unlike things like Quicken.

And when I was traveling a lot more, my clients would reimburse me for all my expenses: food, lodging, travel. So uploading receipts to Billy made things a lot easier. I could quickly provide my expenses to my clients on a weekly or monthly basis, and it was all really simple. That ability to upload receipts came in pretty handy.

Thanks Ed! If you’d like to be featured on Billy’s blog next, get in touch with us!

The post Client Spotlight: Ed Friese appeared first on Billy Accounting.

1. Moved logout button out from the drop-up to be always visible
2. Add tooltips to Logout, Settings, and Help buttons in the user menu
3. Released an updated way of converting PDF to images. This tool will support a broader set of PDF formats and will be quicker.

July 19th

1. “Fit widget bills overlay” – the drop area size on the bills widget on the dashboard was not rendering nicely. This bug is squished. 

July 24th

1. What do you call your taxes? Tax name customization field in settings that updates in invoices for GST and HST customers.
2. Fix required fields with no ‘*‘on them, cash and new account

July 27th

1. “Allow users to select a period from the Contact Export window”.
2. There was a problem in Edge with a chart not displaying on one of the widgets on the dashboard (Anyone know what the “easy numbers” widget refers to?), and that should now be fixed.
3. Affiliate program launched with working tracking links

The post July 2017 Product Release Update Summary appeared first on Billy Accounting.

In 2017, thousands of boomer employees will transition to self-employed work, finally pursuing their creative, backburner passions full-time. Trouble is, they’re often not versed in how to handle their finances as entrepreneurs.

Many don’t know about the tax deductions and credits they’re now entitled to claim as self-employed people — ones they couldn’t take as employees. Some know they can take the write-offs, but aren’t sure how to document them for the Internal Revenue Service (IRS). So they don’t put these tax breaks on their tax returns, leaving thousands of dollars on the table.

This mistake also increases their chances of tanking their pursuit, because it becomes costlier than necessary.

Just ask Mark Samson, an Intel circuit designer for 20+ years who transitioned to owning a photography studio in Portland, Ore. “I felt like the whole support I had as an employee was just pulled out from under me. How did I figure out pricing, keep receipts, account for overhead, bring in clients, network? It was overwhelming,” says Samson.

Entrepreneurs like Samson who stick it out often make due by creating excel spreadsheets of their expenses and relying on their accountants for any possible deductions.

If you want to read more about the 4 Essential Tax Tips For Second-Act Entrepreneurs, click here.

The post 4 Essential Tax Tips For Second-Act Entrepreneurs appeared first on Billy Accounting.

Whether you live in Australia or Canada, it is now possible to customize your Billy templates to reflect what you call your taxes. Just head over to the Settings page and click on Templates tab.

Here’s a walkthrough video prepared by yours truly to help you set that up. Enjoy!

For Australians, there is just one more modification needed…that’s to rename your Invoices to “Tax Invoice”.  Go to the template, select the ‘Language’ setting, and then scroll down till it says ‘Invoices’. Under that

Go to the template, select the ‘Language’ setting, and then scroll down till it says ‘Invoices’. Under that there are email subject/message boxes, then under that, there’s “alternative document title’. Change that to ‘Tax Invoice’ and voila!

The post [Billy Feature] VAT Customization Update appeared first on Billy Accounting.

Billy (www.billyapp.com), isn’t just a handsome cartoon fellow that we decided to write about, but a Refersion customer who is in the business of helping small businesses with their financials. We spoke with Joshua Waldman, Director of Operations at Billy, about the service Billy provides to SMBs and how they’ve grown their business with affiliate marketing.

So why the need for Billy? What pain points does the BillyApp solve?

JW: When it comes to accounting software, the options for entrepreneurs are somewhat limited. Quickbooks, Xero, these are great programs but they have a lot of features that small businesses don’t need. And you pay for them anyway. These programs are built for accountants, not for small companies where a couple people do everything.

For example, if you’re a freelance writer, and you just need to keep track of receipts, invoices, and expenses, all you need is a simple tool to help you organize everything. That’s what Billy is. It’s accounting but not for accountants. It’s all about time-saving.

Our tool automatically generates your next month’s invoice. It can send reminders to your clients, attach a late fee, and it’s very easy to see within the app who owes you money and help you manage your invoices. It can send quotes, which can be signed digitally, and turn that quote into an invoice. And through Billy, clients can pay you via credit card, and on average this means you get paid 10 days sooner than via a check.

If you want to read more about the feature of the Billy app, click here.

