Time-Tracking Freelance Work

  • How many of you use time-tracking so that you can accurately count your billable hours when on assignment? I still count hours the old-fashioned way and I know that I cheat myself out of no less than an hour or so every week. My bad! I’ve occasionally thought about time-tracking assistance, but I never knew where to begin. A new year will soon welcome us and that’s a traditional motivator to set goals and improve work habits.

As I suspected, time-tracking systems have their differences. Some are designed with remote teams in mind; others make a department manager’s life easier. Certain time-tracking systems have been created to address the needs of Freelancers and we’ll sort through a sampling here:

Due Time Tracking

Due Time is free and easy to use—just create a task, start the timer and launch your session. You can click and add notes to detail the project you’re working on. Due Time also includes an automatic idle time detection feature, so you’re able to make allowances for stepping away from your project now and again and still remain accurate in tracking your work hours.

You’ll be pleased to find that Due Time will generate hourly rate or project fee invoices when you enter the rate. Due Time makes it easy to organize client information by name, address, or even payment currency.  Due Time

TopTracker

Along with tracking the number of hours you spend on project tasks, Top Tracker offers screen shots and webcam shots that document your work. Screen shot pages can be deleted or configured to automatically blur before uploading, so that the image is recognizable to you but all text is obscured. The service works with nearly every freelancing platform and will produce a detailed project activity report to document your performance. The service is free.  TopTracker

Sighted Time Tracking and Invoicing

Sighted Time Tracking seamlessly integrates the functions of time-tracking and invoicing, packaged in either the free Basic Service plan or the Premium Plan at $4.00 /month. You can make detailed project notes for every session and also automatically send invoices for hours worked that are customized for billable hours or project fee.

Furthermore, users can send out quotes to prospects when invited to bid on a project and accept credit or debit card payments online and issue a receipt to the client. Plus, you can do it all on your desktop or mobile device.  Sighted

Tick

Each time you submit a time entry, Tick updates your project and task budgets in real time and reports it back to you.  If you regularly track your time against an hourly rate budget of project fee that involves an important deadline or penalties for late completion, then Tick may be your ideal time-tracking solution. It’s even possible to track time on multiple projects simultaneously.  While the service can be used by a solo Freelancer, it is especially suited for a team.

Tick is free if a single user employs the service for one project per month, $19.00/month for an unlimited number of users who’ll track a maximum of 10 projects/month and up to $149.00 /month for an unlimited number of workers to time track an unlimited number of projects.  Tick

Four more time-tracking options will be examined in the next post. Have a good week!

Thanks for reading,

Kim

Photograph: Sundial at the Gate of Honour at Gonville and Caius College in Cambridgeshire, England

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Who Gets the 1099?

The year is drawing to a close and we’re crossing into the 11th month. Before you become enmeshed in the celebrations and obligations that the holidays demand of us, do yourself a favor and commence your tax planning. Create an accounts receivable and  invoicing strategy once you’ve decided when it would be most advantageous to receive payment for services rendered in this calendar/ tax year or the next. IRS Form 1099-MISC will be at the center of the action; understanding when you’ll need it and when you might avoid it is your goal.

The payment in question is $600, whether it was paid or received by your organization. Review the accounts receivable history of clients for whom you performed small jobs earlier in the year.  If a client paid you less than $600 in this calendar year, you will not receive or need to file a Form 1099-MISC for the money earned on that assignment.

Start with the easy stuff.  If you find yourself in mid-contract with a client as December approaches and the project isn’t urgent, might it be possible to work until just before Christmas and then resume work in the first week of January, if it appears that will allow you to cap your billable amount at less than $600 for the client in this calendar/ tax year?  That can be one less 1099-MISC to file and a little more money added to your P & L.

If the client has a deadline don’t even think of such a thing but if there is no urgency, why not ask the client if s/he might find it more convenient to take a “holiday break” starting in mid or late December? Many employees take vacation days at the end of the year in a “use it or lose it” strategy and offices can be short-handed just before Christmas and through the end of the year.  I suggest that you refrain from mentioning the tax implications.  Frame your suggestion as a way of being sensitive to what may be going on in the client’s office, i.e., customer service.

Similarly, might you be able to defer until the New Year certain invoices, as a way to keep a lid on this year’s income and taxes and wait until the first week of January to send accounts receivable for work that was performed in December? Let a couple of hours work spill over into January and make your New Year invoice legal.

Now let’s consider the 1099-MISC forms that you will generate and send.  Did you hire any sub-contractors to help you fulfill the terms of a project? Have you hired a part-time bookkeeper or social media expert or editor for your newsletter? If you paid $600 or more to anyone for business services or rents in this calendar/ tax year, then you must send that individual/ company a Form 1099-MISC no later than January 31 of the upcoming year.

