The FreeAgent Blog
Posted on 4 December 2017 by Victoria Shepherd - Jump to comments
One of the downsides of being self-employed has always been the lack of traditional benefits. As the number of self-employed people in the UK grows (4.5 million in 2015, up from from 3.8 million in 2008) so does the pool of people who are vulnerable to unexpected changes in their circumstances.
We recently carried out a survey of over 500 UK micro-business owners and found that a huge 82% of micro-business owners have worked through an illness because they felt they couldn’t afford to take time off.
To reduce the danger of cash worries due to being under the weather, here are some practical ways to help protect yourself:
Build in a buffer
Everyone has some downtime eventually, so it’s important that the rate you charge contains a decent buffer. You can set aside this extra money as your own personal insurance policy, whether it be for illness, maternity/paternity cover or even just downtime between jobs.
The Association of Independent Professionals and the Self-Employed (IPSE) recommends that you take the salary that you would earn as an employee in a similar role and add a third, which accounts for the added costs that being a freelancer can entail.
So if you earned £30,000 as an employee in a similar role, then adding on a third of this takes you up to £40,000. You can then divide £40,000 by the number of days you would expect to work in a year. This should give you an idea of a ideal minimum day rate.
There’s more information on calculating a rate that covers you for the unexpected in Business basics: how to price your freelance work.
Consider getting covered for recovery
Insurance products like an income protection policy could offer you some cover, which would ensure you continue to receive a regular income until you’re able to return to work. How much you pay into the scheme each month will depend on the policy and your circumstances. Usually income protection insurance covers a wide range of illnesses and situations and has the potential to pay out for many years.
With income protection insurance, everything depends on getting the right policy for you and your specific circumstances – so it’s worth seeing an independent financial adviser or broker for advice.
Keep an eye on creative solutions abroad
In the Netherlands there is something called ‘Broodfonds’ (which means ‘bread funds’), a system where between 20-50 self-employed people group together and pay into a mutual sickness fund. If one of them can’t work due to illness, then the fund will pay out to support them.
Bread funds are ‘affordable, small, transparent and inclusive’. Participants choose their donation level and put aside each month the amount corresponding to that income. The conditions are the same for each participant; people who are older, or who have a medical history or a 'risky' occupation pay no higher monthly contribution. Participants can leave at any time and take their contribution with them.
There’s no formal equivalent of Broodfonds yet in the UK, although a pilot of UK Bread Funds is currently being tested.
I’m always interested to hear the different ways in which FreeAgent is being used by our customers, but when Neil Kerfoot got in touch I was amazed by his story.
For his 40th birthday back in 2006, instead of throwing a fancy party Neil decided to build a well in a remote rural village in Ghana. That act of altruism took on a life of its own and Neil now runs Village by Village, a grassroots charity working with communities in Africa to provide education, healthcare and other basic human rights.
Many of these villages do not have electricity but most have 3G network capability, so all Village by Village staff are issued with cheap smartphones and use the FreeAgent Mobile app to record expenses and projects costs. It also allows local workers to capture receipts of items (like bags of cement) and upload them to FreeAgent via the app.
The Village by Village team learning how to use FreeAgent
This means that Village by Village can see charity money being spent on funded projects in real time, with real proof of purchases, in some of the most remote parts of the world - all thanks to an ingenious application of FreeAgent.
Village by Village are always on the lookout for donations and volunteers so take a look at their website for more details.
Posted on 20 October 2017 by Ed Molyneux - Jump to comments
We’re all grinning from ear to ear after a very successful evening yesterday at the AccountingWeb Software Excellence Awards!
Held at The Brewery in London, the Software Excellence Awards recognise the best technology for the accounting profession. With top software companies from across the UK represented, we were shortlisted in the SME Accounts/Bookkeeping category alongside Clear Books, QuickBooks Online, Sage 50 Accounts and Xero.
Tough competition but I’m delighted to announce that FreeAgent scooped the top prize! 🏆
Users cast over 3,600 votes in the SME Accounts/Bookkeeping category, which is an all-time record for any category of these awards. It means so much to us to know that our friends in the accounting profession think so highly of the software and the hard work we all put into it.
We’re proud to be making the lives of small business owners and their accountants easier and we promise to keep improving and evolving to make your FreeAgent experience even better. Thank you and keep an eye out for more product improvements coming in the near future!
