Tuesday, 10 September 2019

Managing money as a freelance writer – does it make you panic, too? Moira Butterfield

 Being a full-time writer is no financial picnic. It’s a tough career choice because there’s no monthly salary cheque. I compare it to the mental skill you need to walk along a cliff path - i.e.: keep going and don’t look down. Here are some of the things I’ve learnt about this tricky money thing. I hope it will make you feel less alone in this crazy choice we’ve made.

Don't look down 

1) Keep your accounts up together as best you can. If, like me, just thinking about money can make you feel a bit sick, this isn’t a natural piece of behavior. I’ve thought about getting one of those apps they’re advertising on TV, where you photograph your receipts and they go magically into a spreadsheet. Is anyone using such a thing? I actually get my partner to do my books, and my Mum once used to do them – basically because I’m so panicky about doing them myself. One way or another they do get ordered, anyway.This applies to part-time writers, too, of course. 

2) Keep writing earnings and expenses very plainly separate from your household accounts. This is in case you have to show the Inland Revenue. I’ve written before about tax investigations and I won’t bang on about them again, but assume it could happen to you and be prepared. If you can’t clearly show where money came from and where it went, you could be in for a bill.

3) Get tax investigation insurance because if you are chosen it’ll cost you in accountancy fees (unless you are very up-together on tax you will need them to come with you for interviews). Members can get it through the Society of Authors (and they also have a free tax helpline for members) or I get it through my accountant. I have been investigated twice, both times when my earnings went down due to childbirth. I think that the big swings in yearly earnings aroused their suspicions. They probably thought I was hiding money but I wasn’t. In the end they charged me for some opal fruits on a petrol bill and a £4.50 toy on a receipt but it cost me £1,000 in accountancy fees to prove I was clean (apart from the opal fruits).

4) Pay tax monthly or at least save it somewhere. The Inland Revenue now has a scheme enabling you to pay an amount of your choice by monthly direct debit – and you can stop and restart at any time or get the money back out (it's easy to set up online). By the time my tax bills come (January and July) I’ve just about cleared them. It’s a total godsend to me as I could never save in my own private account (I always found I needed it somehow), and I often used to have to borrow the money when the tax bill arrived. The way I do it now is a huge weight off my mind.

What I used to do with my tax 'savings'

5) On fee-paying writing jobs don’t allow publishers to delay paying your invoices past the end of the month after the month invoiced (ie: 30 days, effectively). If they haven’t coughed up, ring their accounts office (or get a confident friend to ring and say they are your financial advisor working on your accounts – Mum used to do that, too). On work that is invoiced through an agent it will be up to them to chase payment, but I’m sure it would be worth reminding them if what you were expecting doesn’t turn up.

6) When working direct with publishers don’t accept payment excuses such as ‘we can’t find your invoice’. Scan it, email it and ask when payment will occur asap, as this is not your mistake.

7) Always check stage payments carefully in a contract. Are they weighted the way you want? You’ll need a fair amount up front and less at the far end because you need to eat. If accepting a fee-paying contract I would never agree to delaying any payment to publication date, as you will have no control over it. On royalty contracts I do accept that because I have a more ongoing interest.

8) Don’t start comparing your earnings to other people in different professions. That way lies madness. If you make the choice to be a full-time writer, own it.

9) Remember that you are not alone. There are lots of us out there on that cliff path, ready to listen. I know that the Society of Authors has a hardship fund, and though I’ve never used it, I have in the past been in a position perilously close to needing that helping hand. That’s why I have such a difficult relationship with this subject. I would personally prefer never to think of money again, and instead think only of words, but I know I have to face it every year, and so do you. Let’s do the best we can.

It's not easy dealing with this, but we're not alone. 

Moira Butterfield
Twitter @moiraworld
Instagram @moirabutterfieldauthor 

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Andrew Preston said...

'Spect that's why the makers changed the name of Opal Fruits to Starburst. Too many associations with nefarious accounting practices !

Actually, yours sounds really complicated. When I freelanced in my own line of work,
the first thing I did was buy an off the shelf limited liability company. Installed myself as director,and my brother as a silent director. Retained every receipt that could be associated with the company..., car, fuel, travel mainly.and threw them in a box.

After a year of freelancing, it was time for the company annual accounts.  After having encountered several freelancers who had played it all fast and loose, never bothered with paying VAT, or keeping accounts..., been caught, and who now drove around in ancient Ford Escorts held together by filler...., I decided that I could do without 7am knocks on my door from HM Customs and Excise.

I went for solid, respectable sounding accountants... Fawcett, Brown and Pinniger.., of Salisbury, Wiltshire.   I met with whichever of them was called Brian. Brian explained to me that thay had a very, very good working relationship with their local tax office, and that the accounts audited by the firm were very seldom challenged. There were several more phrases that basically said "No, we don't get involved in dodgy stuff..". 

And so, once a year, over a couple of weekends, I'd empty out the contents of the receipts box, separate them into each of the 12 months. Write up descriptions of each spend,then put each month's receipts into it's own envelope.  Pull my bank statements together.  No business account, just my personal account.  Cheque book stubs. Then send the lot off to the accountant.  Over several weeks they'd do their work.  And eventually come up with a figure for what I'd paid myself, what was a dividend, and how much corporation tax to pay. 

Over 12 years, never any problems with the authorities. Not remotely.

Quite astonished to read that there is actually something called 'tax investigation insurance'. I guess that's the free market economy for you.

Moira Butterfield said...

My accounts are very simple, but once picked for a tax investigation, HMRC will go every part of your financial life, not just your business. I was picked, I believe, because I had babies (twice) and the following year my earnings dipped. I think it's discrimination against women, but it can never be proved.

Anne Booth said...

Thank you Moira. My relationship with money is very similar to yours - I find the whole idea fills me with panic. My husband helps me and then I also pay for an accountant and it is worth every penny. I even paid my accountant for a couple of years when it turned out I hadn't earned enough to pay tax - but it was such a relief. I still HATE it so it is a great relief to read your post, although I also have panic now about being investigated and so far I have earned less this year than last so I'd better make sure all is in order! I must find out about paying monthly. I do pay something to HMRC every month but I still seem to get a tax bill at the end of the year so I had better make sure that I am not paying twice! Thank you for prompting me to take my head out of the sand and investigate this!

Moira Butterfield said...

You sound just like me, Anne, in the way you feel about money. We freelancers probably don't talk about those feelings enough.