So that you will have the information to complete the Form 1099-MISC, it will be necessary to request that all of your vendors and other business services providers complete a Form W-9, ideally before the work they perform commences.  Download Form W-9

Among the important pieces of information that the W-9 will surface is if your service provider’s business is incorporated as a chapter C or S entity, or an LLC or partnership that is taxed as a C or S corporation.  Along with commercial rent paid to or through a property management company (instead of the property owner), a 1099-MISC will not be required for those types of entities when payments for services rendered meet or surpass $600.

Payments for services rendered made by gift card, debit, or credit card are not to be included in the 1099-MISC tally.  Instead, the card issuers will send a Form 1099-K to your subcontractors, vendors, or you when the amount paid for business services rendered meets or surpasses $600.

Obtaining the 1099-MISC is an adventure. You must order forms from the IRS, or visit an IRS service center and pick up a few. The form is not available for downloading.  Click here to order Form 1099-MISC.

Thanks for reading,

Kim

Image: The Tax Collector, 1542   Marinus van Reymerswaele (1490 – 1546)                  Courtesy of Alte Pinakothek Museum in Munich, Germany

Invoicing Inertia: The Cure

Freelance consultants are no strangers to cash-flow crunches and as quiet as it’s kept, the problem can be of our own doing, or not doing.  The reason for our cash-flow problem could be a slow-paying or, horrors, a non-paying client (an acquaintance who is a business accountant estimates that 5-10 % of professional services providers’ receivables will be uncollectible in a given year).  But we can be our own worse enemy in these matters and it is time to tame our invoicing inertia.

As example last week, I sent an invoice to a client that was worth four figures and was four months late.  Why was I so negligent, when I had important accounts payable to resolve? Why is it so hard for so many small business owners and self-employed professionals to stay on top of our accounts receivable and send out invoices on time?

In my consultancy, and I imagine this is true for most, client work, both performing it and networking to bring more of it in, are the priorities.  Billable hours are the name of the game. Then there is content marketing activity (this blog!) to send to my preferred social media platform (LinkedIn) and my website.  Other revenue streams—teaching twice /week, which entails responsibilities to my students, and producing a monthly post for the online magazine for women entrepreneurs where I am a staff writer—claim another chunk of time and creative energy.  Being in business requires considerable mental and physical stamina.

The invoice was for hourly work, rather than a project fee, meaning that detailed information was expected (and not unreasonably so).  The very thought of generating the thing nearly made me nauseous, so I found several avoidance-behavior activities that on the surface appeared to be ambitious, but in reality served mostly to enable my procrastination.  Then the client asked me about the invoice.  I was so embarrassed!

As I worked on the detailed, multi-page invoice, I thought about what I might do to simplify the process, so that I could easily generate scheduled invoices and would be motivated to do so.  Invoicing for a project fee is much easier than the hourly rate version and it was project fee invoices plus the job income  that sustained me while I neglected the hourly invoice.  Here’s what I recommend (my business accountant friend approves):

Collect in advance

Whether the assignment is paid by hourly rate or project fee, collect a percentage at the contract signing or email-documented agreement (20 % – 35 % of the project fee, or an estimate of the first months’ billable hours).  Discuss with the client a mutually agreeable invoicing schedule and honor it.

Create two all-purpose invoice templates

In the top left of a Word document, type in your name and/or DBA as the vendor, tax I.D. and contact info. This will become the permanent part of your template.  Below that, type in separate lines  for the client name, date, project deliverables, total amount of the project fee and the amount of the invoice.  All you’ll need to do is copy the template, drop in the specifics and presto! You’ll have an invoice to send.

The hourly rate template will have a cover sheet that is similar to the project fee template, but with the lines for rate (the dollar amount you’re charging/hour) and hours (total billable for this invoice) substituted for the project fee info.  A second page of the hourly rate template will have lines for four “week of” headings, ready for you to insert the dates and specifics of your weekly client work.

Either invoice can be used for retainer contracts.  If you are brought in to work a standard number of hours per month for a particular client, or you’re asked to perform predictable functions as needed throughout the year and you can reasonably estimate how often you’ll be asked to perform those services and your cost to provide them, then you can calculate invoice amounts in advance and determine a retainer fee.  If this is the case, then suggest a retainer arrangement at the next contract signing and bolster your income security.

BTW, it is not unusual to invite a client to pay the year’s (or quarter’s) retainer in advance. Offer some attractive incentives for yearly or quarterly advance payments, like a good discount or service add-ons.

On all invoice templates, indicate how the check should be made out (your name or DBA) and indicate that the invoice is due immediately (although it is accepted practice to pay invoices within 30 days). Finally, state that it is a pleasure doing business with your client.

Invoice on time

Whatever the agreed-upon payment schedule, be sure to follow it (not more than one week late). When you honor the invoicing schedule, you communicate to clients that getting paid within 30 days, if not sooner, is what you expect and deserve.  Timely invoicing also benefits your clients, who will be able to better manage their own accounts payable and cash-flow.  If you start to bring in more lucrative assignments, investigate the process of accepting credit card payments.  You’ll be paid faster, but a small processing fee will be deducted.

