Transcript: Is Freelancing a phase or is it here to stay?
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Baz Baruah – host:
This is All Work, No Pay, a show that answers real questions that consultants,
freelancers, and business owners have asked.
Okay, so, I’m here today with Matthew Warters from Warters Co. Accountants based in Yorkshire, and we’re talking about the future of freelancing today. In particular, the particular question that we’re asking, or answering hopefully, is ‘Is freelancing a phase or is it here to stay?’ And obviously, the context for that is around the pandemic. At the moment, there’s going to be a lot of people who are losing their jobs who are going to think, ‘Actually, I could just be a freelancer.’
The thing is there’s a lot more to being a freelance than just being good at your job; that’s something that I’ve learnt over the years. You need to find work. You need to go out networking. You need to market yourself. People need to be aware that you – you have to sell yourself. You have to do PR. You have to know your way around your accounts. You have to know your way around your job. You might have to manage other people. So, there’s a whole load of other stuff that you need to worry about.
So, Matt, so from your point of view, what does a freelancer…
Matthew Warters:
Hiya.
Baz Baruah – host:
… need to know when they’re just starting out?
Matthew Warters:
When they’re just starting out… So, in terms of the question about freelancing and whether it’s here to stay…
Baz Baruah – host:
Yeah.
Matthew Warters:
… I certainly hope so because having switched from employment to freelancing a few years ago, it has genuinely changed my life. So, I get to see my children growing up. I also get to end up working until 9/10 o’clock at night sometimes, but it’s enjoyable, all of it.
So, yeah, when you first set out freelancing, it can be daunting. I think the recent coronavirus outbreak will push people to do it, especially with the redundancies. And also, any companies that have previously been taking on employees that don’t want to have that liability building up of potential redundancy or having to furlough people and pay a third of their wages, they’ll be more keen to take on freelancers instead of employees.
Yeah, and what does a freelancer need to know when they’re getting started? Well, the first thing that you need to get to know is your business: what you’re going to be offering people, and what help you’re going to need with it. So, you just take a look at the people that you had around you when you were employed, you need to be able to source all them services, so it could be IT; it could be finance. Get yourself a good system to keep track of everything. And you do need to think about how organised you are, as well. You have to keep track of everything. So, it’s all down to the individual and their personality, as well.
Baz Baruah – host:
Well, actually, that’s one of the things that I like about freelancing is it is down to your personality, as well. If you’re not an organised person, you can market yourself as, ‘The disorganised freelancer,’ and there are going to be people who like that because they don’t want someone who’s going to be right on the button and pushing them back all the time, as well. So, it gives you the freedom to be yourself to some extent.
Matthew Warters:
It does, yeah. Whatever your reason for going into business is, there will be somebody out there who needs your service that’s in business for the same reason as you.
Baz Baruah – host:
Absolutely, and that’s why – so, being yourself is a really good skill to have.
Matthew Warters:
Yeah, it is. It is. And actually, when you do start up your own business, that can take a little while to come out because you can fall into the trap of trying to fit into the mould of a stereotypical person in your industry, and then as time goes on, you find you don’t enjoy it so you let your true self shine through, and then you start to enjoy it.
Baz Baruah – host:
Absolutely. In fact, yeah, good example of that is actually if you look at a freelancer website and if they use ‘We’ instead of ‘I’, then you know that there’s actually – there’s a little bit of internal friction with themselves there. If they’re saying like, ‘We do this’ and ‘We do that’ when actually it’s ‘I do this’ and ‘I do that’, then yeah, you know that they’re pretending to be a company when it’s actually just them.
Matthew Warters:
Yes, I’ve noticed that, as well, yeah. There’s a lot of ‘We’. Yeah.
Baz Baruah – host:
And actually, the other example of that is you see it on LinkedIn a lot where because LinkedIn is supposed to be a professional network, people speak in this really, really bland corporate way. And I can understand that if you work for a big company because they’ll have all the brand guidelines that you need to follow, but if it’s just you, then you should be you because people are going to hire you.
Matthew Warters:
Yeah, and you do find that people like it a bit more. They actually enjoy when you tell them, ‘It’s me. I’m doing everything for you.’ And it’s a case of, ‘If you like me, we will get on great; if you don’t like me, then there is nobody else that can help you. You’ll have to find somebody that your personality gets on with.’
Baz Baruah – host:
Yeah.
Matthew Warters:
Yeah.
Baz Baruah – host:
Absolutely. So, do you think from a company point of view – from the buyer’s point of view – having a freelancer is an advantage or a disadvantage, then?
Matthew Warters:
So, I believe if you are somebody where you need 24/7 support with whatever you’re getting, then having a freelancer that’s just an individual probably isn’t going to be as good for you because there’ll be times where they’re on holiday, asleep, or away from the office – if they get given the phone call that we all dread at the moment that says, ‘You’ve got two weeks where you’re not allowed to leave the house,’ that type of thing can happen. But likewise, if you are wanting a relationship that’s going to be continuing for a number of years, then yeah, you need to find somebody that can do the job you need and that you get on with because you’ll speak to them quite a lot, and they’ll get to know your business, and you’ll get to know theirs.
Baz Baruah – host:
That’s perfect, yeah. And from the freelancer’s point of view – so, one of my pet topics is I always tell people, ‘Everyone should always charge more.’ If you’re a freelancer, you should definitely charge more because…
Matthew Warters:
Yeah.
