Inevitably, as my design students hit their third year of study, they start to take on freelance projects and then all the questions start coming about how much to charge, how do they invoice, what is an ABN and so on, so I have prepared this blog post to outline the way I do things. I hope you find it useful.
Before you Start
In Australia, the tax department wants to know if you’re a professional, or if you’re a hobbyist. If you are a hobbyist and only make a few hundred dollars from your hobby, you shouldn’t be able to claim all of your hobby equipment on tax. Fair enough. But if you’re an emerging professional, you still might only make a few hundred dollars in your first year, but you should still be able to claim your expenses, so the Australian Government devised a Business Numbering system so you can register as a graphic design professional. Obviously, you are expected to make more money each year as your business grows. If you only make a few hundred dollars every year, they will start to ask questions, and rightly so.
So, first step, if you want to start freelancing professionally in Australia, you should get an ABN. This is an Australian Business Number and identifies you to the tax department. It is free, it lasts forever and you can get one here.
Whether you register for GST (goods and services tax) at the same time is up to you, but the general consensus is you shouldn’t bother if you earn under $50,000. Of course, when you do start earning the big bucks, you can register for GST later.
What do I do with my ABN?
Not much, other than putting it on all of your invoices when you send them. You should also put the words “Tax Invoice” on your invoices so that the person you are invoicing can claim them on their tax return.
An ABN also helps you when you buy certain things, such as cars, phone plans and .com.au domain names. Certain bodies like to have proof you are an Australian business. You will also have to fill out an “activity statement” for the ATO at some point. You can choose to do these yearly or quarterly. I do mine quarterly, but I am registered for GST so I prefer to break it into smaller chunks as I have a lot of receipts and invoices to process. If you are not registered for GST and don’t have much “business activity”, yearly reporting is fine.
How do I send an invoice?
I shudder when my students tell me they are generating invoices in InDesign or Illustrator, and I guess if you’ve only ever sent three, that’s probably OK, but as you get more jobs, your tracking and invoicing needs to become automated. I’ve heard several stories of people going out of business because they just never got around to invoicing, and manual time tracking is painful, especially if a project stretches out for months.
I use Billings, because I have an Apple computer system and Billings is the best program I’ve found designed to work in with the address book and Mac mail automatically. I love it because it imports the client’s details in from the address book, you can send an estimate from Billings and then when the project goes ahead you can track your time automatically into the project, or enter the time and cost manually, whichever you prefer. Then when the time comes, generate an invoice and print/save/email it all at the same time and if the client doesn’t pay on time, you can resend it. You can also generate reports to see who has paid and who hasn’t and how much money you made on a weekly/monthly/yearly basis.
The best thing about Billings is the price. At around $50, the amount of time it has saved me, it has paid for itself hundreds of times over. You can also download a trial version from their site.
What about project management?
A companion program to Billings is Daylite, and the two integrate together to run most small design businesses. Daylite is a project management system for graphic designers, so if you are working with other designers, it’s a great way to delegate roles and responsibilities, track leads, track projects and so on I’ve worked in a studio with three designers and we used it every day on every project. It just means that everyone knows where a project is at, at all times, and who is responsible for which part.
Daylite also records all the information that accompanies a project so that months later, you can go back and see where it was printed, what paper stock was specified, what all the web login details are on a client’s web site, what emails were sent back and forth that relate to a project, and so on. For this reason alone, it is worth using as a sole freelancer.
Ultimately, the best system for running your business is the one that works for you, but if you find yourself repeating the same tasks over and over, or having to go back through information to find something that should really be at your fingertips, it is probably time to update or revise your system. If you don’t have a system, the sooner you get one, the better. Anything that relies purely on your memory is a terrible idea. Work out how to store, record and access the information digitally.
What hourly rate should I charge?
It’s entirely up to you, but a good rule of thumb for recent graduates seems to be around $25 an hour and it should increase regularly from there as you gain more experience. You may also want to quote a flat rate for a project. Often, if the client is nervous, they will prefer a flat rate and then you can work on getting faster, without losing any money.
I recommend always invoicing a client for 50% upfront and the rest upon completion. Invoice each project separately and don’t start work until the money is in the bank. I’ve learnt the hard way that people who have every intention of paying, sometimes don’t. It also helps to engage your client in the process. If it all gets too hard halfway through, it’s easier for them to wander off if they haven’t paid any money yet. The payment upfront helps keep the client focussed and invested in the project … and if they don’t want to pay you any money upfront, chances are, they won’t pay you any money at the end either, so better to learn that about them now, before you do any work.