The post Interview with Joshua Waldman of Billy Accounting appeared first on Billy Accounting.

A freelancer seen here squatting in someone else’s nice office.

With that many new freelancers starting out each year, it’s no wonder that many are having trouble managing their finances properly. A recent report by Elevate’s Center for the New Middle Class revealed that for Millennials with credit scores below 700, 72% were “likely to learn financial skills via trial and error.” Yikes! Personal finance isn’t something you really want to stumble through. So let’s take a few minutes and break down the top 5 money mistakes freelancers make.

1. Not being on top of your taxes

Wait! Don’t fall asleep yet. We know that taxes are a complicated and boring topic, but for freelancers poor management of taxes is by far the number one money mistake. The good news is that if you do it right, you’ll usually pay less in taxes come April since you’ll avoid penalties, fees, and can take proper deductions. The bad news is that for new freelancers, dealing with taxes is annoying and intimidating.

This is a big topic, and we’ll probably dedicate a future blog post to this issue (or you can check out our free ebook on the matter) but for now, let’s highlight some steps you can take today to manage your taxes:

• Realize that taxes are a thing — Freelancers usually take home the full paycheck so it’s your responsibility to save a portion of it for taxes. More often than not, new freelancers just don’t realize that they have to do this, or just how much they’ll need to save. Start with broad strokes according to the current Tax Bracket. Say you fall into the 25% bracket. This means you’ll roughly owe $5200 + 25% of what you make over $37,950. For a $50,000 annual freelance income, that means you’ll owe about $8200 in taxes (before deductions). So plan to save around that much by April as a baseline of what you may have to pay.
• Start paying Estimated Quarterly Taxes — This means the IRS wants you to pay what you think you owe every three months. Why? Because the tax code was written for full-time employees in traditional 9-5 jobs and they haven’t caught up to the times yet. But thems the rules. Use their handy form (1040-ES) to help you break down what you’re estimated to owe, and you can use the IRS’ Direct Pay system to fork over your American dues online.
• Keep track of your expenses — You won’t know what you can write off if you don’t keep track of what you spend money on. Start tracking your expenses and hold on to your business receipts to make life easier when you’re itemizing your deductions. It’s best to use a dedicated platform to do this, but if you’re willing to put in the time, there are Excel templates you can use to help track your business costs.

2. Not separating business and personal accounts

Even if you’re a full-time freelancer, you often won’t need or want to incorporate into an actual, legal business entity. But that doesn’t mean you shouldn’t treat your finances like you’re running a business. One big mistake freelancers make is to maintain just one checking account and one credit card for both personal and business income/expenses. Again, it’s a small upfront effort (and maybe cost depending on the checking account you want to open), but it’ll pay off in the long run.

First off, a separate bank account will help you organize your income and expenses that are solely from and for your business. If you get audited, if you hire an accountant for taxes, if you need to budget for your business, if you need to calculate estimated quarterly taxes; all these get measurably easier (and faster) if your business financials are all in one place uncluttered by your personal transactions. This can even save you money. For example, keep in mind hiring a tax professional is often expensive; if you can save him/her even an hour’s worth of time by handing over access to just your business account, then you’ve already saved yourself between $25 to $100 in their hourly rate.

Let’s see… which one isn’t completely maxed out…

The same goes for having a business-only credit card. While new freelancers probably won’t need an actual business credit card (they’re only good for high expenses and often come with annual fees), you should still open another personal credit card to separate out your freelancing costs. Again, this will help you itemize your expenses and keep you organized, but there are other benefits too:

• Build up your credit score
• Separate credit limits for large purchases (ie. vacation vs desktop computer)
• Fraud protection (if one is stolen/hacked, the other is safe)

As long as you are good about paying off the balance each month, a separate credit card for business expenses is a smart move to make.

3. Relying too much on one source of income

Like many things, freelancing can succumb to the 80/20 rule where 80% of your income can come from 20% of your clients. In fact, a lot of people get into freelancing because of that “one good client” that finally shows them that hey, this might be a viable career after all. But betting it all on one big client can fail overnight, and if you haven’t diversified your income stream, you could go from a surplus to zero quickly. For example, a survey by BrightLocal showed that Freelance SEO workers averaged 9 clients in 2015.

