Everything you always wanted to know about how to write an invoice, freelance contracts and estimates for a job (but were afraid to ask)
There is something innately human about making a leap into unchartered territory. It’s in our nature to dream about the unfamiliar. But many of us don’t quite take that final step. It’s easy to be safe and comfortable, even if you’re not truly satisfied with your lot. Maybe you’re reading this sat at a desk in a non-descript office on a non-descript business park in a non-descript satellite town, wondering about what step to take next. Why not go freelance? Why not start your own business? But how to go freelance? How do you become a good freelancer?
Even in the midst of economic turmoil and a slightly embarrassing national identity crisis, the number of freelancers, gig workers, and self-employed professionals continues to rise – especially in emerging lifestyle and creative businesses. Whether you’re a dog walker or a copywriter, a beautician or a home baker, there’s never been a better time to start out on your own and build your own business.
Maybe you’re right there on the cusp, ready to get started. But you’ve got questions. How to go freelance? How to write an invoice? How to write an estimate for a job? What is a freelance contract? How do I register for a UTR number? Why are there so many acronyms?
In this blog, we’ll try and answer a few of those, and attempt to provide a little introductory information. If you’ve ever wanted to start your own business ideas, wondered how to put together an easy invoice, or fretted over how to write an estimate for a job, then you’re in the right place.
Let’s kick things off at the beginning. What is a freelance contract? Although you may have escaped the drudgery of that office 9-to-5, it’s a little harder to throw off the shackles of administrative work. Is putting together a contract boring? Undoubtedly. Is it essential for your wellbeing and future? Absolutely.
Like any other contract, it functions as a legal agreement between yourself and your end client. Not only will it make sure that you get paid as promised and on time, it’ll protect you should the client you’re about to start working for attempt to back out of or amend the contract. At the very least it should cover the following:
- The work you’ll be doing and how long it’ll take you
- The resources, facilities and equipment you’ll need to complete the project
- A clear indication that you’re a freelancer, not an employee. This is very important if you want to avoid IR35 mishaps later on
- How much you’ll be getting paid for the project, alongside when and how you’ll be paid
- Intellectual property rights. This is absolutely essential. Making it clear that you own your work until you’ve been paid will prevent the end client from using it without handing over the cash
There are a number of excellent freelancer contract templates online. Ultimately you’ll find something that works best for you, but we like this one from the good people at FreeTrain. If it’s your first time putting together a contract, make sure you do your research. You’ll thank yourself for it later.
Another essential part of your paperwork arsenal as a freelancer will come in the form of an invoice. If you like getting paid on time (and who doesn’t?) then you’ll need to make sure that you become proficient in the art of writing an invoice.
Remember when we said you’d still have to deal with a lot of the admin stuff? We weren’t kidding.
As with freelancer contracts, there are a number of great resources online which will provide you with free invoicing templates. Our personal favourites are from Going Freelance and Freelance UK, but feel free to do some digging.
A proper freelancer invoice should contain the following information as a minimum:
- A unique invoice number (you’ll want to have some kind of ordered framework in place so that you can easily find old invoices later on)
- The date you created the invoice
- The amount you’re charging – you’ll need to itemise if you’ve been working on several projects at once for the same client, and specify the total amount at the end
- Your company name, address, and any contact details
- The company name and address of your end client
- Terms of payment (i.e. ‘payment due within 30 days’)
- Your bank details
- A detailed description of what you’re charging for
- If you’re a sole trader, then you’ll also need to include your own name and an address where legal documents can be delivered to
It might seem like a lot to get a handle on, but it won’t take long before you’re an invoicing master.
Acronyms – the bane of many a freelancer. What’s wrong with saying whole words anyway? Once you’re at the helm of your own ship, you’ll quickly become au fait with quite frankly a ludicrous amount of abbreviations, contractions, and condensations. UTR is one of the first you’ll become familiar with.
The ‘UTR’ in ‘UTR number’ stands for Unique Taxpayer Reference and it’s a ten-digit number issued directly by HMRC (yes, another acronym) to identify individual taxpayers within their system. If you’ve set up a limited company, your UTR number helps HMRC identify which companies owe what in terms of tax.
When you register with HMRC as a self-employed person you’ll automatically be assigned a UTR number, which can easily be found on any documents they’ve issued. Very few of us are going to commit those 10 digits to memory, but thankfully it’s easy enough to find your information in your Government Gateway account. It should be either within the Self-Assessment section or in the top right corner of your account summary. If you’re still, then just pick up the phone and give HMRC a call on 03002003310.
Writing an estimate
Let’s take a step back. You’ll often kick off any client relationship with an estimate for the work you’re about to undertake. Naturally, as your career progresses your reputation, skills and experience will grow, and you’ll be able to charge more. It’s something you’ll pick up as you go along.
For the time being, writing an estimate is something you’re going to have get used to as a freelancer. Our top tip: be prompt and be honest. Lay out everything you need in writing. Try and turn around any quote within 48 hours. Do a little digging before you start out and find out what can affect your costs.
What’s going on in your industry, and in the market more generally? Is there legislation coming in that could drive your costs up (or down)? Is your industry going through a bit of a downturn or is it expanding rapidly? See these kinds of question as your foundation to build on.
After you’ve done your groundwork, you’ll need to price up all the resources and materials you need to get the work done. There’s a good chance you’ll own some of the equipment already but be careful not to sell yourself short – you’ll only regret it later.
After that, don’t forget to check in on your competitor rates. You don’t want to come in with a wildly high figure, but you don’t want to undercook it either. Find a happy medium. Ask around. Read online. Speak to others in your industry. It all helps.
Finally, you’ll want to factor in how easy it is for you to get to your new job. If you’re working remotely or digitally it’s not an issue, but it’s still best to check if you’ll be required to attend meetings or similar gatherings. If you’re working on-site, think about travelling distance and the working environment itself.
You should be able to find your estimate as a result of the following equation:
Hourly rate x hours of work estimate + cost of materials + waste percentage + overheads = your estimate
Round it up or down to the nearest appropriate figure, build in a slight margin and provide a schedule with milestones and you’re there or thereabouts.
Starting your own business ideas in the UK? This one is up to you. If you’re not sure what freelancing field you want to go into then you’re probably not quite ready to make the leap yet. Even if you’re not there, however, you’ll have a pretty good idea of your strengths. What are you good at? What do you enjoy? Is there a gap in the market?
It doesn’t matter whether you want to be a fashion evangelist, a hairapist or even a cat behaviour consultant – being a freelancer is all about playing to your strengths and using your unique expertise to the best of your considerable ability.
Freelancer Business Insurance
Here at Dinghy, we’ll support you in whatever you do. We’d also strongly recommend that you have insurance in place before you get started because, well, it’s what we do and we’re good at it.
Going freelance means that you are open to the risks that being an employee does not expose you to. What if a client doesn’t pay an invoice? What if they breach their contract? What if you make a mistake at work and are pursued for damages? What if you cause injury on site? What if you lose client data? These are all risks that you face, and only business insurance specifically for freelancers can give you peace of mind.
At Dinghy we offer specialist freelancer insurance including Professional Indemnity, Public Liability and Business Equipment insurance so you can get on with the important part. Running your business.
With us you can turn your cover on or off, up or down as and when you need to. Saving you money when you are not working and protecting you when you are. It really is that easy. Why not kick things off by getting a quote?