While some individuals are not designed to move to the strings of a 9-to-5, some find it unappealing to work for others. Admittedly, there is a thrill that comes with working on your own terms. But this freedom comes at a price.
The UAE regulation requires a freelancer to obtain a work permit along with a resident visa through a free zone. The license fee, visa cost and health insurance all add up to the start-up cost of the business. Moving forward, freelancers should be prepared to deal with late payments, off-seasons, and also possibly no income or work for the first few months or until they get a hang of the market along with countless day-to-day expenses.
Regardless of the uncertainty of finances, bills have to be paid. Here is how to merge your accounting department with your creative department to ace the freelance game.
Create a budget
A budget helps you get a realistic sense of your income and expenses, helps plan finances, set goals, settle debts and adjust spending habits. It is essential for a sustainable freelance business. You can also automate the budgeting process with a simple spreadsheet or a user-friendly app.
Track your numbers
Every good freelancer needs to track their numbers. This can give a fairly accurate picture of your average income. The historical view can give a better insight into the seasonal trends in the market and help prepare for busy and slow times of the year. You can also benefit by focusing more on areas that generate better revenue.
Saving is essential
You need to save for your future growth, for off-seasons, for your nest egg and for emergencies. An emergency fund lessens the stress of an unpredictable income. Financial experts recommend at least 6 months’ worth of living expenses in emergency fund for freelancers.
Separate personal and business accounts
It is important for freelancers to keep their personal finances separate from business finances. Work should be considered an independent entity, separate from any personal financial matters. Separate accounts simplify finances by making the process of bookkeeping and tax returns easier. A clean business account will also impact your growth as a freelancer and how you operate your small business.
Freelancer and the VAT
Freelancers too have tax obligation, though there is a minimum required turnover threshold for VAT registration as described by Federal Tax Authority in the UAE. It helps to use a tax calculator to determine how much you owe in VAT.
Work with a facilitator
Chasing after the money you are owed can be one of the biggest challenges to freelancers. A facilitator connects the freelancer to the client and handles all finances, giving the freelancer more time and energy to concentrate on the job.
Revise your rates
A freelancer is in a unique position to revise his rates frequently and increase them based on industry trends, inflation and his skills and experiences. This in turn can lead to increased income and expenses.