Invoice as marketing collateral

To date, my invoices are created on an unembellished Word document, but that is about to change.  I plan to align my invoice design with my other marketing collaterals.  Very soon, I’ll design an invoice PDF that contains a scan of my (lovely) business card, that will appear at center top.  All the other info will be written as described here.  You can also investigate free invoice templates in an online search.

In our hyper-competitive business environment, where clients hold the keys and seem to be looking for reasons to cancel projects that Freelance consultants depend upon, it is imperative that we project professionalism.  All interactions with clients, from the first meeting, to the excellence of our work and concluding with an accurate and timely invoice, must reflect well on our brand.

Thanks for reading,

Kim

 

Kill the Deadbeats!

“Businesses don’t fail because they are unprofitable.  They fail because they get crushed on the accounts receivable side.”  Brian Hamilton, CEO  Sageworks, a  financial research firm in Raleigh, NC

A  2005  survey of American Express  small business customers found that  49%  had cash-flow concerns, with accounts receivable as the primary concern,  and  9%  of  that group worried that their cash-flow troubles were sufficiently serious to impede their ability to compete for new business.

A  2007  survey of  2000  Freelancers found that  77%  of us have had trouble getting paid at some point in our careers as independent workers.  Of  the  77%,  late payments have been endured by  85%  at least once;  42%  have been stiffed at least once;  and  34%  have received less than the invoiced amount at least once.  The survey also found that Freelancers  spend 4 hours/month on average pursuing late or unpaid receivables.

Since Freelancers are  excluded from the Fair Labor Standards Act (FLSA), which would require  the Department of Labor to assist us by investigating claims of involuntary unpaid labor (slavery!) and would authorize the Commissioner of Labor to bring criminal proceedings to recover wages owed,  we are more than a little vulnerable to this growing phenomenon.

Our options are weak.  Hiring an attorney is costly and does not guarantee payment of monies owed.  Small Claims Court is time consuming and winning a judgment does not guarantee payment.  Writing a  thorough contract,  which specifically details  services requested,  pricing,  invoice due dates and late fees doesn’t help much either if  a  client lacks the ability to pay,  or simply refuses to pay within a reasonable time frame (big corporations are infamous for this).

Smaller businesses may be caught between a rock and a hard place:  they can’t pay you until someone pays them.  Big corporations have the power to dictate payment terms favorable to their own cash-flow objectives.  Over the past several years,  including the so-called  “booming economy”  years,  many big corporations brazenly increased the turn-around time on accounts payable to their small vendors —because they could.

So what’s a Freelancer trying to maintain respectable cash-flow to do? Take every precaution and watch for signs of problem clients.  Before taking on a new client,  maybe ask around and find out if you know who’s done business with the company.  Maybe check out the BBB and find out if  a complaint has been filed and its resolution.

Milestones and money

Establish project milestones and attach an invoice to each one.  First,  discuss your project with the client and get agreement on the scope of the project and the time table.  At the contract signing,  get a deposit of 10-25 %.  At key junctures in the project,  get another 20-25% payment,  if possible.  The goal is to avoid the trap of  waiting for a large sum of money at the project’s completion,  when the client possesses the complete deliverable.  Hint:  if  the client is unable to make the initial deposit on time,  brace for trouble!

Deadbeat radar

Pay attention to client motivation—are they looking for quality work,  or the cheapest price?  If  a customer comes to you primarily for price,  then price is what will make that client leave you.  Moreover,  they will use price to manipulate you.  So do not be desperate!  It’s hard, I know, when you’re just trying to be solvent.  But customers like that pay the least money,  cause the most headaches and may not pay what they owe,  on time or otherwise. They are best avoided.

Beware the client who is in a big rush, frazzled and frenetic.  This person will appear suddenly and may also be overly concerned with price.  Once the deliverable is in hand, your invoices will be ignored,  as he/she is always  “too busy”  to deal with annoying things like paying you.  Insist on receiving as much payment up front as you can (try 50% down, including a premium for speedy delivery). You may never see the rest of the money,  or you will have to chase and wait.

Beware also the OCD type who is hyper-controlling and fussy.  If you must go there,  be excruciatingly clear about the project scope,  deadlines,  expectations,  project milestones, etc.  Put everything in writing and make sure they agree,  sign off and are prepared to make all milestone payments.  This client will be tough to satisfy and will pick you apart,  demand revisions and may withhold payment,  claiming that you haven’t delivered satisfactorily.

Put into writing how many revisions are included in the project base price plus the price for revisions.  Consider adding  25-30%  to your usual quote to make up for the time you’ll spend responding to incessant emails,  phone calls,  criticism and demands.

Recurring nightmare?

If collecting receivables is a persistent problem for you,  then it is likely that you are not qualifying clients properly or your product is considered deficient.  Clearly define your deliverable.  Set expectations for your services and make sure that you understand what the client wants and the client understands what you will deliver.  A verbal agreement should precede a written proposal/contract that specifies the work you will do,  the timetable and payment due dates and should be signed by both you and the client.

Thanks for reading,

Kim