Behind the Scenes of the FreeAgent Central Freelancers Survey
According to a survey published yesterdayby FreeAgent Central concerning the impact of the economic crisis onFreelancers and small business:
1. An astonishing 60% of Freelancers are not charging late payment fees to clients when payment deadlines are not met.
To safeguard your business and cash flow in thesedifficult economic times it is advisable to have payment terms statedin your contract and on the bottom of your sales invoices. Then, if aclient does not pay by your terms under the 'Late Payment of Commercial Debts Act 1998' (updated in 2002)a business that owes you money that has not been paid in the creditterms agreed is liable to pay interest on that debt together withadministrative costs.
The statutory qualifying time is 30 days before you can apply theinterest, from either the delivery date of the goods or services or thedate on which the debtor is notified of the debt, whichever is thelater. You can then charge 8% above the Bank of England base rate currently 0.5% on the debt.
Agencies do go out of business, if your agent is giving you payment problems be very careful.
2. The survey also said that 69% of respondents had been affectedby the credit crunch with 38% earning less than the previous year.
In times when every penny counts and business are going bust on adaily basis, 58% also stated that their attitude towards businessaccounting is a necessary evil or pretended it's not there.
Ok as an Accountancy firm you would not expect us to say thataccounting is a necessary evil. But 58% of respondents thought it was.I do think however that the message to these 58% is that good businessaccounting is vital to the success of your business.
Poor accounting leads to no tax planning, poor purchasing and poorcash flow management. This all costs money. I reckon this means that58% of respondents are paying too much tax; so if 38% are earning less,that's one way to get better at what you do!
And it is really not that difficult, everything you need is available.
3. A massive 74% do not use on-line accounting systems with 87% not planning to change.
The 87% not planning to change is probably normal. People do not, inour experience like to change banks, accountants or IFA's. Software foraccounts is the same quite often. But if these people are missing outon tax planning opportunities and wasting money, maybe they would thinkagain! Complacency and fear of change costs money!
Online Accounting is becoming far more mainstream now, there aremany good systems out there. FreeAgent was written for ProfessionalContractors and Freelancers and gives any user the ability to plantheir dividends and maximise their net income, minimise their tax bill,be 100% compliant with HMRC regulations and be able to prove it. Thosepeople who do not look at this for fear of change, really are missingout on something.
Using an on-line management system will keep you up to date andinformed. We are passionate about FreeAgent which; when kept up todate will provide the invaluable information you need to takeresponsibility of your business and plan accordingly.
Effective tax planning is based on being pro-active and taking action within your accounting year.
It's too late after the event.
Here are the full Free Agent survey results