Want to avoid feast-or-famine trap of freelance work? Here are 7 financial tips every freelancer in Singapore should know
Singapore’s freelance economy is booming, as an increasing number of workers are enticed by the prospect of being their own boss and getting away from the daily grind. In fact, according to the Ministry of Manpower’s report on the labour force in Singapore, the share of self-employed residents and freelancers grew from 8.3% in June 2016 to 9.3% in June 2017.
However, the lure of freedom and flexibility comes with financial responsibilities; and unless you’re a freelance accountant, tax deductibles and essential business expenses may seem like a whole new world. Here are seven tips that every successful freelancer must know to stay in business.
Figure out your minimum rate
Before you start charging your clients, establish your acceptable minimum freelance rate. This can be as simple as calculating your monthly expenses divided by the hours you plan to work in a month. While it doesn’t necessarily mean that you’ll be charging the minimum, knowing your base rate will help in any fee negotiation
Set aside initial funds to set up shop
To grow your freelance revenue stream, you’ll need to set it up like a regular business. A business address indicates professionalism; some companies may even be wary of mailing cheques to a personal address in case it raises a red flag during audit.
Having the right place and equipment to work is also important. These may be things that an employee takes for granted, but as a freelancer you should consider investing in an appropriate work environment and essential work tools. For example, a freelance trainer may need to invest in a portable projector, flip charts and markers to conduct effective training sessions regardless of venue.
Plan your marketing expenses
Getting the first one or two freelance projects may be a walk in the park. But to sustain your freelance gig in the longer run, you need a steady stream of clients. Think about how you plan to market your services – through freelance job portals, your website or social media presence. These may require some financial investment in the beginning.
Save enough money to last six months
As a freelancer, you need to assume that you may have no income for a few months, and that invoices will be paid late or not at all. You may end up chasing big companies for up to a year before getting paid. Ideally, you should set aside enough money to pay for your food, lodging, transport and any bills that you expect over six months.
Safeguard your payment options
Freelancers can go through a feast-or-famine financial cycle as payments may not come in regularly like a salary. For every project you get, it’s a good idea to ensure that there is a clear contract with a statement of work highlighting milestones, payment terms and a billing plan.
Build in regular payments throughout the project’s lifetime. This guarantees that you will be paid for each completed project milestone and that you won’t be left empty-handed at the end of the project should the client not wish to pay.
Separate your business and personal finances
In the eyes of the Inland Revenue Authority of Singapore, a freelancer is seen as self-employed. Setting up a separate bank account is useful when accounting for business and personal income or expenses. You’ll also need to start keeping a record of your business invoices, receipts and other documents that affect your freelance income and expense.
Know what is tax-deductible
One benefit of keeping your business finances separate is knowing what is tax-deductible as a business expense. The Singapore government allows for business expenses directly attributable to the normal income to be claimed up to 12 months prior to the deemed date of commencement of business. For example, you may need to print business cards and set up a website before even earning your first dollar of income – these are tax-deductible.
Similarly, expenses that are incurred in the course of operating the business as a freelancer can be tax-deductible: telephone charges, rent, public transport costs and even your accountant’s fees fall in this category. Every little bit helps – and staying on top of your financial health will ensure that your freelance work is a sustainable and rewarding choice.