Let’s talk in this post about the business aspect of your translation business – the financial side.
Let’s talk in this post about the business aspect of your translation business – the financial side. Some of the financial tips we’ll provide will be specific to the United States, and others will apply worldwide.
Managing your freelance finances is not only time-consuming but vitally important to your survival as a freelance translator. It’s definitely worth taking the time to consider whether you’re optimally managing your money, or not!
Set up a Business Debit Card and a Business Bank Account
It’s really important that you keep your business and personal finances separate. The statements you receive for your debit card mean that you won’t have to deal with a box full of receipts at the end of the financial year.
Set up a Business Savings Account
Each and every time you receive payment from a translation client, transfer a minimum of 30% of this payment into your business savings account. Of course, the exact amount you transfer will depend entirely on your tax bracket, plans for your retirement, and so on. The money saved in this account should be used to pay your taxes and fund your retirement account. Unfortunately, we’re often hearing translators say that they owe thousands of dollars in tax and they have no idea how they’re going to pay the account.
Of course, this doesn’t only apply to translators – many self-employed people find themselves in this situation at the end of the financial year. This is a situation that is entirely avoidable, simply by creating a business savings account and using it wisely throughout the year.
Keep Accurate Accounting Records and, in Particular, Make Sure You Have a Running Total of Your Receivables.
For the purpose of this post, we’ll assume that your gross income goal is $5,000 per month. If your outstanding invoices only total $3,000, then it’s time to get busy. Don’t be too selective about what type of work you accept and what you refuse.
If you have (say) $7,000 in outstanding invoices, this is the ideal time to raise your rates, be more selective about the type of work you accept or even work on non-paying projects that interest you. An Excel spreadsheet is the perfect way of handling these figures: simply enter every invoice you issue into the Excel spreadsheet, and the figure will automatically be added to your running total receivables.
Create a ‘Vacation ‘Account
Like many self-employed people, translators often say that they don’t take vacations because they’re obviously not going to get paid if they don’t work. One solution to this problem is to raise your rates so that it’s not necessary for you to be working 7 days a week/52 weeks of the year. Another solution is to set up a ‘paid vacation’ for yourself. Let’s assume you typically gross $1500 each week, and ideally you’d like to take four weeks off per year: this means you need to save $6,000 so you can pay yourself $1,500 each week you take off. Divide this amount by the 48 weeks each year that you’d be working, and that amounts to $225 per week. This is the amount you need to put away per week into your vacation account – now you can look forward to your vacation every year because you’ve already saved for it.