As a freelancer, you need to know how to write a budget, for several reasons.
First, as part of business planning, freelancers should have a budget that accounts for all their income and expenses. A budget helps freelancers figure out how much money they expect to take in when their invoice templates are paid, how much they spend on business expenses, and how much to save for things like retirement planning. Don’t forget to pay yourself a wage to live on!
As part of bidding on work, freelancers also need to know how to write a budget proposal. If you’re successful in landing the work, that budget will become part of the contract with your client. You’ll set up your freelance invoicing and get paid based on reaching the milestones in the contract, and based on the budget outlined with, and agreed to by the client.
Let’s look at those two aspects of budgeting for freelancers.
Every business needs to have a budget to follow and track. This can serve as a barometer for how the business is performing.
Here’s how you can write a budget for your freelance business:
Start by noting all your freelance expenses for a given time frame. It would be valuable to build a budget for a month, which can then be expanded to include an entire year. You can also track a year’s worth of expenses, including those that may happen intermittently, like insurance costs, and then divide by 12 to determine monthly expenses.
If you’ve been in business for a while, this should not be too difficult. Use receipts and bank statements to create a record of expenses. If you’re embarking on a freelance business, spend time researching what expenses you will have. Consider any equipment you will have to purchase, rent for office space, Internet and phones, a vehicle, and so on.
It’s good to include an additional 15% per month for unexpected costs, like needing to upgrade equipment.
Once you know your expenses, you can determine what you need for income each month, which should include a salary plus being able to cover all expenses.
If your income is greater than your expenses, set some aside for savings, retirement planning, or tax time, for instance. If your income is falling short, you need to make some decisions about cutting expenses – or finding more work. Your goal should be to have extra money each month to set aside in savings.
Be sure to continue to track all expenses, whether that’s a working lunch or a new computer. Continue to monitor and make adjustments as necessary.
Using a simple tool like an Excel spreadsheet, you should make budget planning and tracking a regular part of the administrative work you do for your business.
The second type of budget essential to the success of a freelancer is writing a budget as part of a freelance proposal. After all, a budget will be a key part of your proposal, helping you to land new clients. But equally as important, if you’re successful in getting the work, it will also form part of your freelance contract.
So here are the steps how to write a budget proposal:
The first step is figuring out what work will be done to complete the contract. If you’re approaching a new client, determine what work you will do for the client, and the costs for each milestone.
Or perhaps the client has spelled out exactly what they need done. For instance, an estimated budget and timeframe may be a key part of a response to an RFP.
Create a budget spreadsheet, using a tool such as Excel. Create columns for the items to be included in your budget, with a second column for the costs of those items, and finally a row at the bottom to calculate all the totals.
Include all expenses, which means your time, any staff or subcontractors, plus costs like travel. If you’re building a website, for instance, there will be expenses like domain name registration.
When figuring out your costs, particularly when it comes to time, consider adding an extra 5 to 10 percent. This will give you some leeway in case the work takes longer than expected. It’s easier to negotiate down with a client than to have to go back and ask for more.
If you’re looking for an all-in-one tool to time-track your freelancing, help with creating documents such as contracts, invoices, or proposals (which can include a budget), get on board and sign up for your free trial of Bonsai's services.
Your proposal will obviously include more than a budget. So it’s time to build the words that back up your numbers.
Once the budget spreadsheet is complete, cut and paste it into your proposal. Then write descriptions for each of the budget items, including a brief background of the work to be done, description of the expense and why it’s necessary, and so on.
Bonsai's proposal software can be used for creating a budget proposal. It will allow you to build different packages for clients to choose from, with different rates for each package, to help maximize your earnings. It allows you to create, send, and track freelance proposals, bringing together contract generation, invoice creation, analytics and reporting.
Depending on the nature of the work, there may be other considerations to include in your budget.
For instance, perhaps the client has asked for work to be done in a compressed time frame. It’s okay to do rush projects, but only do them if the client pays an extra fee.
Therefore, you can include a rush fee clause in your proposal or contract. For simple projects, you might charge 25 percent. For more complex work, don’t be afraid to increase that amount, even up to 100 percent.
You can also include options for a client, such as different prices for different packages of work, a reduced fee if they want to put you on retainer, or a cost for continued upkeep once the project is complete.
If you secure the work, make sure you track your results and ensure you spend what you said you would spend. A budget is just that – a budget. It isn’t necessarily set in stone, as circumstances can change.
For instance, just because you said registering a domain name would cost a certain amount, it doesn’t mean that’s what you will actually spend. If you track as you go and account for all your costs, you’ll be sure not to over-spend. Or, you may have to go back to the client for some re-budgeting.
Being able to write a budget is a key part of running a successful freelance business. You need to be able to account for income and expenses, to monitor how well the business is doing, and plan for the future.
Freelancing also means bidding on work, so a budget is a vital part of your freelance proposals to prospective clients. The budget will become part of the contract, and form the basis of what you’re paid for your work.
Now that you understand the key aspects of budgeting, writing one should be simpler. You can consider the option of using integrated tools available to you as part of Bonsai’s freelance suite by signing up for your free trial now.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?