Are you new to all this freelancing world and stuck with what essential documents you need to keep your freelancing life up and running?
It’s legitimate to feel that’s a laborious and somewhat dull side of freelancing when you can’t get your head around a pile of the documents that you need to prepare as a freelancer.
Not to mention, it’s not a breeze when grappling with something you never ever worried and cared about when you were employed by a company.
But it’s high time for you to stand alone as your own boss when you decided to be a freelancer. Whereas it has the perks of being self-employed, it does also mean, in other words, you’ll be one who has to be responsible for what’s going on around your business. Especially for all the formal documents.
Having the right documents as a freelancer is crucially important to keep up with your freelancing operation. They will also help you with future projects, as well as keep them organized and efficient.
So, what are the 5 essential documents you must prepare as a freelancer? Let’s keep going.
1. Tax Report
Everyone who earns money throughout the year must pay tax, not just freelancers. However, in most countries in the world, freelancers need to be more involved with the tax-paying process.
When you earn money as an employee and you get your paycheck each month, it’ll likely already have things like taxes and national insurance deducted from it. This means that paying your taxes is a more passive experience that’s dealt with by your employer.
As a freelancer, you will need to pay your taxes yourself, and the method you use will be different depending on what you’re registered as.
For example, if you’re registered as self-employed, you’ll have to file a tax return every year and then pay the government directly. This will also be the same if you’re a sole trader or a limited company, although the amount that you have to pay may be different due to different rates of tax by country and industry. Some freelancers may also have to pay VAT if you’re earning enough.
All of this will need to be properly tracked and managed to ensure that you know exactly how much you owe and that you have those funds saved away to easily pay. As a rule of thumb, try to save away 10-20% of everything you earn so that you can put it towards tax. Here’s some more information about how tax works for freelancers.
2. Pension Application
Being a freelancer, it’s your job to find your own pension scheme to pay into as opposed to the workplace pension you had when you were employed.
Although getting a pension sorted may sound a bit frugal and not essential, you must do it, as you may miss out on vital money that you could claim to enjoy a better retirement.
Pension applications for freelancers are not the same as those for employees. They may need to provide details about the hours they work, how much they charge and whether they have any other sources of income.
Although it may vary depending on where you reside, the typical set of questionnaire of pension applications include:
- Do you earn a regular income from self-employment?
- What do you charge for your services?
- How many hours do you work in a typical week/month/year?
- What is your annual turnover?
- Do you have any other sources of income?
3. Quotation Document
A quotation is one of essential documents for freelancers to prepare when quoting clients. It is the best way to present your proposal and make sure that you are on the same page with your client.
A quotation document is a spreadsheet with all the information you need to quote your client. You can use Excel or Google Sheets to create one. But it’s just as easy to use a pre-made quotation template which you can easily get from the internet.
The quotation should contain all the necessary parts before sending it to your client. Below are the prominent elements that you must include in your quotation:
- Project Name
- Price Per Item
- Price In Total
- Turnaround Time
- Quotation Date
- Quotation Expiry Date
- Your Name and Signature
4. Freelance Contracts
When you’re freelancing, it’s possible that you may have work from multiple different clients. Each client is going to need a contract that clearly states the perimeters of each project, how much you’re getting paid, the due date, and other vital information.
As a freelancer, it’s your responsibility to properly manage those contracts and ensure that you’re sending a proper contract that clarifies every point in it. It’s because the contract can be used as a legal document that protects your rights in case something goes wrong with the client.
Given its importance legally, your safest bet is to create a well-formatted contract in accordance with the variations of each client.
Which type of employment contract do you need for freelancing?
- Fixed-Term Employment Contracts – It’s also called a “temporary contract” that is designed for short-term or project-based work.
- Casual Employment Contracts – It’s used when working hours are flexible and unpredictable. Typically, this contract type is for short-term employment.
- Zero Hour Contract – This is a contract type that doesn’t guarantee any hours of work to the employee.
- Freelance Contract – The general form of freelance contract laying out all the terms of the working relationship. This also acts as a legal agreement between an individual and a company.
What do you have to include in your freelance contract form?
- Introductory Paragraph
- Terms and Condition
- Payment Terms
- Project Scope
- Legal Disclaimer
- Termination of Contract
- Your Signatures
While you will be mostly safe with a contract formatted that way above, it would be wise to talk to an expert who can help you with law support in freelancing and make sure it protects you legally to the greatest extent possible.
Contracts detail the parameters of each project you’re working on. However, invoices are official documents you send to your clients to ensure you get paid for your work. As a freelancer, you’re going to be sending a lot of invoices. And given its frequency, it’s important that you have a system in place to better keep track of them.
Invoices typically itemize each aspect of your project so the client can clearly see how much each service costs them. The document will include the personal details of the client, like their name and address, as well as your details. When creating an invoice, you must include your bank details so that the client knows how to pay you. There will also be a due date on the invoice.
Depending on who you’re working with, some invoices can take up to 90 days to get paid, which can be tough for a freelancer who needs that money quickly. If you need the money from an invoice quickly, you can sell the invoice to an invoice factoring company that will give you most of the value of the invoice – usually around 90% – and then chase the client for payment themselves.
Conclusion – Essential Documents For Freelancers
Freelancing has a lot of admin involved, which makes sense as you’re essentially running a business of one. People can easily forget that they’re not only responsible for delivering the work you’re contracted to do; you also need to send invoices, calculate your tax, and all sorts of things that need the right documents to process.
As well as all that, you’ll also have to spend time finding people to work with, and this can all mean that there’s a lot that you need to do. That’s why you really need to be organized to succeed as a freelancer.
By keeping all your daily processes well-documented, you’ll be more likely to better manage your day-to-day operations which is the backbone for freelancing success.