1 00:00:00,000 --> 00:00:03,920 [Pasan Premaratne] Once you're done with a project, it's time to get paid. 2 00:00:03,920 --> 00:00:07,300 At this stage in your business things are still pretty small. 3 00:00:07,300 --> 00:00:12,280 You're going to have a bit of money in the bank, you know all of your expenses off the top of your head, 4 00:00:12,280 --> 00:00:14,390 and you know who owes you money. 5 00:00:14,390 --> 00:00:18,970 But as you grow it's going to get difficult to keep track of these things. 6 00:00:18,970 --> 00:00:26,930 Accounting, or bookkeeping, is a necessary skill set that, like all other admin tasks, will really help you grow your business. 7 00:00:26,930 --> 00:00:34,620 The earlier you implement an accounting system, the easier the entire process will be for you. But where do you start? 8 00:00:34,620 --> 00:00:38,230 The first thing you need is a system to bill your clients. 9 00:00:38,230 --> 00:00:43,960 This doesn't have to be anything complicated, and there are lots of great options out there. 10 00:00:43,960 --> 00:00:48,740 LessAccounting, FreshBooks, and Xero are some of the most popular ones for freelancers. 11 00:00:48,740 --> 00:00:51,940 You may have heard of some of the bigger packages like QuickBooks. 12 00:00:51,940 --> 00:00:57,990 Quickbooks is a great software. But unfortunately for someone just starting out, it's a little bit too much. 13 00:00:57,990 --> 00:01:04,489 There's a little bit of a learning curve. And because of this, someone who is just starting a freelance business can get frustrated quickly. 14 00:01:04,489 --> 00:01:09,090 This makes them hate all bookkeeping tasks, and it falls by the wayside. 15 00:01:09,090 --> 00:01:15,490 To show you how simple and painless accounting can be, we're going to pick a software and walk you through the process. 16 00:01:15,490 --> 00:01:20,010 When you pick your accounting software there's a few things you want to keep an eye out for. 17 00:01:20,010 --> 00:01:28,100 First, it should be really simple to use. If the software frustrates you, you will feel like managing your books is a ridiculous chore. 18 00:01:28,100 --> 00:01:34,630 Unfortunately keeping an eye on your money is crucial to running your business, so it's something you're going to have to do. 19 00:01:34,630 --> 00:01:38,430 Make sure your software is easy for you to use. 20 00:01:38,430 --> 00:01:45,940 Second, you should be able to create invoices extremely easily and be able to send clients the invoice without any hassle. 21 00:01:45,940 --> 00:01:50,010 Finally, you should be able to track all of your expenses with ease. 22 00:01:50,010 --> 00:01:53,800 Expense tracking is very important, and we'll get to why later. 23 00:01:53,800 --> 00:01:55,950 Those are the main features. 24 00:01:55,950 --> 00:02:00,500 There are other things that are nice to have, like the ability to brand and personalize your invoices, 25 00:02:00,500 --> 00:02:02,850 but they won't hold you back in any way. 26 00:02:02,850 --> 00:02:10,090 For this video we're going to use FreshBooks as our example. It has all the features that we need, and you can try it for free. 27 00:02:10,090 --> 00:02:15,610 So once you have a system in place, the second important thing you need is to figure out who owes you money. 28 00:02:15,610 --> 00:02:21,210 We need to get paid for the work we do, let's write up our first invoice to a client. 29 00:02:21,210 --> 00:02:28,630 The guys who run FreshBooks used to run a design agency and as a result, the software is built with freelancers in mind. 30 00:02:28,630 --> 00:02:31,470 Let's go over some of the important things here. 31 00:02:31,470 --> 00:02:38,210 Date of Issue—capturing the date of issue is quite important because it allows you to track who owes you money. 32 00:02:38,210 --> 00:02:45,840 You need this data to figure out if your clients haven't paid you on time and if you should be imposing fines or late payment fees. 33 00:02:45,840 --> 00:02:51,690 Taxes—if you're going to be collecting taxes from your client, this is where you would indicate it. 34 00:02:51,690 --> 00:02:55,660 We're not going to be collecting any taxes so we'll leave this area blank for now. 35 00:02:55,660 --> 00:03:02,810 Taxes are a complicated issue, varying by country and state, and this is the kind of stuff that's best left to a professional. 36 00:03:02,810 --> 00:03:09,980 Then there's Terms. On our contracts, which we're going to tackle in a bit, we're going to include some information on payment terms. 37 00:03:09,980 --> 00:03:14,750 This section of our invoice is a great place to remind them what the payment terms are 38 00:03:14,750 --> 00:03:18,850 and how many days they have to pay for services rendered. 39 00:03:18,850 --> 00:03:25,800 Let's take a second to talk about terms. Your payment terms are quite important and can really make or break your business. 40 00:03:25,800 --> 00:03:32,430 FreshBooks ran a study on payment terms, and the most common term in the invoices sent out through their system was net 30. 41 00:03:32,430 --> 00:03:36,160 That means 30 days after the invoice has been issued. 42 00:03:36,160 --> 00:03:42,350 This seems to be an implied standard in many industries, but it doesn't mean that you should be implementing the same. 43 00:03:42,350 --> 00:03:45,550 Do what's right for your financial situation. 