Posted on 12 October 2017 by Emily Coltman - Jump to comments
Shorter days, Halloween decorations on sale, pumpkin spice infiltrating high street coffee shops - there’s no doubt that autumn is upon us.
As momentum ramps up again after the slower summer period, the autumn months are the ideal time to take a good look at your business and start preparing it for seeing out 2017 in great shape. Emily Coltman FCA, FreeAgent’s chief accountant, gives her top tips for getting your books in order and making life easier in the chilly months ahead.
Check your cash
Do you know exactly how much your business has earned or how much cash it has on hand? If your business’s cash flow is poor then you could be heading for tricky times this winter, so it’s important to make sure that you know how much cash your business has in its bank account.
If you’re not already doing so, check whether you can set up an automatic feed in FreeAgent to pull this data from your bank straight into your accounting software in order to minimise data entry errors. Then make sure you check at least weekly, if not daily, to make sure that your bank balance is correct in your accounts and that all your transactions have been recorded.
Remember if your bank balance in your accounts doesn’t match what’s in your bank, you’ll have to look back and find the difference - it won’t go away!
Send out your invoices
If your business issues invoices to customers, take advantage of any downtime you have to check through your records and make sure you’ve sent invoices for all the work you have done to date. Your customers can’t pay you if you don’t invoice them!
You should also check your list of open invoices - because sometimes there might be some invoices that haven’t been paid because the customer’s just forgotten about them and you haven’t followed them up. There may also be old invoices in your accounts that haven’t been paid and won’t be, perhaps because your customer’s gone out of business.
Take some time now to write off any invoices that you’re sure will never be paid, and to chase up those customers who haven’t paid yet.
Round up your out-of-pocket expenses...
Out-of-pocket expenses are business costs that you paid for personally, for example if you went to the post office and bought a book of stamps to send business letters, but paid with your own cash. As long as these are bona fide business costs, you can put these into your business accounts too, and they reduce the amount of profit you pay tax on, so it’s worthwhile keeping track of all of them!
Go through your wallet and look for stray receipts and make sure that you’ve included any of them which are business costs in your accounts. If you use FreeAgent then snap them using your smartphone and they’ll be uploaded to your accounts immediately - then you can throw the paper receipts away!
...and review how your costs are categorised
When you’re putting your business costs into your accounts - whether they were paid for from your business bank account or whether you paid for them personally - make sure that the costs are in the right categories. For example, a pack of envelopes would be best categorised as ‘Stationery’, while a bill from your office landlord would be ‘Rent’. This helps you make sure that you’re claiming the right amount of tax relief on your costs, and means you can track where you’re spending money in your business.
Be aware of the categories that contain potential tax pitfalls (for example, sundries, subscriptions and lease payments) and make sure that any costs you put in these categories are correct. If you have any doubts, consult an accountant who should be able to advise you.
Keep an eye on when your tax is due
If your business is a limited company, it will be due to pay corporation tax nine months and one day after its year end. If you’re a sole trader, you can expect to be paying income tax and NI at the end of January. And whatever your business type, if it’s registered for VAT, then there will often be a VAT bill to pay every three months.
Make sure you know how much tax you’re due to pay soon, and have money put aside to pay for it. It’s also a good idea to set up a system where you keep a running total of all the tax you owe and align this with your calendar so you know exactly when you have to pay it (or use FreeAgent’s Tax Timeline feature, which gives you live updates of your tax position and deadlines).
Look to the future
Take some time during the early autumn months to consider how your business will deal with the rest of the year. Christmas, in particular, can be a potential bonanza for many businesses, so what will it do for yours?
Will you offer special products, services or discounts at Christmas? If so, could you pair up with another local business who serves the same customers as you do, to offer a joint Christmas package? For example, if you are a children’s party planner, could you find a local caterer, entertainer (magician, balloon modeller, clown) to team up with for special Christmas events? If so, this could provide a welcome boost to both of your businesses.
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- Improved Guess for transactions
- Commercial savvy: what small businesses can learn from this year’s Christmas ads
- Staying on top when you’re under the weather: tips for small business owners
- Five things we’ve learned about UK micro-businesses in 2017
- Customer stories - Village by Village