Baz Baruah – host:
… because of that uncertainty, because of that you never know how the long the gig’s going to last for. So, it’s not – you’re not just paying for the time that you’re working; you’re paying for all the rest of the time, as well.
Matthew Warters:
Yeah, yeah. And you can charge more but still cost less because if you’re a company, you’ve got – a big company has got all their overheads; they have the big directors’ salaries to pay for. And for their employees, they’ve got their employer’s national insurance; the redundancy liability that builds up; all the extra benefits they’ve got to provide their employees; also, their pension, as well. You do have to think about your own pension if you’re going freelance and start saving for your future. But yeah, if you’re freelance, you can actually probably beat the cost of some of the big corporates, provide a better service, and end up doing better for yourself than if you were working for one of the corporates getting told what to do 24/7. So, yeah.
Baz Baruah – host:
So, that’s pretty much a win–win, then?
Matthew Warters:
It is. It is. And then, you’ll get me started on the tax reliefs to being a freelancer, as well.
Baz Baruah – host:
Well, I – so, tell me about them because yeah, tax relief is always something that a lot of people seem to like.
Matthew Warters:
It is. It is. So, if you’re employed, your salary is your salary. You’re taxed on what you earn, and then you go home at the end of the day. But as a freelancer, you have all of your costs – some of which are really just a cost of living, such as your mobile phone – that can go through your business and get you tax relief.
Baz Baruah – host:
Ah, man. This is really annoying: I’ve had a perfect connection all day; I’ve been on calls with people all day. It’s just now it’s going wrong.
Matthew Warters:
Yeah. This is exactly it, yeah, and there’s no one to blame either, is there? Because we’re both freelancers.
Whereas if you’re a freelancer, then there are quite a lot of costs – such as your mileage, use of home, your mobile phone, even your laptop if you get a new laptop – that the business can pay for, meaning that your taxable salary is less. So, whilst you’ve done the same things in your life – such as you’ve driven your car, used your mobile phone – you end up with a lower tax bill. So, you can earn less on paper and end up with more in your pocket, which is always nice.
Baz Baruah – host:
That’s always good, yeah. However, it is slightly dangerous. So, my company is VAT-registered, and so when I’m looking at buying myself a new laptop or something, I’m thinking, ‘Well, actually, the price is 40 per cent less than what it says on there.’
Matthew Warters:
Yes. Yeah, it is. Yeah. It can lead to being a bit – you find yourself putting 40 per cent on as you budget sometimes because you know you’ve got 40 per cent off, yeah.
Baz Baruah – host:
Yeah. Which, yeah, you really shouldn’t do.
Matthew Warters:
Yeah.
Baz Baruah – host:
One thing I would just – I just have to add, as well, is if you’re starting out as a freelancer, it’s really useful to build up a buffer because there will be dry periods where you’ve not got any work in. It’s concept of feast and famine. So, if you can put some of your money away – and obviously, I use a system called Profit First for doing that – if you can put some of your money away, then it will see you through those dry times.
Matthew Warters:
Yeah, yeah. I do think that is a really good point, and it’s worth getting that in place from the get-go because a lot of your bills can be periodic, so if you’ve not got that pot built up, then you can get hit big time, yeah.
Baz Baruah – host:
Yeah, and one of the key things in the Profit First method is by setting up a separate bank account because that adds a little bit of friction. So, if you wanted to dip into that pot, you have to think about it, and then go, ‘Actually, I’m going to transfer that money out. Am I really sure this is what I want to be doing?’ And by keeping it locked away, as well, you’re less likely to spend it accidentally.
Matthew Warters:
Yeah, and the beauty of the business bank accounts nowadays is that you can do them online, so you don’t even have to pay separate bank charges for them all.
Baz Baruah – host:
Absolutely. Yeah, and with – what’s it called – open banking, as well, its dead easy to manage, as well because they all just feed into your accounts package…
Matthew Warters:
Yeah.
Baz Baruah – host:
… and make your job easier.
Matthew Warters:
Yes. Yeah, which is brilliant.
Baz Baruah – host:
So, if you’re a freelancer and you’re just starting out and you’re thinking, ‘Right, I really, really need an accountant…’ – and I have to say you do really, really need an accountant – how can people get in touch with you?
Matthew Warters:
So, if you look on my website, which is www.wartersco.com (it’s spelt with an extra R), there’s a contact form on there. I’ll reply to anyone’s questions that have got any. What I would say is if you’re staring out, or even if you’ve just been made redundant and you’re being forced to start out, you can just have a free conversation to do a bit of planning and check that you’re on the right path.
Baz Baruah – host:
Absolutely. One of the areas that you cannot skip, and you can’t really skimp on is dealing with HMRC because they’re not going to – they’re not very forgiving.
Baz Baruah – host:
Yeah, and they give you a year of trading, and then another nine months to pay. So, some people fall into the trap of waiting 18 months before even thinking about it, at which point you get your accounts prepared, you find out you’ve done alright, but then there’s a significant tax bill, and it could have been a lot less if you’d have spent a few hours thinking about it a year ago.
Baz Baruah – host:
Yeah, yeah. And, of course, if you’re leaving it 18 months, then you’re in effect having to deal with two tax bills in one year, then.
Matthew Warters:
Yeah. Yes. Yeah, you are.
Baz Baruah – host:
Which you don’t want.
Matthew Warters:
No. No.
Baz Baruah – host:
Okay, that’s absolutely fantastic. Thank you very, very much, Matt. That’s it for this week’s show, and we’ll have another question for you next week.
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