44 00:03:45,550 --> 00:03:52,800 If you give the client 30 days to make a payment, that means if they pay you on time you're talking about getting paid a month later 45 00:03:52,800 --> 00:03:54,800 for any work that you do. 46 00:03:54,800 --> 00:04:01,510 If they make late payments, it can be as ridiculous as being paid 2 or more months after you have worked on the actual project. 47 00:04:01,510 --> 00:04:07,120 This is terrible for your cash flow. It's already hard for a freelancer to be in a stable income. 48 00:04:07,120 --> 00:04:11,730 Why make it even harder by allowing payment dates far out in the future? 49 00:04:11,730 --> 00:04:15,440 If you want your payment within a week, that's what you should ask for. 50 00:04:15,440 --> 00:04:18,970 If you think about it, everyone wants to hang on to their money. 51 00:04:18,970 --> 00:04:26,880 If I had an invoice that said I had a payment due in 21 days, I would wait until the 21st date to pay you. Why do otherwise? 52 00:04:26,880 --> 00:04:32,850 No one likes paying bills. So the longer you give your clients to pay you, the longer you will have to wait. 53 00:04:32,850 --> 00:04:36,760 Very few clients will be nice and pay you early. 54 00:04:36,760 --> 00:04:44,020 That being said, one of the other data points from FreshBook's study was that certain terms do induce clients to pay faster. 55 00:04:44,020 --> 00:04:50,080 Saying thank you in your invoice increases your chance of getting paid, as well as avoiding technical jargon. 56 00:04:50,080 --> 00:04:57,200 Now while the data can be interpreted in many ways, the moral of the story is be polite, be simple, and be clear. 57 00:04:57,200 --> 00:05:04,000 Go with, "Thank you; we really appreciate your business. Please send payment within 7 days of receiving this invoice." 58 00:05:04,000 --> 00:05:06,890 Rather than, "Payment terms: net 30." 59 00:05:06,890 --> 00:05:14,040 Be smart about collecting payment. Always remind clients who are late, enforce guidelines, and keep tabs. 60 00:05:14,040 --> 00:05:20,220 Luckily FreshBooks has a few features that can help us do this. Notice this column here that says "Status." 61 00:05:20,220 --> 00:05:27,170 Well under that status it says "sent." That means that we sent our client the invoice but they haven't viewed in yet. 62 00:05:27,170 --> 00:05:30,410 Once they view it, the status changes to "viewed." 63 00:05:30,410 --> 00:05:36,380 This way you know whether your client is telling you the truth when they say they didn't get your invoice. 64 00:05:36,380 --> 00:05:40,890 When your client pays off the invoice, you can log that payment in FreshBooks. 65 00:05:40,890 --> 00:05:48,550 If the client had paid off part of the project costs in an earlier payment, then you can apply this credit towards the invoice total. 66 00:05:48,550 --> 00:05:52,110 FreshBooks allows you to do this in different ways. 67 00:05:52,110 --> 00:05:55,900 As you use FreshBooks more, or any accounting software for that matter, 68 00:05:55,900 --> 00:05:59,920 it will start to give you some great data to understand your business. 69 00:05:59,920 --> 00:06:05,340 You should poke around all this information to see if you can do things better and improve your business. 70 00:06:05,340 --> 00:06:09,550 Now let's assume we have a few projects under our belt with a couple clients. 71 00:06:09,550 --> 00:06:13,780 Invoices have been issued, and we've received payment on some but not on others. 72 00:06:13,780 --> 00:06:20,770 Once you start collecting all this data you will be able to do a better job with point #2 of why accounting is important, 73 00:06:20,770 --> 00:06:23,300 and that's tracking who owes us money. 74 00:06:23,300 --> 00:06:28,250 As you can see, FreshBooks shows you a quick overview of who owes you money. 75 00:06:28,250 --> 00:06:33,940 Of the $3,000 some dollars you have outstanding, $250 of that is a month late. 76 00:06:33,940 --> 00:06:37,120 But most of it is almost 3 months late. 77 00:06:37,120 --> 00:06:43,510 Now this is just an example, of course, but you can see how easy it is to keep track of your money using such software. 78 00:06:43,510 --> 00:06:48,450 Know which clients are late and by how much so that you can evaluate what action to take. 79 00:06:48,450 --> 00:06:55,230 You can drill down further by clicking down on the overdue amount to see which specific invoice was unpaid. 80 00:06:55,230 --> 00:07:01,260 The software can also show you how often your client pays so that if you were to undertake a new project with them, 81 00:07:01,260 --> 00:07:04,370 you have a better understanding of how to work with them. 82 00:07:04,370 --> 00:07:09,680 Clicking on a client here shows that they usually take a certain number of days to pay us. 83 00:07:09,680 --> 00:07:15,670 Since this number is clearly above our payment terms, it shows that we're either not clear enough with our payment terms, 84 00:07:15,670 --> 00:07:18,870 or we're not doing a good enough job of enforcing them. 85 00:07:18,870 --> 00:07:22,890 So there you go. Simple but effective ways to invoice your client. 86 00:07:22,890 --> 00:07:27,500 Now I used the free trial of FreshBooks to show you around but once you have a paid account, 87 00:07:27,500 --> 00:07:31,170 you can customize all the invoices to reflect your branding. 88 00:07:31,170 --> 00:07:37,170 Now this isn't all there is to accounting, but don't worry. We'll tackle the problems as they come along.