Yes, bringing on more clients is easier said than done, but think about it this way: finding new clients is part of your job as a freelancer. With this mindset, at least 5% of your work hours should be dedicated to acquiring new customers. Since it usually takes some time to bring a client on board, make networking and soliciting projects a part of your work routine. Some freelancers set aside 15 minutes a day for this; others have a “New Client Wednesday” mentality of setting aside an hour a week. Whatever it is, set a goal and incorporate the pursuit of more work into your schedule. And to put this in context, Contently.net did a survey in 2015 that gives some insight into how often freelancers are looking for new work:

Some push-back we hear is that many freelancers don’t have time to take on new clients at the moment anyway. That’s a good spot to be in, but it’s still prudent to make sure that one client isn’t making up 90% of your income. If that’s the case, it still behooves you to look to diversify and take on new work, even if it’s only one small project a month. Again, this is a safety net in case of something unexpected. So if you’re at 100% capacity with many income streams, you’re probably good. If you’re at 100% with just two clients? You need to push that down to 95% and start looking for more customers.

4. Not realizing clients can (and will) pay invoices late

This point often comes as a surprise to new freelancers, who will then in turn quickly understand that sometimes the money just takes longer than you expected to arrive. Freelance long enough and you’ll inevitably run into clients who will make late payments, for reasons both credible and …not. In fact, 71% of freelancers have had trouble collecting payments during their career, and 81% of these issues were late payments. 34% said they had instances of not being paid at all.

These are scary statistics, and it just means you need to be prepared for the sad inevitable. Here are some ways to stay afloat during late payments and deal with clients who are missing invoice deadlines.

• Have a safety net — Personal finance blogs will tell you to have 3 to 6 months of living expenses saved as your emergency fund. If you’re a freelancer, you should double that. Not only is a freelance career inherently more unstable than a 9 to 5 (hey, there’s a trade-off to being your own boss), but remember that taxes haven’t been taken out yet. And as discussed earlier, having a diverse income stream is also a safety net.
• Put payment terms in writing — Beginning freelancers tend to just have handshake agreements with their first clients. You should quickly get contracts down on paper to have some leverage when it comes to payment terms. The industry standard is net 30, aka 30 days from when an invoice is issued, but 21 days is also common. Many freelancers also add in a late payment interest clause in their contracts, with a typical fee being 1.5% interest per month.
• Be polite, but be firm — When clients are late, be as polite and professional as possible when you inquire about your payment. You never know what might be going on behind the scenes of their business. But you can’t be a doormat as well.
• Know your legal rights — You’ll want to avoid this if at all possible, but you do have the option to take amounts less than $10,000 to small claims court. There are fees, but if you expect to win, it’ll be worth it. And hey, if you’re a freelancer in New York, you’ve got some extra protection in the “Freelance Isn’t Free Act” (now we just need it in all 50 states!).

Unfortunately, these things happen and it’s important to go into freelancing with eyes wide open. Late payments can devastate your financials, so it’s prudent to have a game plan in place if/when it happens to you.

5. Not knowing what you’re worth

“Your hourly rate seems too low. How about X much more?”

Yeah, that maybe happens if you’re working for your rich uncle, but in the real world those sentences don’t come out of anyone’s mouth. That’s why it’s important to make sure you’re not undervaluing your work and especially your time. Remember, unlike traditional office workers, you’re paying for everything from these paychecks: meals, snacks, coffee, internet, phone, electricity, health insurance, retirement savings, transportation, etc etc etc. In this case, your hourly rate is a lot different than an hourly rate of a 9 to 5 employee with access to that ever-stocked snack closet.

There is plenty of evidence that freelancers are getting exploited. From having to do a lot of free work to industries that consistently undervalues female workers, the life of a freelancer isn’t for the faint of heart. It’s important to know what you’re worth, and just as importantly, what you want to be worth.

Figuring out your personal hourly (or per-project) rate is complicated, but it boils down to a simple equation to get an estimate:

(Living Expenses + Work Expenses + Profit) ÷ Billable Work Hours = Estimated Hourly Rate

The first two items are self explanatory. “Profit” is what you want to take home after paying out for everything you need to work and survive. This includes spending money, vacation money, and money to invest into your savings and retirement. Your “Billable Work Hours” is your estimate of how many hours you’d like to ideally work in an average month.

Of course, your hourly rate will have to be flexible. Maybe you need to lower your rate to start with a new client you really want. Or maybe more intensive clients require a higher rate. But with this equation and some research into the average rate for your profession in general, you’ll have a solid basis to begin to value yourself appropriately.

What money mistakes have you made in the past? Let us know!

The post The Top 5 Money Mistakes Freelancers Make appeared first on Billy Accounting.