The UK is a great place to set up shop as a freelancer or contractor. The government has made it fairly easy to register as self-employed and there are plenty of business opportunities to take advantage of. However, when it comes to budgeting for freelancers and contractors in the UK, it can be a bit more complicated.
Budgeting, or cash flow management, is essential for any business – but especially for those operating as a freelancer or contractor. While there are many routes to success as a freelancer or contractor, budgeting is arguably the most important factor in making sure you meet your business goals. In this article we’ll explore why budgeting is so important for freelancers and contractors in the UK, and provide some helpful tips on staying on top of your finances.
Why Budget for Freelancers and Contractors in the UK?
When budgeting for freelancers and contractors in the UK it’s important to keep in mind the unique nature of the self-employed worker. Unlike other types of business, freelancers and contractors don’t have the same security of a standard salary or a monthly wage. This makes budgeting for freelancers and contractors particularly important, as there are no guaranteed payments which can be relied upon and it’s up to the individual to manage their finances in order to ensure they stay within their means.
The way freelancers and contractors work in the UK also influences the way they must budget. Many freelancers and contractors in the UK are freelancing or contracting on a part-time basis, meaning their income is inconsistent and unpredictable. This complicates the need to budget, as periodic payments may be quite different from month-to-month, making it difficult to get a good ‘big picture’ when budgeting.
Planning and Tracking Your Budget
When budgeting for freelancers and contractors in the UK, it’s important to plan and track the money coming in and out of the business. Accurately understanding income and expenditure is the best way to ensure success when budgeting. Start by creating a spreadsheet showing income and expenditure over the last three months and tracking projections for the next three months. This will enable you to create a more accurate picture of your finances and create a budget you can stick to.
It’s also important to take into account any business expenses you may incur. For example, if you’re working from home as a freelancer then you may need to take into account the cost of utilities, internet and other home office expenses such as stationery and software. Additionally, you should plan for any taxes you may need to pay each year.
Making All Payments on Time
As a freelancer or contractor, it’s essential that you make all your payments on time. Late payments not only incur fines and fees, but they can also damage your reputation as a reliable business partner. Keeping track of when payments are due is important, so it’s a good idea to use a tool like a calendar to help you stay on top of this. Never forget when payments are due and make sure to send out invoices on time to ensure you get paid promptly.
Building an Emergency Fund
Freelancing and contracting can be an unpredictable business, and even the most careful planning can be thrown off by something unexpected. It’s important to have an emergency fund in place to help cover any unexpected expenses or periods of downtime. Aim to save around three months’ worth of income in your emergency fund in case of unexpected circumstances. This will help to reduce the financial impact of any setbacks and help to keep your business on track.
Seeking Professional Advice
Budgeting for freelancers and contractors in the UK can be a complicated endeavour, and at times it may be advisable to seek professional advice. An accountant experienced in working with the self-employed can provide invaluable assistance when setting up a budget and tracking expenses. Accountants can help to ensure your payments are in order and can help to identify areas where expenses can be reduced – a factor which can be particularly beneficial for freelancers and contractors operating on a limited budget.
Budgeting for freelancers and contractors in the UK requires careful planning and close monitoring. It’s important to accurately track income and expenditure, make all payments on time, build an emergency fund and, where necessary, seek professional advice. By staying on top of your finances, you can ensure your business remains successful in the long-term.